The Consumer Financial Protection Bureau, or CFPB, was created in 2011 in response to the 2008 financial crisis as a way to protect consumers from unfair financial practices. Without it, financial institutions could run around unchecked — much like they did before the Great Recession.
With the CFPB’s future in limbo — media reports on April 18 said about 90% of its staff had received layoff notices — it’s important to know how the dismantling of the agency could affect you and your wallet.
Credit Card Protections at Risk
Even if the CFPB survives the Trump administration, it likely will be a much smaller and weaker version than it was before. In an internal email, staff members were instructed to halt any and all activity related to enforcement and litigation, and to suspend all rulemaking.
Hundreds of consumer advocates from across the U.S. have come together in support of the CFPB and met with Congress last month. “At the meetings, constituents will tell their legislators to oppose any measures that might be introduced in Congress that would roll back important consumer protections,” according to a news release from the Consumer Federation of America.
“Congress always hears from corporate lobbyists and billionaires pushing to dismantle the CFPB. … It’s time lawmakers hear from the ordinary consumers, the families living paycheck-to-paycheck who expected them to work to reduce the cost of living, not line big banks’ pockets and increase the cost of credit,” says Lauren Saunders, associate director of the National Consumer Law Center, in the same release.
Credit Card Late Fees
Remember when the CFPB announced last year it would cap credit card late fees at $8? A typical late fee hovers around $32, so the CFPB estimated the cap would save Americans over $10 billion in late fees annually. However, on April 15, the CFPB pulled an about-face and switched sides, agreeing with critics of the cap that the proposed fee limit extended beyond the bureau’s bounds. Critics of the cap also say it could trigger lower credit lines and higher interest rates, and the CFPB officially agrees.
After the agency’s change, a federal judge stopped the rule from taking effect.
In a joint statement, the lawsuit’s plaintiffs said, “This is a win for consumers and common sense. If the CFPB’s rule had gone into effect, it would have resulted in more late payments, lower credit scores, higher interest rates and reduced credit access for those who need it most.” Consumer advocates still disagree.
[Read: Best Credit Cards for Bad Credit.]
Medical Debt on Credit Reports
In January, the CFPB announced a new rule that would ban the inclusion of medical bills on credit reports, prohibiting lenders from including medical debt when making lending decisions. “People who get sick shouldn’t have their financial future upended,” former CFPB Director Rohit Chopra said in a news release. Critics of the rule include the three credit bureaus and hospitals.
According to that same release, the CFPB “expects the rule will lead to the approval of approximately 22,000 additional, affordable mortgages every year and that Americans with medical debt on their credit reports could see their credit scores rise by an average of 20 points.”
But on Feb. 6, an East Texas judge issued a 90-day stay on the rule, moving its effective date from March 17 to June 15. The rule is also subject to a challenge from the CRA, and with new leadership in place, its future is uncertain.
Credit Repair Company Crackdowns
Last year, the CFPB returned $1.8 billion in illegal junk fees to Americans who were wronged by credit repair companies like Lexington Law and CreditRepair.com. This was the largest ever distribution from the CFPB’s victims relief fund.
The companies allegedly “exploited vulnerable consumers who were trying to rebuild their credit, charging them illegal junk fees for results they hadn’t delivered,” Chopra said in a news release at the time.
If the current administration seeks to reduce the scope of the CFPB’s oversight, enforcements such as these could go the way of the dodo, and consumers may have to fend for themselves.
[Read: Best Secured Credit Cards.]
Bottom Line
The CFPB’s slow death could spell tragedy for consumers, especially those who already struggle with credit card debt. For the time being, consumers will have to be their own advocates and keep a closer eye on their financial accounts and credit reports.
More from U.S. News
Will Trump Axe the CFPB? What Consumers Should Know
Should You Be Worried About the CFPB Halt? Here’s What It Means for Banking
CFPB Attempts to Cap Credit Card Late Payment Fees at $8
What Credit Card Protections Could We Lose if the CFPB Closes? originally appeared on usnews.com
Update 04/18/25: This story was previously published at an earlier date and has been updated with new information.
