Under the Trump administration, potential modifications to key consumer protection regulations, encompassing aspects like credit cards and medical debt, are under consideration.
"Relax, team at the CFPB, you've got a day off," RussellVought, the temporary director, penned in an email to staff on Monday. Obtained by CNN, the message confirmed the bureau's headquarters would be shut down this week.
This break comes after a weekend instruction from Vought ordering a pause in a multitude of activities, including halting "all supervision and examination activity." This directive expands upon the narrower freeze ordered the previous week by the former acting director, Treasury Secretary Scott Bessent.
The freeze results in a number of limitations for the CFPB, which was established by Congress under the 2010 Dodd-Frank Act to safeguard consumers from financial abuses and regulate providers of various financial services. As a result, the agency is temporarily unable to engage in new hires, establish regulations, pursue lawsuits, enforce actions, or conduct investigations. The bureau will also suspend the activation dates of recently implemented consumer safeguards and cease shareholder engagements.
With such a comprehensive halt on interventions, advocacy groups have grave concerns about the implications for American consumers. Particularly concerning is the hold on enforcement and supervisory activities due to the increased vulnerability to financial predators.
At a Senate Banking Committee hearing on Tuesday, Democratic Sen. Elizabeth Warren voiced her concern plainly, "There are now zero cops supervising the $18 trillion consumer lending market. Zero cops. Investigations into illegal foreclosures and auto repossessions – cancelled. Exams of giant credit card issuers to weed out unlawful junk fees – cancelled. Probes of illegal debt collection practices – cancelled. Rules to save people billions of dollars – cancelled."
There remains no clarity on when the freeze will conclude. "As long as the CFPB remains inactive, wrongdoers proceed unpunished. It doesn't mean perils cease to occur just because the bureau decided to take a break," said Adam Rust, director of financial services at the Consumer Federation of America.
What safeguards may be under threat
Predicting the future of various consumer protections and enforcement actions with certainty is challenging. Nevertheless, industry observers envision potential changes and challenges under the new CFPB leadership.
Here's merely a selection of what could be at risk:
Medical Debt on Credit Reports Ban:The recently finalized rule, due to commence on March 17, bans the addition of consumers' medical debt on credit reports and prohibits lenders from leveraging select medical information to inform loan decisions. Critics have already spoken out against the rule and taken legal action to prevent it from taking effect.
Capping Credit Card Late Fees:A rule finalized by the CFPB under its former head Rohit Chopra capped most credit card late fees at $8, a significant decrease from the average of $32. A federal judge in Texas delayed the implementation of this rule due to a lawsuit brought forth by banking and business groups. The rule is now vulnerable to review, and it remains to be seen if the CFPB will continue defending it in court.
Limiting Bank Overdraft Fees:In December, the CFPB finalized a rule capping most bank overdraft fees at $5, slated to be implemented in October. The rule seeks to save consumers billions of dollars annually, but banking and credit union associations have already challenged it in court. It remains unclear if the new CFPB leadership will support the rule and defend it in court.
Making Bank Switches Easier:The CFPB finalized a rule in October, aimed at facilitating the transfer of financial data between banks and non-bank financial technology companies, or fintechs. Fintech companies might profit from this rule, but it also puts consumer privacy and account security at risk. An immediate challenge isn't expected, but the rule's future remains uncertain.
Suing Banks for Zelle Fraud:In late December, the CFPB sued JPMorgan Chase, Bank of America, and Wells Fargo for allegedly failing to prevent fraudulent transactions on Zelle, the popular peer-to-peer payment system. Given the halt in enforcement and lawsuits, it appears that this issue may not be resolved soon.
Will the agency survive?
As the freeze persists, uncertainty surrounds the future of CFPB and its potential to protect consumers. Rumors of President Trump's intention to "totally eliminate" the CFPB and references to it as deceased by Elon Musk have added to the unrest.
Some CFPB employees and observers are concerned that the Trump administration desires to dismantle the agency's ability to deliver real benefits to everyday Americans. But Osborn, a senior fellow at the Brookings Institution, sees hope in the fact that the CFPB was founded by Congress, ensuring its permanence under the existing Dodd-Frank Act.
"The Consumer Financial Protection Bureau has managed to recover over $21 billion for families swindled by Wall Street, despite significant opposition from Republicans in Congress and the courts. They will fail again," Warren wrote in a public post.
Regardless of the length or severity of the freeze, the consequences could be far-reaching and harm consumers in various ways. Hostile sentiments towards the CFPB may eventually result in its demise, but for now, its impact on the lives of many Americans is under threat.
The freeze on activities at the CFPB affects its ability to engage in new hires and establish regulations, potentially delaying the implementation of rules like the one capping credit card late fees. Advocacy groups are worried about the impact on consumers, especially the hold on enforcement and supervisory activities that could increase vulnerability to financial predators.
The recent email from RussellVought confirmed a pause in activities, including halting "all supervision and examination activity," which expands upon the freeze ordered by the former acting director. This could affect the implementation of the rule that bans the addition of medical debt on credit reports, which critics have already challenged in court.
