On February 9, 2025 it was reported by AP that the CFPB was ordered by the Trump administration to essentially cease all investigative activities. At this point, it is unclear what the organization may look like going forward, how it will operate or if it will exist at all. No big surprise here since Republicans have long despised the agency and tried to neuter it while democrats have heralded the agency and worked to expand it.
Created in 2010 in response to the 2008 financial crisis, which started due to the crash of the home loan industry, the mission of the CFPB is to “regulate the offering and provision of consumer finance laws and to educate and empower consumers to make better informed financial decisions”. It was created by Congress but operates independently under the Office of Management and Budget. It is important to note that the agency is not directly funded by Congress so it would be able to maintain independence from political pressure.
The CFPB has always been under pressure by banks and other finance institutions since it is a law enforcement agency aimed squarely at consumer finance companies. The arguments to eliminate it fall into three major buckets.
- It is a waste of government money and eliminating it will reduce the deficit.
- It delivers no value
- It is a duplicate regulatory agency
The evidence is overwhelming contrary on all 3 points. The agency’s budget is funded by the Federal Reserve and eliminating it will have no direct impact to the federal budget unless the Federal Reserve decides to ask for less money in future years. Fat chance of that happening. Even if the Fed decided to do the right thing, the 2024 annual budget was $810M which represents a paltry .00012% of the annual federal budget. Not really a big opportunity. Regarding effectiveness, by any measure, the CFPB is highly effective and has delivered, on average, approximately $1.25B back to consumers annually since inception. The point about role duplication is partially true. While true that other law enforcement agencies regulate the financial industry, there are large gaps which is where the CFBP focuses. Additionally, simply shifting the work to another agency solves nothing since it will just shift the dollars from one agency to another while diluting the effectiveness of the receiving agency.
In my opinion, the reason the Trump administration is going after the CFPB has zero to do with improving our Federal Government but rather to loosen the regulation of consumer finance companies such as banks, brokerages, payment processors, lenders and credit card companies. Essentially, the goal is to help the industry titans increase their profits and operate without guardrails. Deceptive practices have been, and still are, prevalent in these industries. Deceptive advertising, high interest rates, junk bonds, and exorbitant bank fees is just the tip of the iceberg. For example, currently the CFPB is litigating a $2B suit against Capital One for advertising high interest savings accounts that actually earn almost no interest at all. If successful, the winner is the American Consumer. If unsuccessful, the winners are the CEOs who will be more empowered to deceive, lie and cheat the consumer. A win for Trump and his close associates.
Neutering the CFPB is clearly a conflict of interest since the Trump Organization is comprised of many companies with both direct and direct connections to consumer finance. TrumpMortgage, TrumpFinance and his most recently cryptocurrency company are just a few. Keep in mind that Trump University, although not directly a consumer finance company, made its money essentially deceiving, defrauding and exploiting consumers. False claims, deceptive advertising and unclear costs were the hallmark of the scam. Let’s be clear, it was a scam. Trump lost fair and square in court and now he wants revenge against regulatory oversight.
And that, ladies and gentlemen, is the real reason Trump is going after the CFPB. To improve the regulatory climate so he and is associates can continue making money by ripping off the consumer. The winner will be Trump and the titans of big business who promise him fealty by bankrolling his campaign with the profits made off the backs of the American people.
Wide Open Mind 