Key Takeaways
- The acting director of the Consumer Financial Protection Bureau asked employees to stop much of their work, closed the headquarters, and said he would refuse the agency’s funding.
- Analysts said that the White House cannot close the agency without Congress’ consent but could hold the CFPB back from doing much of its work.
- States could step in to regulate financial companies if the agency is sidelined, analysts said.
President Donald Trump’s administration is quickly hamstringing the government’s consumer finance watchdog agency.
News outlets reported that Trump’s budget director, Russell Vought, told Consumer Financial Protection Bureau employees this weekend that they should stop doing much of their work. Vought, who’s taken over as the acting CFPB director, has reportedly closed the agency’s Washington, D.C., headquarters.
The agency polices consumer practices at banks and several non-bank companies, overseeing mortgages, credit cards, auto loans, checking accounts, payday loans, credit reports and other financial products.
Here are four things to know about the CFPB with its future uncertain.
What Does the CFPB Do?
Lawmakers created the CFPB after the 2007-09 financial crisis, which stemmed partly from loose federal oversight over subprime mortgage lending.
In addition to directly monitoring practices at larger banks and certain other lenders, the agency can punish companies it doesn’t directly oversee. And it can create rules and guidelines for the financial industry.
Under its most recent leader, Joe Biden-appointee Rohit Chopra, the agency battled with banks on overdraft and late credit card fees. In Chopra’s closing days atop the agency, the CFPB took a flurry of actions against notable businesses.
Though the dollar amount of penalties was lower under the first Trump administration, the CFPB still made a steady stream of enforcement actions. During his first term, the agency issued an average of 29 enforcement actions per year, with a high concentration in 2020. That’s more than the nearly 24 under Biden, according to CFPB data.
$0 funding
What the agency’s work looks like over the next four years is anyone’s guess. But at least for now, much of the work is on pause and can’t be done without funding.
The president can’t eliminate the agency without Congressional approval, according to Ed Mills, a financial policy analyst at Raymond James. However, Mills wrote in a note to clients, he can look to “sideline and downsize the agency.”
“These activities are the latest agency where we will see the president test executive powers,” Mills wrote.
Vought said in an X post on Saturday that the CFPB will not take its next set of funds. When lawmakers created the agency, they set up a quarterly transfer from the Federal Reserve. However, the CFPB runs independently from the Fed.
The move is not unprecedented. Then-acting director Mick Mulvaney also requested $0 from the Fed for a quarter in 2018.
The CFPB’s account on X is now offline. The agency’s homepage leads to a “page not found” error, though many other pages on its website are still operational.
Pushback
Democrats and consumer advocacy groups are slamming the administration’s moves. A union representing CFPB employees sued Vought over his order that CFPB employees halt work and the DOGE team’s access to CFPB systems, according to NBC News.
“The gravity of this attack on the CFPB cannot be overstated,” Rich Dubois, executive director of the National Consumer Law Center, said in a news release. “Financial companies have shown time and time again that they cannot police themselves.”
The agency has survived past attempts to hamstring its work, both from Republicans in Congress who’ve long criticized it and from companies that have sought to challenge its validity. A Supreme Court ruling last year said the agency’s funding structure is constitutional.
What’s Next For the CFPB?
The CFPB director has latitude in deciding the agency’s direction—even “essentially put it to sleep, as Vought is doing,” Ian Katz, an analyst at Capital Alpha Partners, wrote in a note to clients.
Katz wrote that the agency may ultimately resume some of its enforcement work. Chopra’s work at the CFPB may also be rolled back, with past attempts to apply tougher rules on banks and rein in non-banks being reversed.
However, as federal regulators take a step back, states may turn up their own dials on consumer finance company regulation. Financial regulators and attorneys general in states, particularly Democratic strongholds like New York and California, may try to fill any void.
“Expect aggressive regulations from blue states,” Katz wrote.