It might not be quite as drastic a cut as one that would leave only “five men in a room,” but the Consumer Financial Protection Bureau (CFPB) reportedly has let go more than 1,400 of its approximately 1,700 employees as of Thursday, April 17, and is turning its ship's wheel significantly.
Now, there’ll be about 200 CFPB employees left to carry out the agency’s duties, according to an article published by Wired yesterday evening.
On Wednesday before the staff reduction, an internal memo was circulated spelling out the agency’s supervision and enforcement priorities for this year. That memo was posted on X by Brian Schwartz, a White House economic policy reporter at the Wall Street Journal.
The memo indicates more of a military-themed mission for the CFPB, which will now focus its resources “on pressing threats to consumers, particularly service members and their families, and veterans.” In addition, the agency is relinquishing many of its former enforcement activities and leaving them for the states to handle.
The CFPB “will shift resources away from enforcement and supervision that can be done by the States,” according to the memo, which also rescinds all prior enforcement and supervision priority documents that’ve been issued.
The CFPB’s priority areas will be:
- Mortgages (which the memo states will get “the highest priority”);
- Fair Credit Reporting Act data-furnishing violations;
- Fair Debt Collection Practices Act violations;
- Fraudulent overcharges and fees; and
- Inadequate protection of consumer data that results in consumer losses.
The CFPB will shift its attention “back to depository institutions,” according to the memo, which notes that the agency had “completely flipped” such a focus that it had at its inception in 2012 to now more than 60% on nonbanks and 30% on banks and depository institutions.
“The Bureau must seek to return to the 2012 proportion and focus on the largest banks and depository institutions,” the memo directs.
'Alive and kicking'
“Far from heading to an early grave, the CFPB is alive and kicking — just in a world that largely excludes IMBs [independent mortgage banks] and Big Tech,” James W. Brody, Esq., senior partner at Garris Horn LLP, told NMP regarding the changes at the CFPB. “While we never believed the CFPB would disappear, given its statutory foundation and survival during the first Trump Administration, its latest priorities mark a sharp pivot in consumer protection strategy.”
“For non-depository IMBs, this means navigating a disjointed regulatory landscape that’ll be driven by state-level enforcement,” Brody noted.
Other points in the memo include that supervision “events” by the CFPB will be cut in half, the memo states, and supervision that does take place will focus on correcting and remedying consumer harm. And, regarding such harm, the CFPB will aim to get consumers their money back directly, rather than filling its penalty fund.
Again noting the separation between the CFPB and state enforcement activities, the agency “will respect Federalism,” the memo dictates, and will deprioritize participating in supervision / enforcement activities in which the states have their own authority. Also, the agency won’t engage in redlining or bias assessment supervision or enforcement “based solely on statistical evidence and/or stray remarks.”
On that point, “the exclusion of disparate impact claims in fair lending investigations raises concerns about minority protections, while the deprioritization of nonbank oversight has left many CFPB and Fair Lending attorneys dusting off their résumés and looking at homes in Blue states,” Brody commented.
'Surprised' at depository institution focus
Joann Needleman, partner and leader of the Banking and Financial Services Practice at Clark Hill and a former member of the CFPB Consumer Advisory Board, noted it’s unclear how much of this new playbook Jonathan McKernan, President Trump’s nominee for CFPB Director, will keep or revise, “but since [Acting Director] Russ Vought is in charge of the purse, this memo is basically saying ‘do less with less,’” she told NMP.
McKernan’s nomination was approved in early March by the U.S. Senate Banking Committee, but a vote by the full Senate to confirm isn’t expected till sometime in May.
“I’m surprised by the decision to pull away from non-bank supervision and focus on depository supervision, when that is already being accomplished by prudential regulators,” Needleman said. “Isn’t that the overlap that they are trying to avoid?”
She underscored that the CFPB’s remaining resources will go toward supervision in mortgage, debt collection, and credit reporting — and the shift toward federalism will put the states in “overdrive” in terms of financial regulation and enforcement activity.
“States are already being aggressive,” Needleman pointed out, “and this will put them into overdrive to the extent they have the resources to do so. We are seeing extensive activity at the state level.”
Needleman speculated that the CFPB’s shift in focus eventually could help spur more investment in fintech and financial services. “Given the market and the economy, I’m not so sure this will happen immediately,” she told NMP. “Once the market stabilizes, this will spawn increased expansion for the financial services industry.”
However, the memo “is a bit contradictory,” Needleman contended, “in that if you are focusing on fraud, I’m not sure how you do that without supervision and enforcement.”
