The CFPB’s Demise

Consumer Protection: A Eulogy

Trump’s Efforts to Dismantle Consumer Protection

Carson Whitesell

May 17, 2025

Imagine a YouTube channel full of videos created by financial experts with titles like “Five tips for when you can’t pay your bills,” “Beware of scams related to the coronavirus,” “How do I dispute an error on my credit report?” and “How can I improve my credit scores?” That YouTube channel existed and was run by the Consumer Financial Protection Bureau (CFPB), an independent agency in the federal government. Since January, however, every one of those videos (and many more) has been deleted by the Trump administration. The YouTube channel is now completely empty.

A helpful YouTube channel was not the CFPB’s only way of helping Americans. This past December, the agency finalized a rule that would cap most overdraft fees (fees charged when a purchase is made that exceeds the account balance) at $5. It estimated that this cap would save American consumers $5 billion in fees per year. Overdraft fees are disproportionately paid by low-income families, so those savings would mostly benefit America’s most financially vulnerable populations.

In late March, the Senate passed a resolution by a vote of 52-48, almost entirely along party lines (the only Republican to vote against was Missouri Sen. Josh Hawley), striking down that rule. The House passed the resolution—again along party lines—in early April, and it now sits on President Trump’s desk waiting to be signed.

Why would Republicans vote against saving their constituents money? Tim Scott—South Carolina Republican, Chairman of the Senate Committee on Banking, Housing, and Urban Affairs, and sponsor of the Senate resolution—said that capping fees would limit banks’ ability to allow consumers to overdraw their accounts. While overdraft fees make up a large source of revenue for banks, that revenue has significantly declined each year since 2019. In total, overdraft fee revenue has more than halved, dropping from almost $12 billion in 2019 to $5.8 billion in 2023.

This drop is due in large part to a few banks deciding to reduce or eliminate overdraft fees because of increased scrutiny from the CFPB. Capital One and Citibank, for example, have completely eliminated overdraft fees. Bank of America reduced its overdraft fee to $10 and now offers a type of account with no overdraft fees at all. These banks still allow their customers to overdraw their accounts and can do so without losing money by restricting future overdrafts if the balance isn’t paid within a certain amount of time. These banks’ choices to reduce fees show that contrary to Tim Scott’s declaration, capping these fees would not create a substantial burden to banks’ ability to allow overdrafts.

Further, although some banks have taken these steps toward “financial inclusion,” not all have. Most large banks still have overdraft fees over $30, which can be charged multiple times per day. The CFPB’s regulation, then, would help protect low-income accountholders at these banks from incurring potentially hundreds of dollars in fees per year. Even those banks that have reduced fees did so in part because of the CFPB’s pressure.

A table displaying data on overdraft fees for four banks

Overdraft data on the four largest banks in America. The CFPB website includes data on the twenty largest banks. Source: Consumer Financial Protection Bureau.

While Congress’ resolution to strike down the regulation is a prime example of undue deference to banks’ complaints, this is just the latest step in a large, concerted effort by Republicans to shut down the CFPB.

To understand why Congressional Republicans and the Trump administration are deleting YouTube videos and striking down money-saving rules, it’s helpful to start with the 2008 Financial Crisis.

Too Big to Fail

In 2007, then-Harvard law professor Elizabeth Warren wrote an article outlining an idea for a financial regulatory agency that would protect low-income and middle-class consumers from predatory and unsafe financial practices. After the 2008 Great Recession, it became clear that the largest economic downturn since the Great Depression was caused by irresponsible behavior by large banks. These banks engaged in incredibly risky lending practices, investing enormous amounts of money into high-yield bonds backed by particularly risky home mortgages (the 2015 film The Big Short explains these complicated concepts quite well).

After Lehman Brothers collapsed in 2008, the federal government spent billions of dollars to stabilize the financial system, including by bailing banks out of the debt their poor decisions had created. The uproar over these bank bailouts at taxpayer expense (many of which have still not been repaid) led to the creation of a new, independent financial regulatory agency based on Warren’s idea. Congress passed the Dodd-Frank Wall Street Reform and Consumer Protection Act in 2010, largely along party lines.

The uproar over bank bailouts at taxpayer expense led to the creation of a new, independent financial regulatory agency based on Warren’s idea.

The Act imposed regulations and reforms on major banks and financial institutions intended to lower the risk of the type of broad systemic failure that caused the Great Recession. It created the CFPB to combat mortgage fraud and other abusive practices by the financial industry. It did, though, contain compromises that reduced the CFPB’s regulatory power from what Warren envisioned.

Warren imagined a regulatory body that would play a similar role for financial products that the Consumer Product Safety Commission plays for tangible goods like toasters. Her paper opened with a now-classic example: consumers are unable to buy a toaster with a one-in-five chance of spontaneously combusting because the Consumer Product Safety Commission and other regulatory bodies impose strict safety regulations before products ever hit the shelves. No such protections exist for financial regulations, though. A risky, predatory mortgage could have a one-in-five chance of putting a family on the street.

The uproar over bank bailouts at taxpayer expense led to the creation of a new, independent financial regulatory agency based on Warren’s idea.

Similarly, regulations don’t allow toaster prices to be changed after it has already been purchased. Long after you sign a mortgage, however, the bank can triple the price of the credit used to finance the purchase, even if the buyer has met all the credit terms.

In Warren’s original vision, the CFPB (or her version of it) would impose safety regulations on financial goods (like mortgages, loans, etc.) before banks could offer them to consumers. They would check the terms of these financial products, ensuring there were no hidden tricks or traps that would make them more financially dangerous than consumers realized.

In the Treasury Department’s proposal in June, 2009, however, they replaced this pre-clearance scheme with a “plain-vanilla” products scheme. Under Section 1036 of the proposal, the CFPB could require banks and financial organizations to offer financial products or services in a basic, so-called plain-vanilla form. These plain-vanilla products would pose lower risks to consumers through simple, more favorable terms with adequate transparency for consumers to understand their terms. Consumers must have a “meaningful opportunity to decline” plain-vanilla products before they can be offered alternative products (such as adjustable-rate mortgages, complex derivatives, and other more complex financial products).

The plain-vanilla scheme was a weakened replacement for Warren’s imagined pre-clearance, but even it did not survive Congress. When the CFPB was created by the Dodd-Frank Act, it had neither pre-clearance nor plain-vanilla powers, severely limiting its regulatory powers. Additionally, under the 2009 proposal, the CFPB would have been led by a five-member Board with four of the members appointed by the President. Instead, Congress gave the agency just a single director.

The original proposal lost steam as banks pushed back against the more systemic regulatory policies. While banks’ lobbying efforts played some role in producing a weakened version of the Dodd-Frank Act, the compromises were probably not due to some congressional desire to protect banks at the expense of consumers. According to Howell Jackson, an expert on consumer financial protection and professor at Harvard Law School, the results were “not a sign of malfeasance,” but “a sign of a political process where you had to get the right number of senators to vote for the legislation.” The Republican party has been generally anti-regulation since the Reagan administration (although it was also staunchly opposed to regulation during the New Deal era), so compromises reducing the CFPB’s regulatory power were to be expected if the Dodd-Frank Act was to be passed.

Still, it is unfortunate that these compromises benefit large banks at the expense of American consumers.

The CFPB in Practice

Under the Dodd-Frank Act, the CFPB’s mission as listed on its website is to supervise companies, “root out unfair, deceptive, or abusive acts,” write and enforce rules, “take consumer complaints,” conduct financial education, and “monitor financial markets for new risks to consumers.” It has the power to supervise banks with more than $10 billion in assets and to regulate nonbank lenders, such as issuers of mortgages, car loans, and private student loans.

Since its creation, though, the scope of CFPB action has changed drastically from administration to administration. Under the Obama administration, the agency issued new protections on mortgages, investigated and reduced abusive debt collection practices, and returned almost $12 billion in refunds and cancelled debts to consumers.

The CFPB’s mission is to supervise companies, “root out unfair, deceptive, or abusive acts,” write and enforce rules, “take consumer complaints,” conduct financial education, and “monitor financial markets for new risks to consumers.”

During Trump’s first term, he promised to dismantle the Dodd-Frank Act. While he ultimately did not repeal the Act, he did sign a law in 2018 limiting its power by easing regulations on all but the largest of banks. The CFPB’s acting director from November 2017 to December 2018, Mick Mulvaney, had been an outspoken critic of the agency and severely limited its ability to function during his time in charge. Regardless, it still carried out some of its duties and secured some victories for consumers, including a $1 billion settlement with Wells Fargo over fraudulent banking practices, as well as multiple smaller (but still major) settlements with other banks.

During the Biden administration, the agency was revitalized and issued multiple regulations aimed at saving consumers money by reducing bank fees. For example, the agency heightened its supervising of overdraft fees, which led to a $1.8 billion decrease in fees from 2022 to 2023.

The agency also issued a rule last March that lowered the average credit card late fee from $32 to $8, but a federal court blocked the rule after the Chamber of Commerce filed suit. The judge held that the CARD Act, a 2009 federal law regulating credit card practices, allows banks to issue fees as a deterrent effect. Banks argued that an $8 cap on fees significantly impairs deterrence, so the judge held that the CFPB’s rule violated the CARD Act. The Trump administration will almost certainly not appeal the order, so the rule is effectively dead.

The CFPB’s mission is to supervise companies, “root out unfair, deceptive, or abusive acts,” write and enforce rules, “take consumer complaints,” conduct financial education, and “monitor financial markets for new risks to consumers.”

In January, the agency issued a rule that would remove medical bills from credit reports, which it said could lead to an additional 22,000 mortgage approvals per year and could improve credit scores for Americans with medical debt by an average of 20 points. More mortgage approvals mean more Americans can become homeowners, thus improving economic mobility for low-income families. Rohit Chopra, the CFPB’s director during the Biden administration, stated that there is little evidence that outstanding medical debts have any correlation to consumers’ ability to pay bills. Medical debts on credit reports are often inaccurate or inflated due to the complex health insurance system. Republicans in Congress, though, have introduced resolutions to strike down the rule, just like they struck down the cap on overdraft fees.

Producing Results

Many Americans had never even heard of the CFPB before its shutdown made headlines, but a recent study shows broad bipartisan support among American consumers for the CFPB, for regulation of financial services in general, and for many of the specific policies the CFPB pursued under Biden and beforehand.

As of December 2024, the CFPB estimates that it has saved customers upwards of $21 billion through enforcement and supervisory work and imposed $5 billion in penalties on companies for violating federal consumer protection laws. Money from these penalties goes to the victims relief fund, which distributes the money to people who have been harmed by companies that break consumer protection laws. It has also received and investigated over 6.8 million customer complaints about companies, and has provided answers to over 63 million consumers who have found answers about finances on the CFPB website’s Ask CFPB database.

The CFPB has compiled quite the resume of victories for American consumers, yet its very existence is now at risk.

No More Federal Protection

On February 1, a week after taking office for the second time, President Trump fired CFPB Director Rohit Chopra. On February 7, Elon Musk and a team from the Department of Government Efficiency (DOGE) were given access to CFPB headquarters and its data systems. CFPB employees protested the unprecedented access to federal data without congressional oversight, but to little avail. Over the next week, Russell Vought became the new acting head of the CFPB, shut down its headquarters and most of its functions, and emailed employees to not “perform any work tasks” and to go on indefinite administrative leave. The agency’s YouTube videos were deleted, its website’s homepage was temporarily deleted, and the signs were removed from the headquarters building.

As of December 2024, the CFPB estimates that it has saved customers upwards of $21 billion through enforcement and supervisory work and imposed $5 billion in penalties on companies for violating federal consumer protection laws.

The agency has also dropped multiple lawsuits and cancelled settlements since February. In 2023, Toyota agreed to a $60 million settlement for abusive loaning practices. This past Wednesday, the CFPB cancelled that settlement, preventing customers who fell victim to the abuse from receiving the payouts they were promised. The Trump administration is not just trying to shut down the CFPB to prevent it from continuing its mission. It is also trying to undo as much of its past successes as it can.

Unlike during Trump’s first term, this administration has acted quickly and efficiently to gut the CFPB. What made things different this time around?

First, where the first Trump administration was marked by disorganization, the second came ready with an agenda to execute and has clearly learned from the first go around. Where the first administration was full of established DC policymakers who were willing to push back against the President’s more troubling ideas, this administration is much more willing to throw the rulebook out the window to achieve their desired results.

Second, Project 2025, the Heritage Foundation’s blueprint for the second Trump administration, explicitly calls for the abolishment of the CFPB. While Trump tried to distance himself from Project 2025 during his campaign, his first couple months in office have followed it quite closely (the former director of Project 2025 himself said in an interview with Politico that Trump’s actions so far are “beyond [his] wildest dreams” because they follow it so closely). Russell Vought himself wrote a chapter in which he called for an end to the administrative state and for a President who could make “aggressive use of the vast powers of the executive branch” to destroy the federal government, allegedly to “return power…to the American people.” The CFPB was created to preserve consumers’ financial power. Abolishing it will not return power to the people; it will give even more power to large corporations.

Project 2025 calls for wide-scale dissolution of federal agencies. The Trump administration and DOGE have acted swiftly to do so, cutting the federal workforce by approximately 135,000 workers so far, with at least 145,000 more planned reductions on the way. It has slowed or frozen funding to agencies, has effectively destroyed the EPA, Department of Education, and many smaller agencies whose duties included funding libraries, combating homelessness, and supporting economically disadvantaged communities. Closing the CFPB is clearly part of a much larger, systemic effort to deregulate and remove vital government services.

Third, corporations have been challenging the CFPB through lawsuits for years, and the administration is ready to take advantage of some of those rulings. In 2017, the CFPB investigated Seila Law LLC, who refused to comply with requests for documents. When the CFPB sued, Seila claimed that the CFPB’s leadership structure violated constitutional separation of powers. In 2020, the Supreme Court agreed, ruling that the President has the power to remove the CFPB director at will, despite Congress’ intent otherwise.

Because of the Seila ruling, the CFPB became the easiest target of the independent agencies, over which Presidents generally have less authority than the agencies that fall squarely within the Executive Department.

Presidential authority over independent agencies beyond the CFPB is limited in part by a Supreme Court case from 1935. In that case, Humphrey’s Executor v. United States, the Court held that Congress can restrict the president’s power to remove officials from independent agencies. This ruling has been unpopular with conservatives in recent years (a bit ironically, considering it’s a prime example of a conservative Court limiting overly expansive presidential powers). Many conservative lawyers and judges have called for the Court to overturn its decision, allowing for more presidential control of independent agencies.

Corporations also have a vested interest in overturning Humphrey’s Executor. The major independent agencies—the National Labor Relations Board, Federal Trade Commission, and Consumer Product Safety Commission—all regulate large corporations. These agencies provide valuable services to the American people by ensuring fair hiring and labor practices, safe products, and fair competition in a free market economy. The regulations they must enforce to do so, however, are inconvenient to the largest corporations, who would prefer to have free rein to do what they want, regardless of the impact on the public.

Recently, many of these corporations—including Amazon, Meta, Walmart, and SpaceX—have sued the various independent agencies, claiming the president should have the power to fire their officials. If their lawsuits succeed, a corporation-friendly president (like the one we have now) will be able to fire any agency officials who disagree with him. Congress intended for these agencies to remain independent from political pressures, but overturning Humphrey’s Executor would give the president the power to bend them to his will.

In fact, the Department of Justice sent a letter to the Senate Judiciary Committee stating that they would no longer defend such for-cause removal protections because it deems them unconstitutional. The DOJ will instead ask that the Supreme Court overturn Humphrey’s Executor. It is uncertain whether the Court will do so, but when the Court ultimately hears cases concerning Trump’s firing of independent agency heads, many interested parties will be watching in anticipation.

While the 2017 Seila Law ruling discussed above means that any potential change to Humphrey’s Executor will have no effect on the CFPB, there have been other court cases involving the CFPB.

In 2017, the CFPB issued a rule limiting the number of payments certain loan providers could take from consumers’ bank accounts. Prior to the rule, loan providers would try to withdraw money from borrowers’ bank accounts to collect payments. If a withdrawal attempt was unsuccessful, it could trigger overdraft fees and other charges from the borrower’s bank. The CFPB rule stated that after two unsuccessful tries to withdraw money from a borrower’s bank account, lenders can’t try again without authorization from the borrower, thus limiting unexpected additional fees.

Musk and DOGE have taken an axe to large swaths of the federal government.

In response, trade associations for lenders sued the agency in 2022, arguing that it’s funding framework was unconstitutional. They hoped that if the agency’s funding was struck down, its rules would be rescinded. The Supreme Court, however, upheld the funding in 2024, ruling against the trade associations. After delays due to the litigation, the rule finally went into effect on March 30.

Fourth, Elon Musk may stand to gain from the CFPB’s demise. The CFPB is the primary agency that supervises non-depository financial institutions like PayPal, Zelle, and Apple Pay. Without it, these payment services will have no oversight, unlike large banks who are regulated by multiple agencies, not just the CFPB. Without oversight, payment services have more opportunity to implement predatory practices that harm consumers.

Musk and DOGE have taken an axe to large swaths of the federal government.

Musk is in the process of developing X Money, a payment service through X (formerly Twitter). Some media outlets have pointed out that without the CFPB (and with access to its large databases), Musk and X Money stand to profit by having a freer path to competition with established apps like Venmo and Apple Pay.

While this may be true, it does not necessarily mean that this is a motivating factor behind shuttering the agency. As discussed above, much of the animus towards the CFPB existed long before Musk entered the realm of American politics. Further, Musk and DOGE have taken an axe to large swaths of the federal government, most of which Musk has no personal stakes in.

Still, it is worth keeping in mind if for no other reason than that it is another example of corporations benefiting from the CFPB’s fall.

What now?

The realm of consumer finance protection may not be as doomed as one might guess, however. Professor Howell Jackson believes there are a few reasons banks themselves may not be so happy about the CFPB’s demise. First, many of the statutes of limitations on federal financial regulations are five years, and large banks and their lawyers recognize that five years from now, the country could again have a pro-regulation administration. If these institutions were to start acting with complete disregard for consumer protection, they may face severe consequences when the next president takes office in 2029.

Additionally, the CFPB’s power extends only to the largest banks. Smaller banks—those with assets under $10 billion—are still regulated by the Office of the Comptroller of the Currency (OCC) and the Federal Deposit Insurance Corporation (FDIC). While large banks may no longer be bound by law without an effective regulator, small banks will (in theory) continue to be policed by these agencies. It seems fundamentally unfair that small, local banks will be bound by laws that aren’t enforced against mega-banks.

Further, the Dodd-Frank Act and other consumer protection laws can be enforced through other avenues. Section 1042 of the Dodd-Frank Act grants authority to state attorneys general to enforce its consumer protection provisions. While the federal government might not police banks for the next four years, blue states likely will. California and New York have previously brought enforcement actions under Section 1042, and they appear poised to do so again, with New York suing Capital One on May 14 after the CFPB dropped a similar suit in February. While states can enforce consumer protection laws, it will be more difficult for them than for the CFPB.

Large banks might find that they prefer centralized regulation under the CFPB to state enforcement. As Professor Jackson put it, “most practitioners prefer a uniform national treatment as opposed to variations across the states.” If New York enforces laws differently from California, and both enforce more stringently than Alabama, banks and their lawyers will have a difficult time determining appropriate practices.

Fighting the Good Fight

There is some hope, albeit a small one, that the CFPB will survive. The National Treasury Employees Union, which represents CFPB employees, filed suit against Russell Vought on February 9 in NTEU v. Vought. The complaint challenges the administration’s efforts to dismantle the CFPB as a violation of the separation of powers; Congress created the CFPB to serve as an independent agency, so the administration can’t prevent it from performing its congressionally-mandated responsibilities.

Judge Amy Berman Jackson of the DC District Court issued a preliminary injunction, which is an order meant to “preserve the status quo pending the outcome of litigation.” In other words, the court wanted to ensure the CFPB would not be completely dismantled before the court could consider and rule on the issue.

The preliminary injunction stated that Vought and the administration could not delete any data or websites, terminate any employees (except for cause related to their individual performance or conduct), or enforce the February 10 stop-work order. Additionally, they must reinstate all employees terminated between February 10 and the issuing of the injunction on March 28. The injunction effectively instructs the administration to keep the CFPB operating as it is required to by statute until the judge issues a final ruling on the case.

Judge Jackson’s preliminary injunction memo, quoting a now-infamous X post by Elon Musk.

Throughout the litigation process, the lawyers and witnesses for the defendants continuously lied about their actions and intentions. Judge Jackson called them out for their behavior in her memo accompanying the injunction. Defendants’ attempted to suggest that their stop-work order (which, remember, said “please do not perform any work tasks”) was not actually a stop-work order. Judge Jackson said the claim was “so disingenuous that the Court is left with little confidence that the defense can be trusted to tell the truth about anything.”

Later in the memo, while describing the CFPB’s Chief Operating Officer’s answers on the witness stand, she said that “[h]e had the demeanor of an abused wife brought to court by her husband to drop the charges.” In Judge Jackson’s view, even the officials complicit in the dismantling understand that it is wrong and, frankly, unconstitutional.

Finally, at the end of the opinion, she concisely stated the main problem with the administration’s actions and the reason they should be declared illegal: “If the President finds the Consumer Financial Protection Act to be unsatisfactory, the administration will remain completely free to advance his agenda by proposing legislation that reconfigures the agency in a manner that is consistent with his policy preferences.” Then, Congress can decide if the agency should be modified or eliminated, as is their constitutional duty.

Vought immediately appealed the preliminary injunction. On April 11, the DC Circuit Court issued a partial stay on the preliminary injunction. The court ruled that defendants can terminate employees who they have determined to be unnecessary to the CFPB’s statutory duties. They noted that there must be a “particularized assessment” of these employees before firing them.

The CFPB immediately sent notice to more than 1,400 staffers that they would be laid off. This reduction-in-force would leave only 207 employees to perform all the duties Congress has delegated to the agency. Judge Jackson blocked the layoffs, stating that the defendants had not even tried to follow the procedures set forth by the Circuit Court. She stated that the defendants were “thumbing their nose at both [her] Court and the Court of Appeals.”

Only Congress can decide if the agency should be modified or eliminated, as is their constitutional duty.

On April 28, the DC Circuit upheld Judge Jackson’s order and removed the partial stay on the initial preliminary injunction. In other words, the Court returned the preliminary injunction to its full strength, reversing its earlier course because of the administration’s obstinance and efforts to undermine the courts’ orders.

Both Judge Jackson and the Circuit Court have demonstrated frustration with these administration’s actions. As in other cases, the administration’s lawyers and officials are acting in bad faith to circumvent judicial orders and do whatever they want. For now, courts are standing up to this behavior, but it appears likely that the judiciary’s authority will soon be tested.

Congress can decide if the agency should be modified or eliminated, as is their constitutional duty.

Oral arguments on the blocked layoffs were held on May 16. A decision on the entire case, however, is not likely to come for many weeks.

Another Path to Destruction

Ultimately, however, the outcome of NTEU v. Vought doesn’t matter if Congress itself decides to close the CFPB. The House Financial Services Committee recently submitted their section of the budget reconciliation package by a party-line vote. The Republicans’ proposal reduces the CFPB’s funding by 70 percent and calls for excess amounts of the Civil Penalty Fund (which is used to provide restitution payments to victims of financial fraud) to be transferred to the Treasury Department instead of being kept in reserve for future use.

These measures were supposedly proposed to help save taxpayer money. Since the CFPB’s funding comes from Federal Reserve revenues, however, these cuts have no effect on congressional budgets. Further, the estimated $574 million in savings from cutting CFPB funding makes up about 0.009% of the $6.75 trillion the federal government spent last year. These miniscule savings come at the expense of an agency that has brought more than $21 billion in relief for millions of Americans since its inception.

The estimated $574 million in savings from cutting CFPB funding makes up about 0.009% of the $6.75 trillion the federal government spent last year.

If these proposed cuts pass through Congress, there is no path for relief. Similarly, if Congress were to pass a bill dismantling the CFPB entirely, American consumers would simply be out of luck. Many states, nonprofits, community organizations, and academics have urged Congress to protect the CFPB, and congressional Democrats will almost certainly oppose efforts to defund or dismantle the agency. Despite the broad support the CFPB enjoys, though, its enemies have more power right now.

The estimated $574 million in savings from cutting CFPB funding makes up about 0.009% of the $6.75 trillion the federal government spent last year.

Although it is hanging on by a thread, the CFPB could survive the next four years. The court in NTEU v. Vought could rule against the administration. Congress could realize the CFPB has greatly helped the American people and choose to protect it. American consumers (like you, the reader) could reach out to their representatives to urge them to do so.

If these measures fail, we can only hope that the states will take up the consumer protection sword until a future Congress and president can right the current wrongs.