Working in the finance industry has given me a great deal of appreciation for the Consumer Financial Protection Bureau (CFPB). Created in response to the 2008 recession, it protects consumers from unfair, deceptive, and abusive practices by financial institutions.

Recently, the Trump administration ordered the CFPB to halt all work, and cease its own funding. It’s a disaster, but more low key and less visible than all the other disasters. So, in mourning the CFPB, I’d like to review what it actually did.

The general case for the CFPB

The finance industry is fairly opaque to the average consumer. This creates an information asymmetry, where consumers can’t tell if a financial institution is being fair and honest. So, if consumers can’t even see when an institution is being fair and honest, it’s a competitive disadvantage to even bother.

For that reason, financial institutions are heavily regulated, prohibiting “unfair, deceptive, or abusive acts and practices” (UDAAP). These regulations are deliberately vague, because financial institutions are very clever, and will invent entirely new abusive practices that lawmakers never even thought of. Of course, for vague rules to work, you need some human regulators who understand the system well enough to identify and punish abuses.

The function of regulators is not merely to stamp out abuses within the finance industry. It’s to create a panopticon for financial institutions. No institution wants to be under the attention of regulators. So they’ll self-enforce the rules, just to avoid the risk of regulatory attention. With the CFPB down, financial institutions everywhere will adjust their risk calculations, and silently deprioritize the wellbeing of consumers.

The Trump administration has been trying to shut down multiple federal agencies by executive order. This is unconstitutional, because congress is supposed to have the “power of the purse”, and the president can’t just unilaterally go against the funding decisions of congress. I mention this, because CFPB is a murkier case, being funded by the Federal Reserve rather than congress. I cannot comment on the legality of the actions against the CFPB.

I will say that a major criticism of the CFPB was that its funding structure was beyond congressional oversight. In 2022, there was a Supreme Court case challenging the CFPB’s funding structure, with a 7-2 decision in its favor. I don’t have a strong opinion on its funding structure. But if the CFPB were to switch to being funded by congress, it raises the question: why do Republican congress members want to cut back the CFPB? I would speculate that they’re beholden to financial institutions who do not have your best interests at heart.

What the CFPB did

Although I was aware of the general case for the CFPB, I didn’t necessarily have a full picture of what it did. So, if you’re down for it, I highlighted a handful of actions, mostly from the past four years under the Biden administration.

I learned about most of these from PIRG, and did independent reading to confirm.  Internet Archive links are provided for CFPB pages in case they go down.

1. The Consumer Complaint Database

The CFPB maintains a public database of consumer complaints about financial institutions. According to a PIRG report, 32% of the consumer complaints in 2022 resulted in consumer relief (such as monetary relief, or correcting inaccuracies in a credit report). I’m astounded it’s that high.

According to Wikipedia, Republican critics have said the complaints are misleading, and injurious to the reputations of financial institutions. IMO, the average consumer is very unlikely to browse the database; rather, it allows regulators, financial institutions, and organizations like PIRG to see aggregate statistics, and identify problem areas. Nobody who looks at this database believes every single complaint.

As far as tracking reputation goes, there is at least a private solution. If you have complaints about financial institutions, I recommend leaving a review on Trustpilot; that’s what institutions are most likely to pay attention to.

2. Limiting overdraft fees

In 2024, the CFPB created rules around overdraft fees. The problem with these fees is that they’re basically loans, but lacking the transparency and regulation that loans demand. So, if a financial institution is using fees as a profit center, they could make it easy to accidentally overdraft, and slap consumers with untransparent and overpriced loans. CFPB’s new rule (archive) is basically that the fees are only large enough to cover costs (i.e. not to make a profit), or else institutions must obey standard lending disclosure rules.

This is latest in a broader effort to crack down on junk fees. Credit card late fees, hotel booking fees, subscription termination fees, and so on. Sadly the overdraft rule came in December 2024, so it’s mostly a story of what could have been.

3. Wells Fargo fined 3.7 billion dollars

In 2022, CFPB fined Wells Fargo 3.7 billion dollars (archive) for a decade of bad practices harming millions of consumers. These include improperly charging fees, repossessing cars, and freezing accounts.

This was the largest enforcement action on financial institution, but there were countless others. Another notable action was fining Bank of America (archive) for 250 million dollars for double-charging fees, withholding credit card rewards, and opening fake accounts without consumers’ authorization.

4. Fighting dark patterns in subscription cancellation

Have you ever had a subscription that renewed itself without your knowledge, or was very difficult to cancel? In 2023, the CFPB issued a policy statement (archive) about these practices, saying it’s against the law to automatically renew subscriptions without clear disclosure to the consumer, or to make consumers jump through hoops to cancel services.

Although it’s merely a policy statement, it’s backed by the threat of enforcement. That threat alone should scare corporations to avoid dishonest practices.

5. Removing medical debt from credit reports

In 2024, the CFPB issued a rule (archive) that medical debt should not be in credit reports.  So, I admit this one confuses me a bit. The thing about medical debt, is that it’s basically a random event that happens to people, and it’s just not a good predictor of a person’s credit-worthiness.  Lenders know this, and the CFPB confirms it. So even if that data is in the credit report, I doubt that lenders are making much use of it.

In other words, I 100% agree with the rule, I’m just not sure how impactful it is.  The CFPB makes it sound like medical debt collectors were using credit reports as a threat to scare people into paying debts they don’t really owe.

6. Monitoring Buy Now Pay Later

Buy Now Pay Later (BNPL) is a hot new idea in the finance industry, allowing people to make purchases that they can’t afford, instead making payments over time. On the surface, this is not much different from other lending products, but the question is how it works out in practice.

This has been a major concern at the CFPB, and they’ve released multiple research reports (archive, archive) looking at statistics. For instance, they found that 13% of transactions involve a purchase that was returned or disputed.  As a result, they’ve issued an interpretive rule (archive) that BNPL providers are treated as credit card providers, and thus must provide consumers with appropriate legal protections. So lenders are required to investigate disputes and give refunds for returns.

7. Restricting data brokers

In December, CFPB was working on rules to restrict data brokers (archive) with sensitive personal data.  Basically, data brokers would fall under the Fair Credit Reporting Act (FCRA), and have to obey certain rules.  For instance, consumers would be able to request their own data, and request corrections.  The CFPB highlights rules that would prevent data from being sold to scammers, stalkers, or foreign countries of concern.

I don’t know about this interpretation of the FCRA, but it’s honestly a good idea, congress should pass a law for it.  They won’t, but they should.

Conclusion

Clearly, I have a high opinion of the CFPB, unsung heroes of the average American consumer. But do others in the finance industry share my opinion? In my experience, it’s mixed. Some people feel that the CFPB is holding the industry back, or enforces some arbitrary rules that take work but make little difference. Certainly that’s arguable in individual cases. And in theory, regulation generates operational costs, which may be passed on to the consumer.

However, consumers’ interests are not aligned with the interests of financial institutions (to make an understatement). If financial institutions are happy about the death of the CFPB, you should probably be scared.