It looks like a government watchdog may have been put on a chain, and some experts say this move could threaten financial protections.
The Consumer Financial Protection Bureau, a government agency that oversees consumer financial services and products, was ordered to stop all work-related activities. Newly appointed acting director Russell Vought cut off the agency’s funding and sent an email this weekend telling the staff not to issue any new rules and to cease all investigations.
“With the new administration halting work at the CFPB, American citizens are at greater risk of financial fraud and discrimination,” said Leslie H. Tayne, Esq., Finance and Debt Expert and Founder of Tayne Law Group. “In the long term, reduced oversight at the CFPB may erode trust in financial institutions and threaten economic stability for American consumers.”
Relaxing regulations on banking industries could become risky as the field grows more crowded and competition more fierce. Buy now, pay later apps have grown in popularity, as have peer-to-peer payment services. Social media platform X, which is owned by billionaire and Department of Government Efficiency head, Elon Musk, recently announced it was partnering with Visa to create a payment platform.
Democratic Sen. Elizabeth Warren, one of the founders of CFPB, warned in a press release that because the agency was created by an act of Congress, the Trump administration can not legally eliminate it.
The CFPB emerged in the wake of the 2008 financial crisis with the mission of “enforcing federal consumer financial laws and protecting consumers.” As of December 2024, the CFPB reported it had recovered up to $21 billion in compensation, debt cancellation and other forms of relief for American consumers.
Currently, the website’s homepage at consumerfinance.gov displays a 404 error message. The agency’s presence on social media was deleted after DOGE gained access to the CFPB systems.
With funding strangled and the staff not allowed to work, the CFPB is essentially dismantled. Here’s what that could mean.
Why does the CFPB exist?
The CFPB launched in 2011 as an independent financial regulatory enforcement and watchdog agency. Authorized by the Dodd–Frank Wall Street Reform and Consumer Protection Act, Congress established the independent bureau to address financial regulatory failures that were blamed for leading to the subprime mortgage crisis and subsequent 2008 Great Recession.
In addition to overseeing adherence to financial regulations, the CFPB investigates consumer complaints into unfair or deceptive financial products or services and offers public-facing financial education and resources.
Over the course of its 14-year history as an independent agency, the CFPB had often drawn the ire of Republican politicians and the financial industry who challenged the enforcement power of the bureau in court. In June 2020, the Supreme Court ruled that the president could remove the CFPB director without cause, but that the agency and its funding were protected by laws that could only be rescinded by the legislative branch. A 2024 Supreme Court ruling upheld the constitutionality of the bureau’s funding structure.
What happens if the CFPB is eliminated?
Even if the CFPB can’t be legally eliminated, hampering the bureau’s work could still have an impact on consumers who rely on the agency to protect them from fraud, financial abuse and predatory lenders.
Rich Dubois, executive director of the National Consumer Law Center, decried the Trump administration’s decision to impede the work of the CFPB.
“Financial companies have shown time and time again that they cannot police themselves,” Dubois said in a recent press release. He cited several pending investigations affected by the shutdown, including a lawsuit alleging Zelle skipped safety features in its person-to-person payment service and a lawsuit against the credit bureau Experian over credit report errors.
In the past, the CFPB had a way for consumers to submit complaints about financial products or services, and companies typically responded within 15 days, according to credit card and personal finance expert Jason Steele.
“But now it’s unclear if this mechanism is still functioning,” Steele said. “In the long term, it’s also unclear how companies will respond without oversight or supervision.”
Is Trump targeting the FDIC next?
There has been speculation that as part of its agenda to remove regulations, DOGE could undermine or dismantle the Federal Deposit Insurance Corporation too. A recent government hiring freeze affected new hires at the FDIC, according to a Washington Post report.
Created in the aftermath of the Great Depression to reassure Americans that banks were safe, the FDIC uses an industry-funded pool of money to cover losses in case of bank failures. Each depositor to a bank or credit union supported by the FDIC has their money insured up to $250,000 and this promise is backed by the US government.
“Unlike the CFPB, the FDIC has its own statutory power,” said Bill Issac, former FDIC chairman. “It has a board of directors and its own funding from the banking industry. It would not be easy at all to dismantle the FDIC. And it would be a horrible move.”
Financial experts have warned that eliminating the FDIC could cause widespread disruption to the banking industry, potentially affecting not only consumer trust in financial institutions but also the value of the US dollar.
“If the FDIC is dismantled, all money in our banks would be at risk,” Steele said.
However, experts point out that for now, the FDIC remains in place, so bank deposits remain insured up to $250,000. If you bank with a federally insured credit union, your deposits are covered by the National Credit Union Administration.
