Established in the wake of the Great Recession, the Consumer Financial Protection Bureau (CFPB) is a government agency intended to do exactly what its name states: protect consumers financially by overseeing financial products and services. But under the Trump administration, the CFPB may see its efforts stifled.
Following claims by President Trump that the CFPB is a breeding ground for “waste, fraud and abuse,” the agency finds itself “in the crosshairs of a White House that has halted its work, closed its headquarters and fired scores of its workers,” said The Associated Press. For long-time CFPB critics, this effort at dismantling is welcome — but others question how it could affect consumers, given what the agency was designed to do.
What does the CFPB do?
The CFPB is “an independent bureau within the Federal Reserve” tasked with making sure “that the financial products and services offered to American consumers are fair and transparent,” said NPR. As part of this effort, “it implements U.S. consumer finance laws and issues new rules for lenders and other financial institutions,” and also “goes after companies it suspects of dishonest or illegal activity.”
“During the Biden administration,” for example, the CFPB “passed rules capping bank overdraft fees and removing medical debt from credit reports,” “sued financial services companies for misleading consumers and employers for misleading workers” and “focused on curbing junk fees and predatory lending practices,” said the Los Angeles Times.
Why was the CFPB established?
The CFPB was established by Congress in 2010, as part of the Dodd-Frank Wall Street Reform and Consumer Protection Act, with the mission to “address financial regulatory failures that were blamed for leading to the subprime mortgage crisis and subsequent 2008 Great Recession,” said CNET.
On the heels of the Great Recession, the Obama administration “pointed to weak and scattered financial-regulatory agencies as part of the cause,” suggesting that regulators “either didn’t have the authority or didn’t act to prevent the chain of events that led to a near economic collapse during the financial crisis of 2007 and 2008,” said Credit Karma.
In response, the CFPB was set up to “consolidate those regulatory responsibilities in one place,” moving away from the previous setup where “several federal agencies were regulating the consumer banking system,” said NPR.
Why has the CFPB come under criticism?
Trump is far from the first to criticize the CFPB. “Many Republicans opposed the creation of the bureau, insisting it had burdensome regulations that would hamper consumers’ ability to access credit,” said Time. Additionally, conservatives claim that “the independent agency, funded by the Federal Reserve System, lacks sufficient supervision and regularly exceeds its regulatory authority,” said the LA Times.
Despite these critiques, the agency insists that, “since its inception, it’s helped consumers to the tune of $21 billion through monetary compensation, loan principal reductions, canceled debt and more,” NPR said.