Has the CFPB Reached the End of the Road?

The Consumer Financial Protection Bureau is on “life support,” according to a press release issued early Monday by Consumer Reports. Key reasons for that dire prognosis include a 2025 order from the CFPB’s acting director, Russell Vought for employees and contractors to stop all work, Vought’s direction to halt new funding for the agency, and efforts by the Trump Administration’s Department of Government Efficiency to fire as much as 90% of the CFPB’s staff. Efforts to fire staff are being challenged in court.

Other factors leading to Consumer Reports’ conclusion are the CFPB’s decision to drop more than 22 enforcement actions against banks and other financial companies the agency accuses of engaging in unfair and abusive practices, as well as the agency’s decision to reverse or modify orders in 20 other settled cases that would have provided refunds and restitution from banks and financial companies to consumers.

Among the cases dropped are a lawsuit against Capital One Financial Corp. alleging the bank failed to disclose alternative higher-rate accounts in its 360 Savings account program, which the CFPB claims collectively cost 360 Savings accountholders $2 billion in interest; and a suit against the Zelle network alleging it failed to protect consumers from fraud on its platform.

The agency’s decision to abandon its $95-million settlement with Navy Federal Credit Union over deceptive overdraft fees was also cited as a contributing factor. In total, the three cases “had the potential to return more than $3 billion in refunds and restitution to consumers,” according to Consumer Reports.

Founded in 1936, Consumer Reports is an independent, nonprofit organization that publishes reviews, ratings, and investigations of consumer products and services.

Decreased oversight of Big Tech and fintechs is another factor cited by Consumer Reports for the CFPB’s demise. Consumer Reports also noted that in the past year the CFPB has backed away from “longstanding efforts to lower excessive late fees for credit cards” and that a similar rule to lower overdraft fees was overturned by Congress. If enacted, the two mandates allegedly would have saved consumers $10 billion and $5 billion respectively.

“The consequences for consumers are very serious, because consumer financial protection functions were centralized in CFPB after the devastating financial crisis in 2008-2010, where there were 8 million foreclosures and millions of jobs lost due to the economic meltdown,” says  Chuck Bell, advocacy program director at Consumer Reports, in an email message. “Without a strong CFPB to supervise and oversee banks and non-bank financial companies, the U.S. will have only a patchwork system to ensure fair competition and consumer financial protection.”

Indeed, without a functioning CFPB, he alleges, “Predatory financial practices will likely flourish because there will virtual regulatory deserts in major sectors such as credit reporting, auto lending and digital payment apps. Consumers who are harmed by unfair and deceptive practices will have a much harder time getting help from anywhere, because the federal government has neutered the nation’s leading consumer financial watchdog.”

The CFPB could not be reached for comment.

Some payments-industry experts do not see the changes occurring at the CFPB, which was created in 2010 in response to the 2008 financial crisis to protect consumers from unfair and abusive financial practices, as a negative.

“For context, it’s important to bear in mind how utterly politicized the CFPB, insulated from Congressional oversight, was under [former] director Rohit Chopra. [The current] administration has tried aggressively to defang it,” says Eric Grover, principal at Intrepid Ventures.

Nevertheless, Grover points out that Congress, not the Trump administration, has the power to dissolve the agency, and it is unlikely Congress will take such a step.

“If the CFPB were eliminated, Congress would transfer its consumer-protection activities back to the Fed, the FDIC, the OCC, the NCUA, the FTC, HUD, and the Department of Education, all of which retain the institutional capacity, and in many cases the staff, to do the job,” Grover adds.