The CFPB Goes Dark: What you need to know
Updated: Sep 21
What is the CFPB and why does it exist?
The Consumer Financial Protection Bureau (CFPB) emerged from the ashes of the 2008 financial crisis, established by the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010.
As a refresher on those dark times: The 2008 crisis stemmed from a perfect storm in the housing market, where banks had been making increasingly risky mortgage loans and then packaging these questionable mortgages into complex financial products (called mortgage-backed securities and collateralized debt obligations) that were sold to investors worldwide. When housing prices dropped and homeowners began defaulting on their mortgages, it triggered a chain reaction that nearly collapsed the entire global financial system as these toxic assets spread throughout the banking sector and beyond.1
In response to this crisis, Congress created the CFPB--not to fix the past crisis directly, but rather to prevent future crises by aggressively monitoring how financial institutions interact with ordinary consumers. The CFPB set to work implementing strict new rules around mortgage lending (requiring lenders to verify borrowers could actually repay loans), creating a complaint database to track predatory practices, and giving the agency broad powers to investigate and punish financial institutions that deceived or took advantage of consumers.1.
What has the CFPB achieved?
Over the past decade and a half, the CFPB has secured over $21 billion in relief for consumers and exposed fraud at some of the nation’s largest financial institutions.2 Here are just a few of its most significant actions (please find links to more information about each in the footnotes):
Bank of America required to pay more than $100 million to customers for systematically double-dipping on fees for insufficient funds, withholding cash and reward points on credit cards, and misusing sensitive customer information to open unauthorized accounts.3
Wells Fargo required to pay $2 billion in restitution and canceled debts to customers and a $1.7 billion fine for widespread fraud and abuse involving its auto loans, mortgages, and deposit accounts. This is on top of the $3 billion Wells Fargo was ordered to pay for opening fake accounts in its customers’ names.4
Ally Financial Bank required to pay $80 million in damages and a $18 million civil penalty for discriminatory auto loan pricing practices that harmed people of color.5
Corinthian College fined $683 million for defrauding its students over many years.6
Rampant fraud on the Zelle payment platform exposed major banks forced to take accountability.7
Despite these apparent achievements, throughout its existence, the CFPB has been a lightning rod for controversy, with Democrats and consumer advocates praising its aggressive oversight of financial institutions, while Republicans and the banking industry have consistently criticized it as an example of regulatory overreach, particularly objecting to its funding structure through the Federal Reserve rather than congressional appropriations.
The agency's single-director structure has also faced legal challenges, with critics arguing it gives too much power to one individual and raises constitutional concerns. The Supreme Court's 2020 ruling that the CFPB's leadership structure was unconstitutional, allowing presidents to fire directors at will, marked a significant shift in the agency's independence.8
Why did the CFPB go dark? Why is this important?
On January 29, Senator Ted Cruz introduced legislation to completely defund the agency, aiming to strip its funding and render it powerless.9 On February 1, President Trump fired CFPB Director Rohit Chopra, who had been known for his aggressive pursuit of corporate wrongdoing. When Treasury Secretary Scott Bessent assumed control he immediately froze most of the agency's operations. Even more recently, Russell Vought was appointed as the new acting director of the CFPB. Yesterday, Vought ordered all staff to cease supervision and examination activities and announced that the CFPB would no longer accept funding from the Federal Reserve. The agency's headquarters in Washington, D.C., was ordered closed from February 10-14, with employees instructed to work remotely unless otherwise directed.10
These actions effectively suspended enforcement of several key consumer protection measures, including new rules on "junk fees" and regulations designed to make switching banks easier. The cessation of supervisory activities is expected to reduce compliance costs for banks and limit enforcement actions, leading analysts to predict positive impacts on bank stocks. But impacts on consumers are not likely to be so positive. As Delicia Hand, Senior Director of Digital Marketplace Policy at Consumer Reports warns, "Consumers face an increasingly complex financial marketplace dominated by AI, big tech, and new digital products, making the CFPB’s work more critical now than ever… Without strong oversight and enforcement, consumers are particularly vulnerable to predatory practices, hidden fees, and data privacy violations."11
What rules will be impacted?
Most immediately, as reported by Consumer Reports, here are five consumer-focused rules and action at imminent risk of being rescinded:11
Credit Card and Overdraft Fees: The CFPB had finalized rules capping overdraft fees at $5 (down from $35) and credit card late fees at $8 monthly (down from $30-41).
Medical Debt on Credit Reports: The CFPB issued a rule prohibiting medical debt from appearing on credit reports, as it reduces credit scores by an average of 20 points.
Data Broker Regulation: The CFPB proposed regulating data brokers under the Fair Credit Reporting Act, limiting the sale of personal information to specific permissible uses and requiring data accuracy and consumer access.
Fintech Regulation: The CFPB had focused on regulating emerging financial technologies, including Buy Now Pay Later loans and paycheck advance apps, proposing rules for charge dispute rights and requiring disclosure of fees and interest rates.
Major Enforcement Actions: Four significant CFPB enforcement actions are now at risk, including a $2 billion case against Capital One for misleading savings account rates, a lawsuit against major banks over Zelle fraud losses approaching $1 billion, action against Walmart and Branch Messenger for illegal account openings, and a $175 million penalty against Cash App for security failures.
What to do?
With the government stepping back from consumer protection, you will need to take on more responsibility for protecting yourself and your family from financial predators. While we have always recommended thoughtful oversight of your finances and personal information, we encourage you to be even more proactive now. Here's how:
Monitor Your Accounts Aggressively Set up daily balance alerts on all accounts and enable two-factor authentication. Review transactions weekly, especially on payment apps like Zelle or Cash App. Report suspicious activity immediately, as fraud protections may weaken without CFPB oversight.
Document Everything Financial Keep detailed records of all banking fees, credit card charges, and payment histories. Screenshot or save confirmation numbers for important transactions. With reduced oversight, having your own documentation becomes crucial for disputing charges or defending against errors.
Check Multiple Credit Reports Regularly Request free reports from all three bureaus every four months (rotating between them). Pay special attention to medical debt entries and dispute any errors immediately. Consider credit freezes to protect against data broker information misuse.
Avoid Risky Financial Products Be extremely cautious with Buy Now Pay Later services, payday advance apps, and other fintech products that may have reduced consumer protections. Read all terms carefully and calculate the true cost of borrowing before using these services.
Leverage State Protections Research your state's consumer protection laws, as many states are strengthening local regulations to fill the federal void. File complaints with state regulators and attorneys general offices when needed, as they may become your primary avenue for resolving financial disputes.
Finally, in these times of weakening consumer protections, working with a fiduciary advisor isn't just helpful - it's crucial. And we couldn’t take our commitment to looking out for you more seriously than we do now. As fiduciaries, we're legally bound to put your interests first, providing an essential safeguard when oversight of financial institutions is being diminished, if not dismantled.
And, to your friends and family who are similarly confused or overwhelmed by the onslaught of big news and how it could impact them financially: We hope you'll share our messages with them. Your loved ones are important to us, too, and we're eager to help them navigate these challenging waters with the same commitment and care we provide to you.
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