CFPB Shifts Gears: Trump Administration Transforms Consumer Protection Agency
Federal workforce within CFPB to experience significant reductions under Trump's administration's revised focus for the agency.
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In a move initiated by the Trump administration, the Consumer Financial Protection Bureau (CFPB) is undergoing a significant overhaul. On Thursday, the CFPB announced plans for a major overhaul of personnel, with more than 1,500 employees receiving layoff notices [1].
These cuts will affect the CFPB's core functions, including supervision of financial institutions and its enforcement arm [1]. Following the job cuts, the CFPB will retain a lean team of less than 250 employees to handle its regulatory activities [1].
According to a letter sent to CFPB staff by the agency's chief legal officer, Mark Paoletta, the CFPB is refocusing its efforts on "tangible harm to consumers" [2]. This refocus will involve the reallocation of resources from enforcement and supervision activities that can be handled by states [2].
The CFPB's supervision arm will also see a 50% reduction in the number of supervisory "events" or exams, with the emphasis on addressing consumer complaints and remedying harm [2]. The CFPB will now focus primarily on depository institutions, such as banks and credit unions, returning to a 2012 mix where 70% of its supervision was on banks and depository institutions, and 30% on nonbanks [2].
The CFPB's new priorities will also see the agency stepping back from areas where state regulators have significant authority, unless it's explicitly required by law. duplicate regulatory functions handled by other federal agencies will be eliminated [2]. The CFPB has also vowed not to pursue supervision under novel legal theories and will focus on areas clearly within its statutory authority [2].
Areas that are to be deprioritized at the CFPB include loans for other "initiatives for 'justice involved' individuals (criminals)," as well as medical debt, peer-to-peer platforms and lending, student loans, remittances, consumer data, along with digital payments [2].
The CFPB's new focus aligns with the Trump administration's broader push for financial regulatory reform. Under the new directive, the CFPB will prioritize the protection of service members, veterans, and the handling of mortgage issues [6]. The agency will also focus on actual fraud against consumers where there are identifiable victims with material and measurable damages, rather than imposing penalties solely to fill the penalty fund [6].
The CFPB is currently led by Acting Director Russell Vought, who is also the head of the Office of Management and Budget (OMB). Jonathan McKernan has been nominated to serve as the CFPB director, though his nomination is yet to be considered by the Senate [3]. McKernan was previously a member of the board of directors at the Federal Deposit Insurance Corporation (FDIC) [3].
Sources:[1] - FOX Business[2] - The Wall Street Journal[3] - CNBC[4] - The Balance[5] - Consumer Financial Protection Bureau[6] - The Hill
- The Consumer Financial Protection Bureau (CFPB), undergoing an overhaul by the Trump administration, intends to focus on tangible harm to consumers, with over 1,500 employees receiving layoff notices.
- The reallocation of resources at the CFPB will involve the reduction of enforcement and supervision activities that can be handled by states.
- The CFPB's supervision arm will see a 50% reduction in the number of supervisory events, with a greater emphasis on addressing consumer complaints and remedying harm.
- The new priorities at the CFPB will see the agency stepping back from areas where state regulators have significant authority, unless expressly required by law.
- The CFPB's new focus will prioritize the protection of service members, veterans, and handling of mortgage issues, aligning with the Trump administration's broader push for financial regulatory reform.
- Areas to be deprioritized at the CFPB include loans for 'justice involved' individuals, medical debt, peer-to-peer platforms and lending, student loans, remittances, consumer data, and digital payments.
- Under the new directive, the CFPB will focus on actual fraud against consumers, rather than imposing penalties solely to fill the penalty fund.
- Jonathan McKernan, nominated to serve as the CFPB director, previously served on the board of directors at the Federal Deposit Insurance Corporation (FDIC), though his nomination is yet to be considered by the Senate.
