The recent order from the Trump administration on February 8 that instructs Consumer Financial Protection Bureau (CFPB) employees to cease most of their operations represents a significant crisis for an agency built in response to a previous crisis.
The CFPB, established in 2011 under President Obama in the wake of the housing market collapse, was designed to shield Americans from misconduct by financial companies, ensure compliance with consumer protection regulations across various financial products like home loans and credit cards, and provide oversight of the sector responsible for the most substantial U.S. economic downturn since the Great Depression.
Critics, including many Republican legislators, have long claimed the CFPB operates without sufficient oversight and imposes excessive regulatory burdens on the financial industry. Conversely, supporters assert that the agency plays a crucial role in consumer protection.
What led to the creation of the CFPB?
The CFPB was formed as an independent governmental entity following the 2008 financial crisis when Congress enacted financial reforms. The recession that followed the subprime mortgage crisis, often termed the Great Recession, inflicted severe damages on millions of Americans and sparked global economic turmoil. It resulted in a loss of nearly $8 trillion in stock market wealth and a staggering $6 trillion in home equity.
Tasked with defending consumers from dubious financial products, corporate deceit, and scams, the CFPB was established under the Dodd-Frank Wall Street Reform and Consumer Protection Act signed by Obama in 2010.
What are the CFPB’s responsibilities?
The CFPB oversees and enforces a variety of consumer finance legislation, including the Fair Credit Reporting Act, which ensures the accuracy and confidentiality of consumer credit reports. The agency also develops and enforces financial regulations.
Among its responsibilities, the CFPB processes refunds for consumers harmed by financial institutions, facilitates loan modifications and debt relief for qualifying borrowers, and levies fines on entities that breach regulations. Key accomplishments highlighted by the CFPB and consumer advocacy groups include:
- Providing $20 billion in relief to consumers through reduced loan balances and debt cancellation since its inception.
- Imposing $5 billion in civil monetary penalties against businesses and individuals violating consumer protection laws.
- Punishing banks and other corporate entities for malpractices, such as opening fraudulent accounts and levying unauthorized “junk” fees.
- Instituting limits on excessive late fees for credit cards (a federal judge blocked this CFPB regulation in 2024).
- Strengthening regulations for “buy now, pay later” financing to protect consumers utilizing this increasingly popular credit method.
- Protecting U.S. service members from illegal lending practices.
- Eliminating medical debt from consumer credit reports.
“It serves as a law enforcement body, taking on significant financial institutions that defraud consumers, whether they be credit reporting agencies, major banks, or credit card companies,” stated Rohit Chopra, who was recently dismissed by President Trump as the CFPB director, in an NPR interview. “The CFPB has been instrumental in recovering billions of dollars for wronged consumers.”
Prior to Chopra’s exit, the CFPB had initiated several legal actions against major corporations, including a lawsuit against Capital One over allegations of misleading customers regarding high-interest savings accounts and accusations against Experian for failing to accurately address consumer complaints regarding credit report inaccuracies. Both Capital One and Experian refute these claims.
In December, the CFPB announced that over 4 million Americans purportedly scammed by credit repair firms, including Lexington Law and CreditRepair.com, would collectively receive $1.8 billion in refunds.
What are the criticisms of the CFPB?
Supported by the Federal Reserve, the CFPB has encountered various legal challenges from detractors throughout its brief existence. In May, the Supreme Court upheld its funding model, contested by the payday lending sector.
The CFPB has been described as “an agency steeped in political correctness and wielding its influence against disfavored sectors and individuals for an extended period. This needs to stop,” remarked the new CFPB director, Russ Vought, in a social media statement on February 9. Vought, who previously held the role of Office of Management and Budget director in the initial Trump administration, contributed to the Heritage Foundation’s Project 2025, advocating for the abolishment of the agency.
When asked if the objective was to eliminate the CFPB, Trump affirmed, “I would say yes, as we aim to eradicate waste, fraud, and abuse.”
The White House press office declined to provide further insights, and representatives from the CFPB and the Heritage Foundation did not respond to inquiries.
Norbert Michel, vice president and director of the Cato Institute’s Center for Monetary and Financial Alternatives, stated that if eliminating redundancy within the federal government were a goal, the CFPB would be a “great starting point.” He argues, “It is completely false to claim there was no consumer protection in the financial markets before the CFPB,” pointing to existing regulators such as the Federal Trade Commission, Federal Reserve, and Federal Deposit Insurance Corporation already in place.
While Michel has long supported shutting down the agency, he expressed uncertainty about the strategy of the White House. “Congress established this agency, and I am unsure how the executive branch can legitimately dismantle a federal agency created by Congress, regardless of my personal views on it,” he elaborated. “I do not understand the ultimate goal they are pursuing,” referring to the Trump administration’s stance on the CFPB.
A union representing employees across multiple federal agencies is initiating legal action to prevent the closure of the CFPB. Democratic lawmakers, including Sen. Elizabeth Warren from Massachusetts, who conceptualized the CFPB while teaching at Harvard, are advocating for its continued operation.
“If you possess a bank account, credit card, mortgage, or student loan, we are at a critical juncture. I am sounding the alarm. Elon Musk and the architect of Project 2025, Russ Vought, are attempting to dismantle the Consumer Financial Protection Bureau. If they prevail, CEOs and Wall Street will once again be free to deceive, entrap, and exploit you,” Warren declared in a video statement.
