Appeals court agrees to rehear CFPB union's case

Bloomberg News

• Key Insight: The U.S. Court of Appeals for the D.C. Circuit granted the National Treasury Employee Union's petition for an en banc rehearing, vacating a prior 2-1 ruling in favor of acting CFPB Director Russell Vought.
• What's at Stake: The court's decision was influenced by dozens of lawmakers and nonprofits who signed amicus briefs supporting the union.
• Forward Look: The case is being closely watched for its implications on the CFPB and its employees, as well as the broader question of whether government officials can effectively shut down an agency without an official memo or policy explicitly laying out such a plan.

A federal appeals court has agreed to rehear arguments by the union for the Consumer Financial Protection Bureau to determine whether the Trump administration tried to dismantle the agency through mass firings. 

On Wednesday, the U.S. Court of Appeals for the D.C. Circuit granted a petition by the National Treasury Employees Union to rehear its case against acting CFPB Director Russell Vought. A majority of judges voted for a rehearing by the full court, according to the court's order. 

The rehearing is a major win for the NTEU, which appealed a ruling by a three-judge panel of the D.C. Circuit in August. The panel had ruled 2-1 in favor of Vought, claiming he has broad authority to fire up to 90% of the bureau's staff. Two of the panel's judges were appointed by President Trump, and one by President Obama. The NTEU sued Vought in February to halt any attempts at reductions in force. 

The latest order vacated the panel's judgment in August and a partial stay remains in effect. Oral arguments will be heard on Feb. 24, 2026.

The case is being closely watched for its implications for the CFPB and its employees, and because of the potential legal importance of actions taken or statements made by agency heads that are not officially made in writing. At issue is whether government officials can shut down an agency if their plan is not explicitly laid out in an official memo or policy. 

Vought is trying to fulfill President Trump's goal of dismantling the agency. He said last month that he may have to furlough many of the CFPB's employees by claiming he cannot request funding for the agency from the Federal Reserve System. However, if the central bank turns a profit soon, it undermines the administration's latest legal rationale for why it refuses to fund the CFPB. 

The court said it agreed to a rehearing after dozens of lawmakers and nonprofits signed legal briefs and letters in support of the union's case. The court cited the Constitutional Accountability Center, 41 nonprofit organizations, and 36 members of Congress who signed amicus briefs claiming that Vought cannot legally shut down an agency created by Congress.

The appeals court set a tight briefing schedule going forward. The union is required to file its brief on Jan. 9, 2026, with supporting briefs expected by Jan. 16. The Department of Justice — representing Vought and the CFPB — must file its brief on Feb. 2, with supporting briefs due Feb. 9, and the union's response expected on Feb. 17.

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The DOJ opposed the NTEU's petition for an en banc rehearing and has claimed that courts have no authority over how the executive branch runs an agency.

The DOJ asked the appeals court to deny the petition for rehearing. It claimed that the union acted preemptively to stop mass firings, and that Vought did not officially make any announcement about firings, therefore, the union should wait until after a reduction in force has been issued before it can file a lawsuit claiming the CFPB is not fulfilling its lawful requirements under the Administrative Procedure Act.