Trump's Latest Target: The Consumer Financial Protection Bureau

Summary

The NPR Politics Podcast: "Trump's Latest Target: The Consumer Financial Protection Bureau"

Release Date: February 10, 2025

---

Introduction

In the February 10, 2025 episode of The NPR Politics Podcast, hosts Asma Khalid and Susan Davis delve into the recent strategic moves by the Trump administration against the Consumer Financial Protection Bureau (CFPB). Joined by special guest Laurel Walmsley, a personal finance reporter for NPR, the discussion unpacks the implications of the administration's directives to halt the CFPB's operations and the broader impact on consumer financial protections.

---

Understanding the Consumer Financial Protection Bureau

[01:18] Laurel Walmsley:
"It's the consumer finance watchdog agency for the country...their mandate is to work on behalf of consumers to make sure that they are not being abused by banks, but also non-bank institutions."

Laurel provides a comprehensive overview of the CFPB, highlighting its establishment in response to the 2008 financial crisis. The agency operates under the Federal Reserve System, with a mission to safeguard consumers from predatory financial practices. Key functions include rulemaking—for instance, capping credit card late fees—and enforcement actions, such as adjudicating consumer complaints and imposing penalties on non-compliant financial entities.

---

Recent Actions by the Trump Administration

[02:39] Asma Khalid:
"Over the weekend, the Trump administration ordered the agency to stop working and shut its headquarters."

Laurel details a series of decisive actions taken by the Trump administration:

1. Infiltration by Government Efficiency Team: Members from Elon Musk's government efficiency team gained access to CFPB headquarters, including internal systems related to HR and finance.

2. Appointment of Russell Vogt: Russell Vogt, a key figure behind the conservative Project 2025 and the newly confirmed director of the Office of Management and Budget, was named the acting director of the CFPB.

3. Stop Work Order: Vogt issued a sweeping directive halting all CFPB operations. Subsequently, he announced via his X (Twitter) account that he would not seek the next round of funding from the Federal Reserve.

4. Closure of CFPB Headquarters: On Sunday, the CFPB headquarters was closed for the week with no public explanation, instructing staff to transition to remote work. This was further solidified the following morning with an email instructing employees to stay home and cease all activities.

[03:11] Laurel Walmsley:
"The Trump administration is on a different legal footing in at least being able to turn off the financial spigot for this one because it's controlled by the executive branch and not the legislative branch."

---

Conservative Opposition to the CFPB

[05:04] Susan Davis:
"Conservatives have been against the CFPB almost from the start... free-market conservatives, people that don't think that you need to add additional regulatory layers."

Susan elaborates on the longstanding conservative resistance to the CFPB, positioning it as a symbol of regulatory overreach. Unlike other financial regulatory bodies like the SEC or FDIC, which operate through top-down regulation, the CFPB was designed as a bottom-up watchdog, directly advocating for consumer rights. This unique structure has made it a focal point for conservatives who advocate for minimal government intervention in financial markets.

Furthermore, the CFPB's proactive stance against emerging technologies in finance, such as digital payment systems used by tech giants like Google, has further alienated major corporations, adding another layer of opposition to the agency.

---

Structural and Funding Challenges

[06:10] Susan Davis:
"CFPB was funded by transfers from the Federal Reserve, which is just a different unique system... it falls within the power within the executive branch."

The CFPB's funding mechanism, primarily through transfers from the Federal Reserve rather than direct congressional appropriations, was intentionally designed to ensure its independence. However, this structure also makes it more susceptible to executive branch influence, as seen with the Trump administration's recent actions. Unlike agencies funded by Congress, the CFPB's financial autonomy means that the executive can more easily withhold funds, effectively crippling the agency without direct defiance of Congress.

---

Implications of Shutting Down the CFPB

[09:05] Laurel Walmsley:
"Even if it doesn't disappear, you know, it can sort of become a shell of itself... they can't make any rules. They can't do any enforcement."

The immediate impact of the administration's actions is the suspension of the CFPB's core functions. Without the ability to enforce regulations, issue new rules, or assist consumers, the agency's role as a protector against financial abuse is nullified. Laurel likens this to "taking the cops off the beat," leaving consumers vulnerable to scams, fraud, and predatory lending practices.

[11:52] Laurel Walmsley:
"They're like the frontline defense for consumers. And now we're just, like, telling this enforcement agency, don't enforce."

Susan adds that the removal of the CFPB's protective functions could lead to increased financial exploitation, as there would be no robust mechanism for consumers to seek redress against unfair financial practices.

---

Legal Challenges and Future Prospects

[12:25] Laurel Walmsley:
"There's two lawsuits so far. One of them... their employee records being handed over to Elon Musk's team... the second lawsuit is that Vogt's directives go against what's been directed by Congress."

In response to the administration's actions, two major lawsuits have been initiated:

1. Privacy Concerns: The first lawsuit challenges the transfer of CFPB staffers' sensitive information to the government efficiency team, raising significant privacy and security issues.

2. Violation of Congressional Mandate: The second lawsuit contends that the cessation of CFPB activities contravenes congressional directives that established the agency and outline its responsibilities.

[13:33] Susan Davis:
"If it's going to be a four-year fight, like if the CFPB rise up again at some point, it could just take a long time."

The path forward for the CFPB involves prolonged litigation, with uncertainties regarding whether the agency can be reinstated to its full operational capacity. Susan emphasizes the potential for a drawn-out battle lasting several years, during which the agency's reinstatement would depend on the outcomes of legal proceedings and potential shifts in the political landscape.

---

Conclusion

The Trump administration's strategic move to incapacitate the CFPB marks a significant shift in the landscape of consumer financial protection in the United States. While conservatives have long opposed the agency, the abrupt halt to its operations poses substantial risks to millions of Americans who rely on the CFPB for safeguarding their financial interests. As legal battles ensue, the future of the CFPB remains uncertain, highlighting the ongoing tug-of-war between regulatory oversight and executive authority in shaping the nation's financial regulatory framework.

Notable Quotes:

• Laurel Walmsley [01:18]:
  "It's the consumer finance watchdog agency for the country... their mandate is to work on behalf of consumers to make sure that they are not being abused by banks, but also non-bank institutions."

• Susan Davis [05:04]:
  "Conservatives have been against the CFPB almost from the start... free-market conservatives, people that don't think that you need to add additional regulatory layers."

• Laurel Walmsley [09:05]:
  "Even if it doesn't disappear, you know, it can sort of become a shell of itself... they can't make any rules. They can't do any enforcement."

• Susan Davis [13:33]:
  "If it's going to be a four-year fight, like if the CFPB rise up again at some point, it could just take a long time."

---

Final Thoughts

This episode of The NPR Politics Podcast provides an in-depth analysis of the Trump administration's actions against the CFPB, offering listeners a clear understanding of the agency's role, the motivations behind its targeted shutdown, and the broader implications for consumer financial protection in the United States. Through expert insights and detailed discussion, the podcast equips listeners with the knowledge to grasp the significance of these developments in the political and financial arenas.

Transcript

[Sridhar]

This message comes from Carvana. Sell your car the convenient way, enter your license plate or vin, answer a few questions and get a real offer in seconds. Go to Carvana.com today. This is Sridhar in Chicago, and I'm here with my mom who introduced me to the NPR Politics Podcast. Hi. Tomorrow is my 12th birthday.

[Asma Khalid]

This podcast was recorded at 1:37pm Eastern Time on Monday, February 10th of 2025.

[Sridhar]

Things may have changed by the time you hear, and so will my age. Here's the show.

[Asma Khalid]

Oh, happy birthday.

[Sridhar]

That's so nice.

[Laurel Walmsley]

Oh, I love that.

[Asma Khalid]

Hey there. It's the NPR Politics Podcast. I'm Asma Khalid. I cover the White House.

[Sridhar]

I'm Susan Davis. I cover politics.

[Asma Khalid]

And today on the show, we are looking at the possible demise of the Consumer Financial Protection Bureau, known as the cfpb. Over the weekend, the Trump administration ordered the agency to stop working and shut its headquarters. And to make sense of what this all means, we are joined on the show today by a special special guest, Laurel Walmsley. Hey there, Laurel.

[Sridhar]

Hello.

[Asma Khalid]

So, Laurel, you cover personal finance for us here at npr. And I want to start with you. For people who are not familiar with the Consumer Financial Protection Bureau, can you describe what does this agency do?

[Laurel Walmsley]

Yeah, it's been around for about 14 and a half years now. And it is the consumer finance watchdog agency for the country. So it's part of the Federal Reserve System and it's funded through that. It is really the only agency whose mandate is to work on behalf of consumers to make sure that they are not being abused by banks, but also non bank institutions. You know, they were formed in the wake of the financial crisis in 2008, you know, where there was a lot of looking at how can we make sure that this doesn't happen again? And there are new rules coming in about mortgages and subprime mortgages, that kind of stuff. So they do stuff like that, but they do rulemaking as part of what they do. So they have recently, you know, made rules capping credit car card fees and late credit card late fees, stuff like that, or that medical debt can't be on your credit report. But they also do enforcement. And so part of what they do is they have these examiners, they're called, they've got staff who go out to companies and make sure that they are following the laws that are in place. But they also, like they have a complaint line. People can literally submit complaints when they think that they've been wronged or like they've been slapped with A fee that they never heard about before. And the CFPB will look into it and often get their money back.

[Asma Khalid]

What exactly happened over the weekend?

[Laurel Walmsley]

Okay, there was a lot. One of the first things that happened was on Friday, members of Elon Musk's government efficiency team showed up at CFPB headquarters and came in. They'd been added to the directory there and they also were able to gain access to, were granted access to internal CFPB systems for stuff like human resources, finance, procurement. Russell Vogt was also named the new acting director of cfpb, which we should.

[Asma Khalid]

Point out he's one of the main architects of the conservative blueprint known as Project 2025.

[Laurel Walmsley]

That's right. In addition to being the newly confirmed director of the Office of Management and Budget. And no sooner was it clear that he had now taken over that he sent out an email with a pretty sweeping essentially stop work order to staff at CFPB saying really can't do any of the work that CFPB does. Shortly after that email vote posted on X from his own account that he would not be asking the Federal Reserve for the next round of funding for the agency. And on Sunday came word that CFPB's headquarters would be closed for the week. There was no reason given for that, but staff members were told to work from home. And then just this morning there was another email that went out, said, actually stay at home, but don't work, don't do anything.

[Sridhar]

I think that it's important to remember that conservatives have been against the CFPB almost from the start. As Laurel noted, it was born out of the 2008 financial crisis under the Obama administration. And the architect essentially of the CFPB was Elizabeth War, who at the time Senator from Massachusetts, no now, but at the time she was an intellectual academic from Harvard who had come up with the framework for this program. And it really was supposed to be regulation from the bottom up. There are obviously a ton of financial regulatory agencies that exist in the country of the sec, the fdic, but they're sort of top down regulators. And as Laurel noted, this was an opportunity to give consumers some recourse if they felt like they were victims of predatory lending through their mortgages, through their credit card companies. And the CFPB say they've actually been pretty successful by their own numbers. They say that in the 14 years since they were established, they've brought about $20 billion in consumer relief, that they've enacted $5 billion in civil money penalties, and that they say that they've provided some element of financial relief to 195 million Americans.

[Asma Khalid]

So how is that not popular with people, Sue?

[Sridhar]

So I think from the beginning, it was seen as a much more progressive, populist idea of how you regulate the government. So more free market conservatives, people that don't think that you need to add additional regulatory layers on top of a pretty complicated regulatory framework. I mean, conservatives just don't like regulatory agencies as a sort of a foundational view, and they felt that this one was redundant. I would also say it's important to note in this current political climate that a lot of tech companies really don't like the CFPB because the CFPB has also taken more aggressive action looking at digital payment systems that are used over platforms like Google, which is sort of new technology that CFPB has been looking at. So corporations don't like it because it adds another layer of regulatory fight that they have in their commerce. So it. It doesn't surprise me that Donald Trump took this action. This isn't like, oh, at one point, Republicans used to like this agency. Republicans have never liked this agency. From the conservative side, this is a big victory for something they've wanted from the beginning.

[Asma Khalid]

So it also seems like what's happening with the CFPB is similar to what happened recently with usaid. Is it the same?

[Sridhar]

I think it's same philosophically. When you think about what Donald Trump's trying to do right now, which is sort of broadly remake the federal government and make it smaller, make it more conservative. I think there's a lot of distinctions certainly between the missions of the two agencies. The point that Laurel made, too, that I think is worth just focusing on for a second, is how the CFPB is structured and funded. I'm not an expert on this, but it is not funded through the annual appropriations of Congress. And that was by design. They wanted to create a regulatory agency that was more independent. So if you weren't subject to constant congressional appropriations, you weren't affected by shutdowns, your work would not be influenced by Congress. A lot of members of Congress, especially Republicans in Congress, did like that because they felt like when you directly. They did not like that. They did not like it because when you do directly appropriate agencies, you have more oversight over them legally. Now, I think what's interesting in the contrast between USAID and cfpb, USAID was directly appropriated by Congress. That's part of the litigation fight that's going on right now. CFPB was funded by transfers from the Federal Reserve, which is just A different unique system. And I have seen arguments that that will put the administration on better legal footing because it falls within the power within the executive branch. So in this instance, it's not really clear that Trump is defying Congress because Congress never appropriated any money for this agency. However, Congress did pass a law establishing the agency. So I think that will provide a basis for the legal fight. But I think that the Trump administration is on a different legal footing in at least being able to turn off the financial spigot for this one because it's controlled by the executive branch and not the legislative branch.

[Asma Khalid]

From my recollection. I mean, this was created as part of the Dodd Frank act in 2010. So isn't it in the law, the.

[Sridhar]

Creation of the agency? Yes. But to me, again, we're in this, like, weird. We've never been here before, legal limbo. Like, he hasn't technically tried to shutter the agency. They've just kind of put it in suspended animation. I have no doubt that there's gonna be some form of litigation against this. You're seeing this happen in all of these agencies, but how precisely they try to shut it down or not shut it down or how it affects the work, I don't think we entirely know just yet.

[Asma Khalid]

All right, let's take a quick break and lots more to talk about in a moment.

[Sridhar]

This message comes from NPR sponsor Saatva founder and CEO Ron Rudson shares the story of how he got started creating Saatva. In 2007, 2008, I went out and I bought the most popular luxury mattresses. I tore them apart, and I realized, based on the raw materials, cost and the analysis that I had done, that I was able to sell that level mattress, but with a very affordable price. To learn more, go to swatva.com npr and we're back.

[Asma Khalid]

And Laurel, I want to understand what the impact is if CFPB goes away, if it disappears.

[Laurel Walmsley]

I guess the first thing I would say is even if it doesn't disappear, you know, it can sort of become a shell of itself, which is kind of what I feel like we're looking at right now. Right. They're staffers, but they're not allowed to do anything. They can't make any rules. They can't do any enforcement. You know, they can't put out any information to help consumers. All that kind of stuff that is core to the mission of the agency. They already aren't doing and are not allowed to do under, under Russell Vote. So, you know, that's kind of what we saw during the first Trump administration. I mean, they also went after CFPB then. And really, you know, there's sort of.

[Asma Khalid]

This feels different than the first time. It does.

[Laurel Walmsley]

I mean, I think you're seeing sort of the Elon Musk effect and probably also the Russell vote effect. Like they've got a plan this time to hamper it even further. But I think it's also possible to just make the entity not strong and able to do very much. I mean, they can go and change the rules that were made under the Biden administration. They can really gut what the agency is set up to do. So, I mean, I think even if you don't destroy it, even if you don't give it any more funding, I mean, right now they're just gonna start going through the reserve funds that they have there. But I mean, I think a CFPB that can't do any of this stuff, really, you. You almost don't need to destroy it.

[Sridhar]

I also think that, to me, there's a politically interesting point here because Trump is moving so fast and doing so many things in government, but this is one where I think it has the risk of maybe going a bit too far in that a lot of what he's doing right now is like, campaign promise made, campaign promise kept. And he wasn't campaigning on shutting down. Like the agency that helps consumers. This is arguably like a pretty working class type agency. Like if you've been wronged by your bank or your mortgage company, like, this is the recourse for every everyday citizens to go to the government and say, help me investigate this. And taking that away doesn't exactly fit with his other message of who he's fighting for and what he's about. It really does seem like it is much more a favor to the banking industry and the tech companies. Like it's helping people at the top and not people at the bottom. And I don't know if people have strongly held feelings about the cfpb, you might be able to get away with it that way. Like, people just might not know. But there has certainly been millions of Americans who have engaged with this age. And it's like where you could go if you had been wronged. And while there's certainly other financial regulatory institutions overlooking like the health of the financial sector in this country, if CFPB weathers on the vine or closes down, like there's nothing else, there's no other recourse for consumers at that level with that much power anywhere. So I think that it might start to have a Ripple effect where, like, look, people still get kind of screwed over by their banks and their mortgage companies sometimes. Like, that's not a solved problem in America. It might sort of recreate some of that anger.

[Laurel Walmsley]

Yes. And CFPB staffers, you know, one who just left the agency, told me that this is like taking the cops off the beat. I mean, they are like the frontline defense for consumers. And now we're just, like, telling this enforcement agency, don't enforce. And so, you know, there's a lot of concern from other consumer advocacy groups saying with the agency hampered in this way, it just leaves Americans super vulnerable to scammers and fraud and financial abuse.

[Asma Khalid]

Well, there are legal challenges underway at this moment to try to keep the agency open. I mean. Correct. What are those?

[Laurel Walmsley]

Yeah. So there's two lawsuits so far. One of them, my understanding, is that it's about the staff themselves and sort of, like, their employee records and stuff being just handed over to Elon Musk's team. That it's, like, putting them at risk. You know, their own health and financial information is now in the hands of that DOGE government efficiency team. So there's concern there. And then the second lawsuit is that votes directives to not let them do their work is, you know, goes against, I think, what's been directed by Congress. And that he can't do that, essentially.

[Asma Khalid]

Can't unilaterally shut the agency down.

[Laurel Walmsley]

Yeah. Because they are congressionally obligated to do the work that they're supposed to be doing.

[Asma Khalid]

Sue, I want to ask you a big picture question. It feels like this attempt to, we could say, neuter CFPB is yet another move from the Trump administration that seems to mimic the Silicon Valley expression, move fast and break things. How likely is it that if these agencies get broken up, they could come back in some other form? I mean, in other words, if they die now, are they dead forever?

[Sridhar]

That's a good question. And I think part of what bends towards the Trumpian view in this is that, yes, there is legal recourse, and, yes, there is gonna be a ton of litigation. And they're not done yet. Right. Like, they're gonna turn this on other agencies. Like, this is part of a bigger litigation, just takes a really long time. So I don't know if USAID or cpfb, like, if all of this is resolved in the ways that people wanna keep that institution, but if it takes two, three, four years, like, what's left and how do you build it back up or how do you restaff it So I think you can do an incredible amount of damage in a short period of time, especially if the will of the White House is really gonna try to suffocate these agencies over the next four years. Whether they ultimately succeed in the end, unilaterally sort of closing them, I just don't know. I don't have that level of Cryst. But I think that if it's going to be a four year fight, like if the CFPB re rise up again at some point, it could just take a long time.

[Asma Khalid]

All right. Well, on that note, that is a wrap for today's show. Laurel, thank you so much for joining us with all your reporting. Really appreciate it.

[Laurel Walmsley]

Thanks for having me.

[Asma Khalid]

I'm Asma Khalid. I cover the White House.

[Sridhar]

I'm Susan Davis. I cover politics.

[Asma Khalid]

And thank you all, as always, for listening to the NPR Politics podcast.

[Sridhar]

Support for NPR and the following message come from Saatva. Saatva Luxury mattresses are every bit as elegant as the most expensive brands, but because they're sold online, they're about half the price. Visit saatva.com NPR and save an additional $200. Evergreen trees are Pacific Northwest icons in journalism. An evergreen story isn't tied to one news cycle. It goes deep and helps you. The Evergreen is also a podcast from OPB about the Northwest. I'm Jen Chavez. Listen to the Evergreen podcast from OPD every Monday, part of the NPR Network.