See you, CFPB? It looks that way!
The Consumer Financial Protection Bureau, commonly called the CFPB, was at the center of attention this past week, as its new acting director, Russell Vought, told the agency’s staff to stop working and go home. The CFPB’s job is to protect consumers—you, me, and everyone we know—from unfair financial practices, such as predatory lending, and even scams. So, if the CFPB is being shut down, it means that we’re less safe than we were before.
Why the CFPB is in the crosshairs
It’s a long, complicated story as to why the CFPB is in trouble. But suffice it to say that the Trump administration, and many Republican lawmakers, aren’t fans of it. It regulates banks, payment apps, and other financial businesses, and can cost them money, or add red tape to their operations. But it also plays an important role in making sure that bad actors in the financial industry don’t get too far—that they’re identified, punished, and consumers are warned about them.
The agency itself was created in the wake of the housing crisis and Great Recession, way back in 2010, along with a bunch of other laws meant to more closely regulate the financial industry. For those of you who were too young to remember the Great Recession, the whole thing was kicked off by lenders making bad or predatory home loans—they gave people money to buy homes, even when they knew those people couldn’t afford to buy one. But those loans were backed by the government, so the lenders made the loans, collected a fee, and then let the government (or taxpayers) deal with the fallout when it all eventually collapsed.
In recent years, the CFPB has been fairly aggressive, too. It’s passed rules, like making sure that medical debt doesn’t get included on your credit report. That aggression has ruffled some feathers, so it may be that some people are happy to see the CFPB put on a tighter leash.
What happens next with the CFPB?
We don’t actually know what happens next. The CFPB isn’t dead—it needs to exist, by law. Only Congress can pass a new law, or repeal the old one, to make sure it goes away for good. That hasn’t happened. But what’s interesting is that the agency has done a good job, and is generally liked by a majority of Americans. In fact, over the past 15 years that the CFPB has existed, it’s saved consumers $21 billion. And it only costs less than $1 billion per year to operate. So, it’s effective and efficient.
With that in mind, this may simply be political gamesmanship—the CFPB may revert back to normal at some point, but is being hamstrung for other reasons. We’ll need to wait and see how things shake out. But again, the main point is that by defanging the agency, consumers are less safe than they were two weeks ago, or a year ago.
