The Trump Administration has all but shuttered the Consumer Financial Protection Bureau (CFPB).
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In an email sent on Feb. 8, the newly installed White House budget director, Russell Vought, who is also the acting director of the CFPB, instructed CFPB employees to stop investigating and processing consumer issues and to suspend any rules that were finalized, but not officially put into action. (To eliminate the agency would require a separate act of Congress, which is unlikely to occur.)
It’s worth reflecting on how the CFPB came into existence and what its defanging means for consumers.
In the aftermath of the 2007-2008 financial crisis, the Obama administration enacted the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010, with a goal of strengthening the oversight of financial institutions.
The reforms included the establishment of a new federal agency, the CFPB, which would be focused on creating rules for protecting consumers. The Obama Administration noted that “before CFPB was established, seven different Federal agencies were responsible for various aspects of consumer financial protection. No single agency had effective tools to set the rules or oversee the whole market.”
The agency was the brainchild of now-Senator Elizabeth Warren, who was instrumental in the creation, building and launch of the agency.
In her 2011 testimony before Congress, Warren said “by law, the CFPB is obligated:
1) To ensure that consumers have timely and understandable information to make responsible decisions about financial transactions.
2) To protect consumers from unfair, deceptive, and abusive acts or practices, and from discrimination.
3) To reduce outdated, unnecessary, or overly burdensome regulations.
4) To promote fair competition by enforcing the federal consumer financial laws consistently.
5) To advance markets for consumer financial products and services that operate transparently and efficiently to facilitate access and innovation.”
The CFPB has enacted rules that have enhanced consumer protections with regard to credit cards, mortgages, student loans, auto loans, credit reports and scores, and payday loans.
True to its goal, the CFPB’s work has provided a single point of accountability, when consumers interact with established large institutions and the smaller independent companies that often fell through the cracks.
The agency also has supervisory and enforcement power, which according to the website (the front door of the website was unavailable at the time of this writing, but other parts were still available), has resulted in approximately $19.7 billion in consumer relief and $5 billion in civil money penalties. The CFPB was also a central portal for financial education and for Americans to submit complaints about a financial product or service.
With the Trump Administration’s desire to defang the agency through job eliminations and a stoppage of all work, Americans will lose a critical government agency, whose sole focus is to protect them.
There has already been a lawsuit filed to restore the CFPB, but that will take time to wind through the system.
In the interim, here are other federal and state agencies that may help, if you encounter bad actors in the financial world:
The Federal Trade Commission (FTC)
If you suspect a company or individual of perpetrating a scam or fraud, go to ftc.gov/complaint.
The Securities and Exchange Commission (SEC)
If you have an investor-related issue, including “complaints against brokers, brokerage firms, investment advisers, transfer agents, mutual funds, and other market participants”, go to https://help.sec.gov/s/investor-complaint.
The Employee Benefits Security Administration
If there is an issue with your 401(k), profit sharing, defined benefit, or other retirement plan, you can go to https://www.askebsa.dol.gov/WebIntake/.
State regulators
Anticipating sweeping changes, the CFPB notified state regulators that they should be alert to consumer complaints arising. Each state has a securities, bank and insurance regulator.
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Jill Schlesinger, CFP, is a CBS News business analyst. A former options trader and CIO of an investment advisory firm, she welcomes comments and questions at [email protected]. Check her website at www.jillonmoney.com.
