The Consumer Financial Protection Bureau (CFPB) is embroiled in a bitter dispute between its leadership and staff over whether the Trump administration is attempting to wind down the agency. The clash has led to a lawsuit filed by the National Treasury Employees Union (NTEU) seeking to halt the agency's effective shutdown. At the center of the controversy is a disagreement over whether CFPB employees are being allowed to continue their legally required duties.

The CFPB, which enforces laws and writes regulations for the financial services industry, has been targeted by the Department of Government Efficiency (DOGE), with Elon Musk posting "RIP" to the agency in early February. The NTEU alleges that the Trump administration is violating the US separation of powers by dismantling an agency created and funded by Congress. The lawsuit cites directives from CFPB acting director Russell Vought for staff to halt their work, which the union claims is an attempt to shut down the agency.

In response to the allegations, CFPB chief operating officer Adam Martinez submitted a declaration to the court stating that agency leadership is looking to "rightsize" the agency. However, this has been met with skepticism by staff members, who claim that Martinez's statement is misleading and that the agency is indeed being wound down. Several current and former CFPB staffers have submitted sworn statements to the court, alleging that the Trump administration is seeking to fire the "vast majority" of agency workers and make it so "that the CFPB would exist in name only."

Judge Amy Berman Jackson has expressed concerns that the agency would be shut down before she has a chance to weigh in, and has scheduled a hearing for next week to discuss a preliminary injunction on the terminations. Martinez is expected to testify at the hearing, which has been set for 10AM on Monday. The judge has also considered ways to ensure the agency wouldn't be "choked out of existence" before she makes a ruling.

The CFPB's typical operations involve fielding consumer complaints about financial products and regulating digital payments apps, such as those planned by Elon Musk's X. However, staff members claim that even legally mandated work has been halted, and that they are being prevented from performing their duties. Martinez has attempted to clarify the situation, stating that new leadership has "taken a methodical approach to handling the Bureau's operations and responding to senior executives who have recommended or requested guidance to perform each of the CFPB's critical statutory responsibilities."

Despite this, staff members remain unconvinced, with one supervisor of the Escalated Case Management team filing a sworn declaration stating that their team had not performed work since Vought's February 10th order to "stand down from performing any work task." The supervisor, who used a pseudonym for fear of retaliation, claimed that the order had no exception for statutorily mandated functions.

In an effort to address the situation, CFPB chief legal officer Mark Paoletta sent an email to staff stating that employees should be performing work required by law and do not need to seek prior approval to do so. However, staff members claim that this is too little, too late, and that the agency's leadership is still not providing clear guidance on what work is permitted.

The dispute has significant implications for the financial services industry, which is increasingly reliant on digital products and services. The CFPB's role in regulating these products and services is critical, and any disruption to its operations could have far-reaching consequences. As the situation continues to unfold, it remains to be seen what the future holds for the agency and its employees.