Cutbacks and potential workforce reductions continue to plague federal agencies, including the Department of Housing and Urban Development (HUD) and Federal Housing Administration (FHA). Yet, among those efforts, the Consumer Financial Protection Bureau (CFPB) remains a standout as a target for possible full-on deletion.
The present status of the CFPB is, effectively, a stay of execution, with a “work stop” and potential full defunding as well as a nearly complete workforce jettison in the cards. But, at the same time, President Trump has now nominated former FDIC board member, Jonathan McKernan, to be CFPB’s permanent director — indicating there may yet be a future for the bureau.
In the interim, it’s worth pondering: should the CFPB even exist? That, of course, depends on who you ask.
Starting at the top with President Donald Trump, the current administration has called the CFPB an impediment to businesses and business progress, “a regulator of Main Street, not Wall Street.”
The President himself said earlier this month he wants to eliminate the agency "because we're trying to get rid of waste, fraud, and abuse," per CBS News, and also emphasized the CFPB is "very important to get rid of," in part because the agency was "set up to destroy some very good people," as reported by ABC News.
Sen. Ted Cruz (R-Texas) on Jan. 29 introduced the “Defund the CFPB Act,” and the bill was co-sponsored by a group of six senators, including Sens. John Barrasso (R-Wyo.), Rick Scott (R-Fla.), Steve Daines (R-Mont.), Marsha Blackburn (R-Tenn.), Mike Rounds (R-S.D.), and Mike Lee (R-Utah).
“The CFPB is an unelected, unaccountable bureaucratic agency that has imposed burdensome and harmful regulations on American businesses, banks, and credit unions," Cruz stated upon introducing the bill. "Enacting this legislation would save American taxpayers billions of dollars, and I call on the Senate to expeditiously take it up and pass it.”
That bill very succinctly seeks to “limit to $0 the amount that the Director of the Bureau of Consumer Financial Protection may request to fund the activities of the Bureau.”
The Texas Bankers Association applauded the legislation, claiming “the Bureau over the last four years has been unaccountable for bureaucratic over-reach and politicized regulation that harms small businesses and community banks that serve them.”
Further, the organization accused the CFPB of “bureaucratic hypocrisy” and discrimination against its own employees, and also noted the agency is a consumer data security risk, since CFPB “revealed in 2023 that it exposed the data of over a quarter million Americans.”
What have we been hearing at National Mortgage Professional? One of NMP's readers who provided feedback went so far as to call the CFPB “a clown show” run by the Democrats. Likewise, another NMP reader said they find the agency incompetent, apparently having “no clue what [laws and matters] they cover, and they [the CFPB] don't care.”
Still, rather than a total deletion of the CFPB, that latter NMP Daily reader noted that “revision, from where I'm sitting, is a very good thing.”
Flipside
On the other side of the coin, Democrats in Congress and many consumers have expressed their vehement opposition to a removal or shutdown of the CFPB, claiming the agency is an important and effective channel for protecting consumers against financial fraud and abuses.
And now, nearly half (23) of the state attorneys general are arguing that the current work-stop of the CFPB will “cause irreparable harm.”
“The sudden withdrawal of ... CFPB services, supervision, and collaborative assistance will inflict immediate harm on States and their residents,” according to a “friend of the court” letter dated Feb. 19 from the AGs supporting a lawsuit filed by Baltimore Mayor, Brandon M. Scott, and the City Council of Baltimore. That complaint seeks to prevent defunding of CFPB under Acting Director Russell Vought.
To quote their letter, the coalition of state AGs argues:
- The absence of statutorily mandated services provided by the CFPB will harm consumers’ wellbeing and the states’ own enforcement efforts;
- State-chartered banks will be unfairly disadvantaged by the CFPB’s abdication of its supervisory duty over very large banks; and
- The CFPB’s non-supervision and non-enforcement in areas of historic joint CFPB-state collaboration substantially increases the burden on states to protect consumers.
“Indeed, these harms have already begun,” the amici curiae brief reads.
“In sum, the CFPB has, to date, been an invaluable partner to many States in performing a variety of consumer-protection functions mandated by Congress,” according to the brief. “Defendants’ actions to effectively shutter the CFPB go well beyond the normal shift in enforcement priorities that accompanies any change in presidential administration — they amount to a total dereliction of all mandatory statutory duties.”
Some consumer groups agree with the state attorneys general coalition. The National Association of Consumer Advocates (NACA), for example, stated that “shutting down CFPB could reopen wounds of the financial crisis” of the late 2000s, which stemmed from the subprime mortgage crisis.
“These actions to devastate the bureau’s function is [sic] reminiscent of the 2007-2008 financial crisis involving reckless financial institutions and the idle regulators who abandoned their oversight of the big banks and lenders,” the NACA statement reads. “These events very nearly crippled the U.S. and global economy, collapsing banks and leaving millions of consumers in financial ruins.”
And, along those same lines, one NMP Daily reader addressed a potential CFPB closure or elimination this way, quoting the old adage: “Those who don’t learn from the past are doomed to repeat it.”
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