The Consumer Financial Protection Bureau (CFPB) is headed for a rocky future under President-elect Trump.
The powerful financial watchdog agency is in for a reckoning during a second Trump administration, which will likely take steps to curb its power and regulatory agenda.
The CFPB has been in Republican crosshairs since it was created through the 2010 Dodd-Frank Wall Street reform law to crack down on customer abuse in the financial system. But the CFPB is receiving new scrutiny after a warning from tech mogul and close Trump ally Elon Musk.
Musk, the co-lead of Trump's new "Department of Government Efficiency" (DOGE), fired a warning shot at the consumer watchdog agency last week, calling for it to be “deleted.”
While Musk and DOGE can't follow through on that alone, experts say the CFPB is likely to face efforts to weaken its regulatory powers under Trump.
"The conservative movement has been existentially opposed to the CFPB since it was conceived of by then-professor Elizabeth Warren,” said Graham Steele, former assistant secretary of financial institutions at U.S. Treasury under President Biden.
Dodd-Frank sought to protect the CFPB from political attacks and industry influence by giving an independent source of funding from the Federal Reserve and a director that could only be fired by the president for misconduct.
Democrats, especially progressive Wall Street skeptics, have praised the CFPB for its aggressive action against banks, lenders and other financial firms, often pointing to the billions of dollars secured by the bureau in restitution for jilted consumers.
But Republicans insist the CFPB has overstepped its authority and the Constitution with a regulatory crusade against law-abiding businesses.
Numerous lawsuits have challenged the agency’s constitutionality, including a case that was heard by the Supreme Court last year. The court ultimately rejected the challenge to the CFPB's funding structure in a 7-2 decision in May.
Even so, the Supreme Court ruled in 2020 that the CFPB director must be fireable by the president at will to uphold the separation of powers among government branches.
That decision cleared the way for President Biden to fire former CFPB Director Kathy Kraninger, who Trump appointed after a power struggle to replace her predecessor and the bureau's founding director, Richard Cordray.
Trump is expected to fire CFPB Director Rohit Chopra, a former Warren aide who helped stand up the CFPB after Dodd-Frank, shortly after taking office. Doing so would open the door for Trump to appoint a Republican likely to curb the CFPB's actions.
Eliminating the agency, as Musk suggested, would require an act of Congress, making it an unlikely outcome, especially with Republicans' narrow majorities in both chambers.
“While there certainly are some Republicans in Congress who would like to see the CFPB disappear, it’s highly unlikely there’s enough support to pass a law eliminating the bureau,” Ian Katz, managing director of Capital Alpha Partners, wrote in a research note Monday.
“The far greater likelihood is that Trump will nominate a CFPB director who will spend a chunk of time rescinding some of Chopra’s rules — most likely those dealing with credit card late fees, small-business lending data collection and [Buy Now Pay Later] — and generally taking a more relaxed approach to oversight,” Katz added.
The agency has been busy under Chopra, often taking aim at what the Biden administration has termed "junk fees." This has included numerous rules and enforcement actions targeting loan servicing fees, bank overdraft fees and credit card late fees.
The credit card late fee rule, which sought to cap late fees at $8, has faced substantial pushback from Republicans and the banking industry. A federal judge put the rule on hold after the Chamber of Commerce and other business groups sued.
The CFPB has also sought to address new developments in the financial services space, such as Buy Now Pay Later and digital wallets.
In May, the agency moved to classify Buy Now Pay Later applications as credit cards in an effort to extend consumer protections to Americans using services like Klarna, Affirm and PayPal. Last month, the CFPB also finalized a rule bringing large companies that offer digital wallets and payment apps, such as Apple and Google, under its supervision.
If Trump's first term in office is any indication, the shift could be sharp when his newly appointed CFPB director takes charge. When Mick Mulvaney took control of the agency as acting director in 2017, he instituted a freeze on hiring and new rulemaking and requested a budget of zero dollars from the Fed.
Mulvaney and Kraninger also throttled back the CFPB's regulatory agenda, including a controversial rule that would have upended the payday loan industry.
Consumer advocacy groups and organizations that support stricter financial regulation are already bracing for the new administration’s efforts to target the CFPB and roll back regulations.
“Signs are mounting that the second Trump administration will try, like the first iteration, to undermine the Consumer Financial Protection Bureau’s mission and capacity to safeguard the rights and wallets of families throughout the United States,” Americans for Financial Reform said in a statement last week.
“Weakening the CFPB, slowing its work, or steering it to favor industry over the public interest would give bad actors a green light to do their worst, and further deepen this country’s racial wealth gap,” the non-profit warned.
Public Citizen co-president Robert Weissman pushed back on Musk's call to "delete" the agency, urging him to "do his research" about its effectiveness.
“The CFPB has been a model of government efficiency, returning almost $20 billion to consumers cheated by bank and financial corporation wrongdoing,” Weissman said in a statement.
He also highlighted concerns about the tech billionaire’s involvement in efforts to target the CFPB given Musk’s interest in turning his social platform X into a payment platform as well. X has obtained money transmitter licenses in 39 states so far.
As Musk takes on a prominent role in the Trump administration, his extensive business portfolio has raised questions about conflicts of interest. His companies Tesla and SpaceX hold billions of dollars' worth of government contracts.
“Musk is calling for elimination of the consumer protection regulator over a business line he seems poised to enter,” Weissman said. “If he were just a regular-old rich person, this could perhaps be dismissed as self-interested whining.”
“But Musk is not just a regular rich person,” he continued. “Not only is he the richest person in the history of the world, he is joined at the side with the president-elect of the United States – and empowered by the president-elect to make recommendations to slash government agencies and public protections.”
