The CFPB drops its lawsuit against Capital One, marking a major reversal

The Consumer Financial Protection Bureau on Thursday dropped five major legal cases it had underway — including a big lawsuit against Capital One — marking a major reversal for an agency that had pursued aggressive action against financial institutions accused of wrongdoing during the Biden administration.

Just last month, the CFPB had accused Capital One of failing to pay more than $2 billion in interest to customers by misleading them into thinking they would be getting higher rates. Capital One denied the charges.

The bureau also dropped its cases against Rocket Homes, Pennsylvania Higher Education Assistance Agency, Vanderbilt Mortgage and Finance, and Heights Finance Holding Company.

News of the court filings dismissing the CFPB’s legal cases came just as the Senate Banking Committee was grilling President Trump’s nominee to lead the agency, Jonathan McKernan.

The CFPB has faced intense turmoil in recent weeks, with over a hundred workers fired and the agency virtually shuttered after staff were told to stop all work. Employees were locked out of the bureau’s D.C. headquarters and the building’s lease was canceled.

People protest in support of the Consumer Financial Protection Bureau (CFPB) headquarters in Washington, D.C., earlier this month.

Jacquelyn Martin/AP/AP

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Jacquelyn Martin/AP/AP

During his Senate testimony, McKernan said the agency had overreached under the Biden administration,

“We’ve got to refocus it on its mission,” said McKernan, who was previously on the board of the FDIC. “We need to right-size it, make sure that we have an efficient CFPB and we need to reinstate some accountability to our elected officials.”

Sen Elizabeth Warren (D-Mass.), who played a major role in the bureau’s founding after the 2008 financial crisis, said during the hearing that she did not believe that the timing of the court filings were coincidental, though she offered no evidence.

“It seems to me the timing of that announcement is designed to embarrass you and to show exactly who is in charge of this agency right now: Elon Musk and his little band of hackers,” she told McKernan.

Sen. Tina Smith (D-Minn.) said that she had asked McKernan about the pending litigation the day before and had been “assured” that he would “review these lawsuits.”

“This makes me question like who’s really going to be in charge of the CFPB if this is what’s happening while your nomination is being considered?,” she said.

“My question is, who’s going to be in charge here?” Smith asked McKernan.

“Senator, if I’m confirmed, I’m the director,” he replied.

‘CFPB RIP’

The CFPB is currently led by acting director Russell Vought, the White House budget director and one of the architects of the conservative plan Project 2025.

The Trump administration has made clear its contempt for the bureau, and that it wants to either eliminate CFPB or drastically pare back its work. Musk has tweeted “CFPB RIP.”

Consumer groups decried the end of the litigation.

“Voters in the last election expressed their dismay with high prices, yet the Administration is stopping the essential work to stop corporate abuses that take billions from people every year,” said Lauren Saunders, associate director of the National Consumer Law Center. “The cases dismissed today actually underscore why the CFPB’s work is so essential to investigate practices that are draining hard-earned money from the pockets of everyday people.”

Before joining the FDIC’s Board of Directors, McKernan held staff roles in the Senate, the Treasury, the Federal Housing Finance Agency, and spent a brief stint detailed to CFPB. He previously spent nine years as a lawyer focused on banking and consumer financial laws, according to his prepared testimony. Several business groups have endorsed McKernan’s nomination.