The Wall Street Journal has reported that a letter was sent to Consumer Financial Protection Bureau (CFPB) staffers from Bureau Chief Legal Officer Mark Paoletta earlier this week outlining how the agency will channel its focus on “tangible harm to consumers” by reallocating resources from enforcement and supervision activities that can be done 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 All prior enforcement and supervision priority documents are hereby rescinded.”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 from Paoletta continued 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 Bureau must seek to return to the 2012 proportion and focus on the largest banks and depository institutions,” Paoletta wrote.
Continued Reduction in the Bureau’s Workforce
According to news outlet Government Executive, the CFPB has issued Reductions in Force (RIFs) for roughly 1,500 of its personnel, amounting to approximately 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. Employees were informed they would be locked out by 6 p.m. on April 18, and would be separated from federal service by June 16, barring qualifications for other available positions.
Turnover at the Bureau began in February with the dismissal of CFPB Director Rohit Chopra by President Donald Trump, who had served in the role since being appointed by President Joe Biden in 2021 for a five-year term. Less than 48 hours after Chopra was removed as Director of the Bureau, Treasury Secretary Scott Bessent was named acting head of the CFPB.
Russell Vought, Director of the Office of Management and Budget (OMB), then took over as Acting Administrator of the CFPB, instructing Bureau staffers to work from home, while halting all CFPB enforcement efforts.
Jonathan McKernan, most recently a Director on the Board of the Federal Deposit Insurance Corporation (FDIC), was then nominated by the Trump administration as next Director of the CFPB. McKernan’s nomination has yet to be considered by the Senate.
The CFPB was established by the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 in the wake of the financial crisis of 2007-2008. The role of the CFPB is to review the practices of companies, banks, and lenders in the financial services industry and work to protect consumers from predatory practices. Authorized by Congress in 2010, the role of the CFPB is to reform predatory and deceptive financial industry practices that policymakers believed led to a wave of mortgage defaults, and ultimately to the crisis and subsequent Great Recession.
