According to news outlet The Guardian, staffers at the Consumer Financial Protection Bureau (CFPB) feel that Americans who fall victim of financial crimes will have “nowhere to turn” if the Trump administration stays its course and continues staffing cuts at the Bureau.
Government Executive recently reported that the Bureau issued Reductions in Force (RIFs) for roughly 1,500 of its personnel—impacting amounting roughly 88% of its workforce. In addition to the RIFs, the Bureau reportedly slashed 50% of those responsible for inspection operations of the nation’s financial services companies.
The Guardian found an attorney at the Bureau who commented under anonymity, “The agency that Congress created after the last financial crisis to help prevent another financial crisis is currently completely handcuffed from working. And we are on the verge of another major financial crisis, so it’s terrifying. The one thing we were created to do we can’t do–at a time when we’re most needed.”
Staving Off Mass Layoffs
Just last week, Reps. Maxine Waters and Hakeem Jeffries, along with Sens. Chuck Schumer and Elizabeth Warren, led 233 current and former Members of Congress, including the entire Senate Democratic caucus, in filing an amicus brief in defense of the CFPB remaining open and operational. This group includes former Rep. Barney Frank and former Sen. Chris Dodd, the lead architects of the Dodd-Frank Wall Street Reform and Consumer Protection Act, which established the Bureau in the aftermath of the 2008 financial crisis.
While the Trump administration and Elon Musk’s Department of Government Efficiency (DOGE) have made several attempts to eliminate the CFPB without Congressional approval, the amicus brief led by Reps. Waters and Jeffries makes it clear in that the sole authority to do so lies with Congress, as Congress created the agency. This Constitutional power holds true regardless of any President’s personal views about the agency.
“The administration’s actions, if allowed to occur, would not just be unconstitutional—they would also be disastrous. As the Supreme Court has explained, eliminating the CFPB would ‘trigger a major regulatory disruption and would leave appreciable damage to Congress’s work in the consumer-finance arena,” wrote the lawmakers in the brief. “…Without the CFPB, for example, consumers would have nowhere to turn for timely assistance from the federal government for help confronting unfair practices in the financial services industry. See 12 U.S.C. § 5493(b)(3)(A) (mandating the creation of a unit to give that assistance). Without the CFPB, consumers would not have access to the vital educational information published by the Bureau on consumer financial products and services. See, e.g., 15 U.S.C. §§ 1646(a), (b) (requiring such reports). And without the CFPB, banks and nonbanks’ legal violations would go uninvestigated and federal consumer protection laws would be underenforced.”
Leadership in Flux
Since February, Russ Vought has served as Interim Director of the Bureau. In mid-February, the Trump administration nominated Jonathan McKernan, most recently a Director on the Board of the Federal Deposit Insurance Corporation (FDIC), as next Director of the CFPB. McKernan was awaiting Senate confirmation to lead the Bureau when the Trump administration shifted gears and nominated McKernan to serve as Undersecretary of Domestic Finance at the U.S. Department of the Treasury. As of last week, President Trump reportedly will withdraw McKernan’s nomination as CFPB Director in lieu of his nomination to the Treasury Department. Vought’s term as Interim CFPB Director has a cap of 210 days. An anonymous Bureau attorney told The Guardian, “I think the goal is to try and close the agency before Vought’s time is up as Acting Director, which is why they keep pressing so hard to try to be allowed to [terminate] everybody immediately.”
Seeking a Shift in Policies
The Wall Street Journal recently reported a letter was sent to CFPB staffers from Bureau Chief Legal Officer Mark Paoletta outlining how the agency will channel its focus on “tangible harm to consumers” through a reallocation of resources from enforcement and supervision activities that executed by states.
“The Bureau will focus its enforcement and supervision resources on pressing threats to consumers, particularly service members and their families, and veterans,” said Paoletta in the memo. “To focus on tangible harms to consumers, the Bureau will shift resources away from enforcement and supervision that can be done by states. All prior enforcement and supervision priority documents are hereby rescinded.”
The memo notes that the Bureau will turn its attention to mortgage fraud its “highest priority,” followed by Fair Credit Reporting Act (FCRA)/Regulation V data furnishing violations; Fair Debt Collection Practices Act (FDCPA)/Regulation F violations relating to consumer contracts/debts; various fraudulent overcharges, fees, etc.; and the protection of consumer info resulting in actual loss to consumers.
And while listing what will take enforcement precedence moving forward, the Bureau announced that it will deprioritize the following:
- Loans for “justice involved” individuals (criminals)
- Medical debt
- Peer-to-peer platforms and lending
- Student loans
- Remittances
- Consumer data
- Digital payments
In shifting its supervisory efforts back to depository institutions, Paoletta noted that in 2012, 70% of the CFPB’s supervision focused on banks and depository institutions, and 30% on nonbanks. In his memo, he noted that those figures have reversed course, as more than 60% of CFPB’s supervision is focused on nonbanks, and less than 40% on banks and depository institutions.
The attorney who spoke anonymously to The Guardian about the CFPB’s shift in direction added, “To some extent, I think it’s a show to say they’re doing something. All it does is create confusion. They think they are being super business-friendly, but everything they’ve done so far is actually not at all helpful to most of the businesses we regulate. We’re not doing enforcement, and we’re not doing any examination against some of the worst of the worst. We want to stop the harm before it happens, because that’s better for everyone. The kinds of questions that get asked, it’s clear they don’t know what we do, and they don’t care.”
Click here for more on The Guardian’s conversation with CFPB staffers regarding the direction of the Bureau.
