The Feb. 11, 2025 shutdown of the Consumer Financial Protection Bureau (CFPB) leaves consumers vulnerable to financial exploitation and weakens protections against unfair practices.
The watchdog agency has taken action to end practices like:
- Junk fees
- Bad mortgage loans
- Illegal high-interest loans
- Inaction by credit bureaus when consumer have legitimate disputes
Here is what we know:
- Russ Vought, the newly appointed acting head of the CFPB, ordered employees to halt most of the agency’s work on February 9, 2025.
- The CFPB’s headquarters in Washington D.C. has been closed, and staff have been instructed not to perform any work tasks without written approval from leadership.
- Two top CFPB officials, the directors of supervision and enforcement, have resigned in response to these stop work orders.
- The agency’s public-facing operations have been disrupted, with its website showing error messages and its social media profiles being removed.
- The CFPB is currently not defending itself against lawsuits challenging its rules, potentially jeopardizing consumer protections it had previously established
This shutdown is part of a broader initiative by the Trump administration to reshape federal agencies, with involvement from Elon Musk’s Department of Government Efficiency (DOGE).
How the CFPB Shutdown Affects Consumers
1. Halted Enforcement Against Unfair Practices
The CFPB’s suspension of enforcement activities means that actions against unfair, deceptive, or abusive financial practices are effectively paused. This could embolden financial institutions to engage in questionable practices without fear of regulatory consequences.
2. Lack of oversight of credit reporting agencies
The CFPB’s lawsuit against Experian for conducting sham investigations of credit report errors and failing to remove or reinserting errors on reports has been suspended. This could impact consumers’ ability to effectively dispute errors on their credit reports.
3. Medical debt reporting could resume
The CFPB’s recent rule prohibiting unpaid medical debt from appearing on consumers’ credit reports is now in jeopardy7. This rule was intended to prevent harm to individuals’ credit due to medical debt, which disproportionately affects certain communities.
4. No enforcement actions
The CFPB’s ability to take action has been halted. This could limit the agency’s capacity to address systemic issues in credit reporting mistakes, the ability to repair credit, and dispute resolution.
5. Limited complaint handling
While consumers can still file complaints with the agency, the CFPB’s ability to act on these complaints may be severely limited during the shutdown.
6. Jeopardized Consumer Savings from “Junk Fee” Rules
Proposed rules to limit fees such as bank overdraft charges and credit card late fees, which were projected to save consumers billions annually, are now in limbo. For example, caps on overdraft fees and reduced credit card late fees could have saved $15 billion annually, but these savings are now uncertain.
7. Increased Risk of Predatory Practices
The absence of CFPB oversight may lead to a resurgence of predatory practices, such as hidden fees, misleading loan terms, and weak fraud protections. This is particularly concerning as advanced technologies like AI become more integrated into financial services, potentially exposing consumers to new vulnerabilities.
8. Gaps in Consumer Oversight
The shutdown creates regulatory gaps that other agencies, such as the Federal Trade Commission (FTC), may not fully address. While the FTC can enforce some consumer protection laws, its scope is limited compared to the CFPB’s broader mandate.
9. Threats to Data Privacy
Concerns have been raised about the security of sensitive consumer data stored in CFPB systems, especially with unvetted personnel reportedly gaining access during the shutdown.
10. Broader Economic Risks
Critics argue that dismantling the CFPB undermines safeguards designed after the 2008 financial crisis to prevent systemic risks. Without strong oversight, there is concern that financial institutions may repeat past mistakes, potentially destabilizing the economy.
“It’s recovered over $20 billion in relief for 195 million consumers in the United States, and it’s handled directly about 5.6 million complaints from consumers across the country,” said Chuck Bell of Consumer Reports.
What Consumers Can Do
Utilize state-level consumer protection resources: Many states have their own consumer protection agencies that can provide assistance and guidance in the absence of the CFPB.
Utilize your state attorney general: The Attorney General’s office serves as a crucial avenue for consumer protection and handles multiple categories of complaints.
Utilize the Better Business Bureau: The BBB accepts complaints about businesses and provides a free dispute resolution service.
Contact your representatives: Reach out to elected officials to express concern about the CFPB shutdown and urge them to support its reinstatement.
Monitor your accounts: Regularly check your financial statements and credit reports for any suspicious activity or errors.
Be wary of high-pressure sales tactics: Take your time to make financial decisions and don’t succumb to aggressive marketing.
Final thoughts
The future of the CFPB and its consumer protection role remains uncertain as these developments continue to unfold. While state-level regulations and other federal agencies may provide some oversight, they are unlikely to fully replace the CFPB’s comprehensive role.
