Early in Trump’s second term, CFPB issued stop-work orders to its own staff

Terry Gerton Terese, let me start with you. You all received multiple congressional requests in 2025 to review the impact that CFPB’s workforce and contract actions had on that agency’s operations. Just take a minute and refresh us on the circumstances. What was going on that sparked so much congressional interest here?

Terese Blanchard Sure. So at the time, in early 2025, there was a change in the new administration at the CFPB and leadership as well. And we had moved from having a 10-year director to having a series of acting directors at the CFPB who implemented a number of workforce and contract actions and also took some actions related to stop work orders that they issued to employees. And that is what we were in our report on because we received some congressional requests inquiring about what was happening at the agency during that time.

Terry Gerton CFPB really was, in the Trump administration’s initial crosshairs, it was one of the first places they started along with USAID, and a lot of people looked at the workforce reductions and assumed that was the story, but your report seems to say that the operational impact was something different. Mike, will you walk us through what you found there?

Michael Zeitler Of course, so the prospect of firing all term and probationary employees did garner a lot of headlines, as well as initiating reductions in force to dismiss a large portion of the agency’s workforce, but those actions didn’t have a major impact on operations because they were paused by the courts. So several actions the agency took included allowing employees to participate in a government-wide Deferred Resignation Program. Which 67 employees availed themselves of that. They also, as I mentioned, dismissed term and probationary employees. 182 employees were dismissed, but that was paused by the courts and they were reinstated. Finally, the agency implemented two reductions in force in February and April. Those were paused by the courts, and so no employees were dismissed.

Terry Gerton Terese, go ahead.

Terese Blanchard I’d like to add that we also noted during this time, while the workforce actions did not have an impact on agency operations, the employees and contractors stopped work orders that the agency issued during this timeframe of early February, 2025 did have a large impact on agency operation. We found that over the course of one week in February, the acting directors issued three progressively more restrictive stop work orders to employees — were the first two stop work orders itemized activities that employees should not perform, but did call employees to continue performing work required by law. There was a third stop work order issued that same week that ultimately told employees to stop performing all work and did not call employees to continue to perform work required by laws. It wasn’t until about a month later in March, 2025 that we noted that the agency’s leadership emailed employees and told them to continue perform work require by law And as a result, we found that the agency largely did not perform their core functions for a month, and in some cases, longer. In addition, the contract stop work order had an impact on agency operations as well. So in 2025, early 2025, the agency had about 525 contractors that supported the agency’s mission, functions, as well as provided operational support to them. The agency ultimately issued stop work orders for almost all of those 525 contracts in early 2025. And in some cases, even issued termination notices, ultimately notifying the contractor that the agency was intending to terminate those contracts. Well, all being said, the ultimate terminated contracts were about 79 of the 525 before the court stepped in and told the agency to stop canceling their contracts. We did note that the agency ultimately did reinstate 16 of those 79 contracts because they realized they were supporting mandated functions or required operational support.

Terry Gerton Michael Zeitler and Terese Blanchard are OIG managers in the Office of the Inspector General for both the Federal Reserve Board and CFPB. Michael, let me ask you to follow on what Terese has just described there because we saw in a number of federal agencies contractual stop work orders, but we haven’t heard much about administrative leaders telling their organic workforce to stop work. Why was that a choice here at CFPB and why did it matter so much?

Michael Zeitler Yeah, so under the law, the director of the CPD has broad discretion to run the agency. So they determine staffing levels, budget level up to a cap, and the activities that the agency will implement. Under the Dodd-Frank Act, some activities are explicitly required by law. But others, the agency has the power to conduct those activities, but there is no minimum amount that must be implemented. And this specifically relates to supervision and enforcement. So, while the agency has the power to conduct examinations and enforcement investigations, the law does not set any minimum amount of investigations or examinations that they must conduct. So, with that broad authority, the director was able to instruct employees to stop work on those activities and for a period of time, they were not done. And then with the court orders preventing the dismissal of employees, we found ourselves in a situation where employees are being paid not to work.

Terry Gerton So, Therese, as you looked through these stop work orders, where did they actually show up in agency operations? What was most impacted?

Terese Blanchard So, you know, what’s unique about the Dodd-Frank Act, as Michael was saying, was that in some areas, it’s very prescriptive in what functions need to be performed, and in other areas, it’s less prescripted. When it’s more prescripting, it relates to consumer response functions. And in those cases where the contract stop work orders were issued for consumer response function, we saw those functions turn back on very shortly after the stop work order were issued. However, where the Dodd-Frank Act is less prescriptive. So at first the number and breadth of supervision and enforcement activities. We saw that about 450 supervision events were terminated and then 80 investigations and those were largely not restarted for almost a year. And that was because there was more flexibility in the Dodd-Frank Act and more discretion given to the director for those activities.

Terry Gerton And so Michael, what does this tell us about how CFPB actually operates? Is much of its function carried out by contractors and that’s the key piece? Or how do we need to think about what their organic federal workforce actually does?

Michael Zeitler But I think, again, under the current structure, the director has broad authority, and I would I would imagine that the director would say we were unable to dismiss the employees who we didn’t think needed to do any work, but they were prevented from that by the court orders. The litigation is still ongoing, and it remains to be seen what the result of that is. But as it as it stands now, the agency is doing a drastically less supervision and enforcement activity that it has in the past.

Terry Gerton And what does that mean for the broader financial market?

Michael Zeitler Some would argue that that means that the financial institutions’ compliance with consumer financial protection law is getting less scrutiny.

Terry Gerton In the short run then, how are the folks who are actually at CFPB responding? What is the state of play today?

Michael Zeitler So what we do know is from January 2025 to January 2026, 575 employees have voluntarily departed or their terms expired. So the workforce has been reduced by about one third. The current leadership has restarted supervision and enforcement activity, but doing it at a different pace and in a different way. And from our perspective, as long as the director has that broad discretion. They are going to use it and we’ll have to see what the result of litigation is.