Why Americans need the CFPB

EVER SINCE the Consumer Financial Protection Bureau opened in 2011 with a mandate to regulate financial institutions, its detractors have tried to eliminate it. They have questioned its constitutionality, dismantled its board and slammed it for all sorts of shortcomings.

The second Trump administration, however, might have devised a more effective attack: Just walk in and pull the plug. Trump officials often cast this as a fight to rein in bureaucratic overreach, but in reality they are disappearing an agency that plays a crucial role in protecting the economy.

In recent weeks, Elon Musk's U.S. DOGE Service has barged into the CFPB and dismissed nearly all its staff. Trump fired its director, Rohit Chopra, and installed Russell Vought, the White House budget director, as its acting director. Vought ordered employees to halt operations for a week in February and canceled dozens of contracts essential to the organization's operations. Musk curtly summarized the effort on X: "CFPB RIP."

This blitz has been similar to DOGE upheavals at other agencies. But the CFPB's dismantling is noteworthy for the way it exposes the hypocrisy in the Trump administration's haphazard campaign to dislodge Washington elites and save taxpayer dollars. The CFPB - an organization of 1,700 employees that draws its funding from the Federal Reserve and stands between powerless consumers and mighty financial companies - does not fit comfortably into this populist narrative.

To conceptualize the agency's work, think back to the last time you spotted suspect fees or charges on your credit card or financial statement - and drove yourself crazy trying to get the issue acknowledged. One of the CFPB's primary functions has been to take complaints from consumers and present them to financial institutions.

It also goes after unfair, deceptive and abusive practices. Last year, for instance, the agency announced a rule that limited banks' ability to charge overdraft fees, often referred to as "poverty taxes," to people who have insufficient funds in their accounts. The rule is projected to save customers $5 billion annually.

The CFPB also enforces antidiscrimination laws in the financial realm and exercises "examination" authority over large banks, meaning it has the power to flyspeck their books and processes. It claims to have secured $21 billion in compensation and other forms of relief from enforcement actions and supervision; an estimated 205 million consumers or consumer accounts have been eligible for such relief.

A hefty chunk of this relief came from a CFPB order in December 2022 citing a variety of actions by Wells Fargo, whose customers were "illegally assessed fees and interest charges on auto and mortgage loans, had their cars wrongly repossessed, and had payments to auto and mortgage loans misapplied by the bank." The order required the company to pay $2 billion in redress to consumers, plus a penalty of $1.7 billion.

Numbers such as these frighten vested interests. As The Post reported, Musk's broadside against the CFPB follows an initiative from his social media company, X, to compete in the roaring digital payments marketplace. The agency already had taken enforcement actions against companies in this space, including Apple, Cash App and Zelle. Dispatching Musk to undermine an agency with jurisdiction over his own business smacks of precisely the sort of swampy behavior that Trump has long denounced on the campaign trail.

To be sure, the CFPB has not been flawless. Critics argue that it operates with wide-ranging authority to police poorly defined "abusive practices." And Congress, in an attempt to insulate the agency from politics, originally prevented the president from dismissing its director without cause. The Supreme Court ruled in 2020 that this was unconstitutional, as it gave too much power to a single executive appointee without presidential oversight. This decision added some needed accountability to the CFPB - while preserving its authority to protect financial consumers.

This authority ought to be preserved. The CFPB's short history tells a broader story about government bureaucracy that officials at the Department of Government Efficiency ought to keep in mind: Regulatory regimes do not emerge out of thin air; they typically arise in response to preventable lapses, mishaps and tragedies. Such is the case with the CFPB, which polices the subprime mortgages, risky loans and other schemes that led to the 2007-2009 Great Recession.

Just as the Federal Aviation Administration is tightening travel restrictions in the crowded airspace surrounding Reagan National Airport to prevent another disaster like the Jan. 29 midair collision over the Potomac, the CFPB works to prevent another economic crash. Removing its guardrails only invites further calamity.