In recent weeks, President Trump has moved quickly to implement sweeping changes to the federal government. Chief among these are recent cuts to federal agencies, made courtesy of the newly created Department of Government Efficiency (DOGE).
Intended to serve as an advisory body to government leaders, DOGE is primarily focused on slashing government regulations and spending. However, targeting entire agencies for elimination is not out of the question. In fact, as recently as Friday it was reported that DOGE may by doing just that by placing the highly controversial Consumer Financial Protection Bureau (CFPB) in its crosshairs—good.
The brainchild of Massachusetts Senator Elizabeth Warren, the CFPB was founded in 2011 as part of the Dodd-Frank Wall Street Reform and Consumer Protection Act. It was designed to consolidate the responsibilities of several government agencies into one and provide consumer protection by holding firms accountable for illegal behavior. Specifically, the agency was given the “authority to administer, enforce, and otherwise implement federal consumer financial laws.” In practice, this meant the power to make rules and regulations, issue orders and subpoenas, conduct investigations, and provide general guidance.
Supporters argue the CFPB has proven successful at protecting consumers from various unseen financial penalties and scams, such as those relating to predatory student loans, and that the agency continues to serve a vital purpose. Sadly, they are mistaken.
While protecting consumers from predatory behavior is undoubtedly important, other agencies like the Federal Trade Commission are perfectly capable of carrying out such responsibilities. The CFPB’s creation was unnecessary and only adds to the growing number of federal agencies and sub-agencies demanding larger budgets, providing duplicative services, and often operating with limited oversight.
The CFPB is particularly problematic because it is not subject to the traditional appropriations process, meaning that rather than have its budget approved by Congress each year, it receives monetary transfers from the Federal Reserve Board. This insulates it from political pressure but also decreases necessary accountability, something for which it has received much criticism. The CFPB is also unique in that it is not governed by a bipartisan board of commissioners like other agencies. Rather, it is led by a single unelected bureaucrat appointed by the president for a five-year term. While the U.S. Supreme Court recently ruled that such a funding structure is constitutional, there are still valid concerns regarding accountability and whether the agency should even exist.
The CFPB has repeatedly proven that it is unaccountable to Congress, and ultimately the American public, and should be abolished. Rather than carefully crafting rules that minimize market intervention to what is necessary to protect consumer interests, the agency has frequently proposed far-reaching regulations on a wide range of different topics, regardless of the unintended consequences of those rules on consumers. Several recent regulatory proposals illustrate the agency’s one-size-fits-all mentality and lack of concern for those impacted.
Last March, the CFPB finalized a new rule that would cap credit card late fees at $8 or 25 percent of the minimum period payment, arguing that current fees—which average $32—are “excessive” and that the rule could deliver hundreds of dollars in annual savings to consumers. The new rule ignores the important role such fees play in covering the cost incurred by credit issuers and, more importantly, encouraging customers to make payments on time.
Minimal late fees have been found to increase customer delinquency, which forces banks to take losses. Banks must then cover these losses by tightening future credit extensions. None of this is good for consumers, many of whom have expressed concerns about capping late fees. Fortunately, a U.S. District Judge upheld the order in December blocking the rule from going into effect.
More recently, the CFPB decided to release several other rulemakings during the eleventh hour of the Biden administration. These range from a proposed rule on data broker practices under the Fair Credit Reporting Act (FCRA) to a rule on identity theft protections also under the FCRA.
One particularly noteworthy rule announced in December would address—what the CFPB describes as—an “outdated overdraft loophole” that exempts overdraft loans from lending laws. Essentially, the new rule would limit the overdraft fees that banks and credit unions may charge customers. Much like the ill-fated credit card late fee cap rule, the overdraft rule sounds nice but would produce unintended consequences for consumers such as forcing banks to limit access to overdraft protection and reduce low-cost bank accounts. Overdraft services serve as a lifeline for one in five Americans who lack access to credit and depend on them to meet short-term financial obligations and survive unexpected emergencies.
The CFPB’s decision to unleash a slew of new rulemakings, late last year, sets it apart from other federal agencies like the Federal Deposit Insurance Corporation and Office of Comptroller of the Currency. Each committed to pausing major rulemakings until after the new administration was in place. The fact that the CFPB did not do so is perhaps partially why President Trump recently decided to fire its director, Rohit Chopra. It also explains why there are already early reports that the consumer watchdog’s new acting director, Treasury Secretary Scott Bessent, has already frozen most work at the agency, and that DOGE employees are allegedly busy raiding its offices. Now DOGE must finish the job and shutter the CFPB for good. Consumers would be better off for it.
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