Trump's Halt On CFPB Raises Big Concerns: Will Key Consumer Protections Survive?

The Consumer Financial Protection Bureau (CFPB), a key U.S. agency, has ground to a halt under the Trump administration, raising concerns that the pause in operations could leave nearly $18 trillion in American consumer debt with less oversight and regulation.

Founded in 2011 after the 2008 financial crisis, the CFPB is tasked with regulating consumer finance, including overseeing credit card companies, mortgage lenders, and debt collectors.

The independent agency, championed by former senator Elizabeth Warren, was designed to ensure financial fairness and protect consumers.

However, under recent actions by the Trump administration, many of its operations have been paused. Staffers report that meetings and work assignments have been wiped from their calendars, and even the agency's website faced technical issues.

By Monday evening, visitors to the CFPB's homepage were greeted with a "404: Page not found" error, NBC reported.

CFPB's acting director, Russell Vought, reportedly asked the staff on Monday to "not perform any work tasks," announcing the closure of the agency's headquarters this week.

Meanwhile, the Elon Musk-led Department of Government Efficiency has reportedly attempted to gain access to CFPB personnel information.

The agency, founded with bipartisan support and funded by the Federal Reserve System, has long faced criticism from conservatives who argue that it lacked sufficient oversight and often exceeded its regulatory reach, with some even calling for its abolition.

What does the CFPB oversee?

The CFPB is responsible for establishing regulations and taking action against unfair, deceptive, or harmful practices in the financial industry. It oversees a wide range of entities, including banks, mortgage companies, credit card providers, student loan servicers, payday lenders, money transfer firms, credit agencies, and debt collectors, AP reported.

Under the Biden administration, the CFPB implemented rules to limit bank overdraft fees and eliminate medical debt from credit reports.

The agency also took legal action against financial companies that misled consumers and employers who misled their workers, in addition to targeting excessive fees and harmful lending practices.

Efforts to dismantle the CFPB

Since its creation, the CFPB has been under attack, especially from GOP lawmakers and Wall Street critics.

During President Donald Trump's first term, Mick Mulvaney was appointed as CFPB director, a vocal critic of the agency. He reduced its ability to tackle issues like payday lending and discrimination cases.

However, the CFPB had a more successful run under the Biden administration, recovering nearly $20 billion for consumers.

Now, under the Trump administration's push for deregulation, several key consumer protections may be jeopardized. For example, the CFPB had implemented rules limiting overdraft fees, capping credit card late fees, and banning medical debt from being included in credit reports. These changes have already faced opposition, with lawsuits from industry groups.

Why CFPB is under fire

Before Trump took office, banks and industry groups often sued to block the CFPB's rules.

For example, in 2017, the bureau tried to limit payday lenders from making too many withdrawals from customers' bank accounts. Payday lenders challenged the agency's funding, claiming it was unconstitutional. However, in May 2024, the U.S. Supreme Court ruled in favor of the CFPB, upholding its funding model, CNN reported.

On Monday, Trump defended his administration's efforts to reform the agency, stating that it was "set up to destroy people."

What's at risk for consumers?

Several critical protections could be delayed or reversed under the current administration. These include:

Medical debt and credit reports: A rule was introduced to prevent medical debt from appearing on consumers' credit reports and stop lenders from using certain medical details to decide on loans. The rule was set to be implemented on March 17.

Credit card late fees: The CFPB had introduced a rule to cap credit card late fees at $8, down from an average of $32, which was expected to save consumers billions of dollars annually. A federal judge recently blocked its enforcement, and the future of the rule now seems uncertain.

Overdraft fees: The CFPB also sought to limit overdraft fees, capping them at $5 instead of the typical $35. The new rule, set to take effect in October, would help save consumers up to $5 billion a year, but now faces legal challenges.

Open banking: A new rule designed to make the process of switching banks and sharing financial data with fintech comapnies easier might be delayed. It aims to improve competition and security, but banking associations have sued the CFPB, arguing the rule risks consumers' privacy.

Zelle fraud: The CFPB took legal action against three major banks -- JPMorgan Chase, Bank of America and Wells Fargo -- over fraud on the Zelle payment system. The agency stated that, over the past seven years, hundreds of thousands of customers at the three banks, which co-own Zelle with four other banks, have lost more than $870 million. Zelle has denied the figure.