Aashish Kiphayet/NurPhoto via AP
Approximately 100 workers of the Consumer Financial Protection Bureau rally outside of its Washington headquarters on February 8, 2025.
No federal agency has had a bigger target on its back in the last 15 years than the Consumer Financial Protection Bureau. Pro-business conservatives are simply offended by an agency with a mission to protect ordinary people, the lowest rung on America’s totem pole, from financial scams, and they have yearned to litigate, legislate, and intimidate it out of existence. All of the lawsuits have failed at erasing the CFPB’s fundamental structure; the last opinion preserving it was written by Clarence Thomas. Legislative efforts to kill the bureau never got off the ground.
Frustrated in Congress and the courts, MAGA has turned to snuffing out the CFPB by executive fiat. And even there, they haven’t gotten everything that they wanted, while their successes are likely to be beaten back in the courts.
Russell Vought, the Project 2025 architect and White House budget director who took over as acting CFPB director on Friday, expanded a shutdown of the bureau’s activity in a Saturday night memo, in ways that conflict with established law. He then attempted to defund the CFPB, only to find that it was already funded for the rest of the fiscal year.
Treasury Secretary Scott Bessent, who lasted all of one week as acting director after the firing of Rohit Chopra, had already shut down most of the CFPB’s day-to-day functions last Monday. He even added a gift to Big Tech a day later, by stopping the CFPB from designating companies with payment apps for supervision.
But Vought took this a step further. His midnight memo repeated Bessent’s pause on rulemaking, enforcement actions, settlements, public communications, and litigation, but added that the bureau must “cease all supervision and examination immediately” and “cease all stakeholder engagement.” He also changed Bessent’s directive to “not commence, take additional investigative activities related to, or settle enforcement actions,” by adding that the CFPB cannot “open any new investigation in any manner, and cease any pending investigations.”
All of these are bad, but the supervision restriction is particularly incendiary. As former CFPB official Julie Margetta Morgan explains, supervision is the lifeblood of any financial regulator, the “first line of defense against scammers, predatory banks, and tech companies stealing your financial data.” This takes hundreds of examiners who oversee financial firms out of the field, leaving the multitrillion-dollar consumer financial markets exposed and ripe for scam artists.
It also means that small community banks are now regulated more than big banks. As part of a political compromise during the creation of the CFPB, it supervises only banks with more than $10 billion in assets. The other banking regulators handle banks under $10 billion. Since the other regulators are still active, smaller banks are the only ones being checked right now for compliance with things like the Truth in Lending Act, the Home Mortgage Disclosure Act, and more. This could threaten competition, since big banks will for the time being have lower compliance costs and a freer rein to profit from cheating customers. The playing field was just unbalanced in favor of the big banks.
The Independent Community Bankers of America, which welcomed Vought as acting director on Saturday, did not respond to a request for comment.
Vought tried something else on Saturday, but it was a bit misreported. He sent a letter to the Federal Reserve refusing a quarterly drawdown in funds for agency operations for the third quarter of fiscal year 2025, which begins April 1. (The CFPB is funded through drawdowns from the Federal Reserve, not annual appropriations from Congress.) But the contents of the letter reveal that the previous leadership of the CFPB was quite smart in preparing for Trump and Vought’s ascendancy.
“During my review of the Bureau’s finances, I have learned that the Bureau has a balance of $711,586,678.00 in the Bureau of Consumer Financial Protection fund,” Vought wrote. He reasons that “no additional funds are necessary to carry out the authorities of the Bureau for Fiscal Year 2025.” That may be correct; the CFPB in the prior two years has drawn down around $720 million annually. Clearly, the prior leadership anticipated that Vought would, as former budget director Mick Mulvaney did when he was acting CFPB director in Trump’s first term, try to deny the agency funds. So they drew down enough in advance to operate through the end of the fiscal year. “It’s the only thing that has brought me joy,” said one former CFPB official.
It should be said that none of what Vought did yesterday was legal, at least according to prominent critics. Adam Levitin, a law professor at Georgetown University who served on the CFPB’s Consumer Advisory Board from 2012 to 2015, explained that the statute creating the CFPB is pretty clear that the bureau “shall require reports and conduct examinations on a periodic basis” for at least the non-bank entities it covers. “Shall” has a very specific legislative meaning. Maybe you could temporarily pause the frequency of supervision, but you cannot stop it entirely. (Vought appears to have more wiggle room on supervision of large banks, where there isn’t the same requirement for examinations.)
Levitin has also pointed out that the statutes the CFPB administers can only be altered by Congress, and remain in place whether the bureau is enforcing them or not. State attorneys general can enforce them, in patchwork ways that banks will probably like less than the current federal format.
Elon Musk’s DOGE team has been mucking around at the CFPB. The bureau’s union has raised alarm about potential breaches of the vast storehouses of data the bureau receives from consumers and regulated entities. “The CFPB has gathered a wealth of proprietary information from big tech payment platforms that could be exploited by someone with a conflict of interest to corner the payments industry,” the union raised as an example.
The CFPB homepage has had a “404: Page Not Found” message since Friday night, though all other links at the site work.
Litigation is likely to get some aspects of the CFPB working again. And some unlikely participants may support that litigation. Back in 2023, when right-wing advocates tried to render the CFPB’s funding mechanism unconstitutional, mortgage bankers freaked out, because they realized that the rules the bureau administers, updates, and modifies are actually critical to smooth functioning of consumer financial markets. “All of the regulations that organize daily financial transactions for 300 million people were just called into question,” University of Utah professor and former CFPB official Christopher L. Peterson told the Prospect at the time. That uncertainty is actually bad for business.
For now, the zealots who welcome this kind of chaos are winning out, temporarily. And the agency that has returned over $21 billion to victims of financial fraud, abuse, and deception since its creation in 2010 is on ice.
