What does having the Consumer Financial Protection Bureau on hold mean for consumers?
NEW YORK (AP) — The Consumer Financial Protection Bureau, which Congress established to monitor credit card companies, mortgage providers, debt collectors and other segments of the consumer finance industry, is the latest U.S. government agency to have its work halted by the Trump administration.
Conservatives have long targeted the work of the CFPB. Critics complain the independent agency, funded by the Federal Reserve System, lacks sufficient supervision and regularly exceeds its regulatory authority. Defenders argue the bureau's watchdog mission has strong bipartisan support.
Here's some background on the scope of the CFPB's activities and how the agency's tenuous status might affect consumers:
The Consumer Financial Protection Bureau is charged with creating rules and taking enforcement actions to protect consumers from unfair, deceptive, or abusive practices by a wide range of financial institutions and businesses. Its actions involve banks, mortgage servicers, credit card companies, student loan processors, payday lenders, money transfer providers, credit reporting agencies and debt collectors.
During the Biden administration, the CFPB passed rules capping bank overdraft fees and removing medical debt from credit reports. The bureau sued financial services companies for misleading consumers and employers for misleading workers. It also focused on curbing junk fees and predatory lending practices.
Congress established the agency as part of the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010. The legislation was intended to prevent a repeat of the 2008 financial crisis and subprime mortgage-lending scandal. The CFPB says it has obtained nearly $20 billion for consumers since then in the form of monetary compensation, canceled debts, reduced loans and other financial relief.
Russell Vought, the newly installed director of the Office of Management and Budget, told the CFPB last weekend to stop its investigations and work on proposed rules. He instructed the agency to suspend the enforcement dates of any rules that had been finalized but not yet put into effect, and closed the CFPB's offices for a week.
Vought sent an email to employees on Monday morning saying they should “not perform any work tasks.” They were directed to contact the top lawyer for the Office of Management and Budget “to get approval in writing” before doing anything.
Vought also said in a social media post that the agency would not withdraw its next round of funding from the Federal Reserve, which Congress assigned as the CFPB's funding source to avoid the political wrangling of the congressional appropriations process.
Two top officials resigned Tuesday in protest. Also Tuesday, Trump named Jonathan McKernan, a former Federal Deposit Insurance Corporation board member, as the agency's new director.
Before Trump took office, banks and industry groups sometimes sued to block some of the agency’s rules.
For example, when the CFPB issued a rule in 2017 to limit the number of payments the providers of payday loans, vehicle title loans, and high-cost installment loans could take from customer bank accounts, trade associations for payday lenders challenged the bureau's Federal Reserve funding as unconstitutional. In May 2024, the U.S. Supreme Court rejected their argument and upheld the CFPB's funding and oversight model.
Trump on Monday defended his administration’s efforts to reform the Consumer Financial Protection Bureau, saying the agency was “set up to destroy people.”
The overdraft fee rule was finalized and set to take effect in October, but Vought’s directive puts it on hold. Banks had previously sued to get the rule thrown out.
The rule would require the largest banks to pick one of three options: to reduce overdraft fees to $5, to reduce them to a rate that reflects how much an overdraft costs them, or to disclose, along with the fee, the fee’s Annual Percent Rate (APR) as they do with other short-term loans. Overdraft fees currently run about $35 on average.
The CFPB finalized a rule in January that would remove medical debt from credit reports. The agency had said the change could potentially improve the credit scores of millions of people and make it easier for them to get mortgages and other loans. The rule was set to take effect 60 days after its publication in the Federal Register but is now suspended. It also was the subject of a legal challenge.
“President Trump campaigned on lowering prices, and a lot of people voted for him because of high prices. and yet we’re seeing Republicans move to make them pay high overdraft fees and pay more for loans on their credit,” said Lauren Saunders, associate director of the National Consumer Law Center. “The public broadly thinks that overdraft fees are unfair and medical debt shouldn’t be on credit reports. If you ask ordinary people, these are not partisan issues.”
Lindsey Johnson, president and CEO of the Consumer Bankers Association, characterized the CFPB’s work under Biden as “aggressive.” She said the agency took action in recent years without going through the appropriate procedures.
“We don’t believe they had the proper oversight,” she said.
Miranda Margowsky, a spokesperson for the Financial Technology Association, an industry group that counts many financial technology companies as members, said her organization anticipates and hopes several CFPB rules, including those governing “buy now, pay later” plans and other fintech products, will be reversed “with the stroke of a pen.”
She characterized the rules as “overly broad, overreaching, and harmful.”
Supporters of the CFPB protested outside the bureau's shuttered Washington headquarters this week. NAACP President Derrick Johnson and others have demanded the office's reopening.
“The CFPB has provided crucial protections against big banks and lenders,” Johnson said in a statement. “Without this critical oversight, consumers — especially Black and Brown communities — will be vulnerable to fraud, predatory lending, and discriminatory financial practices.”
Kitty Richards, senior strategic advisor at the advocacy group Groundwork Collaborative, said consumers today are more vulnerable to data privacy violations, junk fees, and financial scams. Without the CFPB, corporations are “freer to prey on the American people without fearing they might have to give back the money," she said.
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