Federal Consumer Watchdog Faces Its Staunchest Challenge Yet

The Consumer Financial Protection Bureau remains in limbo six months into President Donald Trump’s term, with little sign of a return to normalcy.

The agency polices consumer abuses at banks, mortgage companies, and other consumer lenders. However, it’s doing far less investigating and enforcing after Trump officials halted much of the CFPB’s work.

The CFPB has long survived existential threats, including a few court cases that challenged its constitutionality. However, the Trump administration’s cuts are its biggest test yet, and it’s becoming more likely that their impact will be long-lasting.

“I don’t think it goes back to anything close to normal during this Trump administration,” said Ian Katz, a policy analyst at Capital Alpha.

Consumer advocates warn of dire consequences, with less scrupulous lenders taking advantage of customers under a dormant CFPB. They note that Congress created the agency in the wake of 2008, when deceptive subprime mortgage practices helped cause a global financial collapse.

“The lessons from the financial crisis have been forgotten,” said Adam Rust, director of financial services at the Consumer Federation of America, adding that the CFPB’s work is “the kind of thing a person may not know to appreciate until it’s too late.”

State attorneys general and banking regulators are poised to take a bigger role in consumer financial protection, but consumer groups and state officials say they can’t replace the CFPB’s heft.

The agency did not respond to a request for comment.

What’s Happened Over the Last Six Months?

When Trump’s budget director, Russell Vought, was appointed as the agency’s acting head in February, major cuts were made: leadership closed the headquarters and stopped much of the CFPB’s work.

Administration officials also sought to cut 1,500 employees, leaving the CFPB with 200 workers. Federal courts have temporarily blocked the mass layoffs while they consider a lawsuit over the issue.

The agency has dropped cases it had been pursuing against banks, mortgage companies and other lenders. However, the work hasn’t vanished entirely as the CFPB has reopened at least one and is still actively investigating others.

The CFPB has also said it is cutting its regular examinations of companies by half. In a memo, it told staff that it would prioritize problems facing military members and veterans and focus less on student loans, medical debt, and financial technology issues.

The agency has reversed some Biden-era regulations and industry guidance. It retreated from a rule overseeing buy-now, pay-later companies, a rule cutting credit-card late fees to $8, and another removing medical debt from credit reports.

What Will the CFPB Look Like?

There is no permanent CFPB leader at the moment. 

The White House had appointed former Federal Deposit Insurance Corp. board member Jonathan McKernan to lead the agency, but has since picked McKernan to fill a different role at the Treasury Department. 

Industry observers had seen McKernan, a bank lawyer and former Republican staffer on Capitol Hill, as someone who would restore the CFPB to more normal days, like those in the first Trump administration. But now that prospect seems more unlikely.

Congress is also considering cutting the CFPB’s funding through Trump’s “One Big Beautiful Bill” to fund the government.

In the meantime, the agency is sending a message to banks and other lenders that “nobody is going to be looking over your shoulder,” said Diane Thompson, deputy director at the National Consumer Law Center and a former top CFPB advisor. 

For their part, banking industry groups have largely supported the CFPB’s rescission of rules created during the Biden administration, which they argued drastically overreached the agency’s authority. But they also see a future for the CFPB.

Lindsey Johnson, president and CEO of the Consumer Bankers Association, said the group will continue working with policymakers in D.C. to “create a credible, durable, and stable CFPB that appropriately heeds its authority under law.”

Thompson, however, argued that the ongoing rollbacks are diminishing the public’s trust in an agency that for years has been able to help consumers get complaints resolved against banks, credit reporting firms and other financial companies.

“It permanently undermines the ability of this agency to deliver help for people,” Thompson said. “It permanently tips the scales away from individual folks and toward these mega corporations.”