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The Hill
06-03-2025
- Business
- The Hill
CFPB allowing some offices to resume functions
The Consumer Financial Protection Bureau (CFPB) is allowing some offices to resume their functions, as the Trump administration faces a legal challenge over its stop work order and other efforts to overhaul the consumer watchdog. Mark Paoletta, CFPB's chief legal officer, sent an email to employees Sunday clarifying that they should still be performing statutorily required work. Several offices at the agency have since received authorization to resume their work, according to a trove of emails filed in court Tuesday. 'These measures were intended to ensure that new leadership could establish operational control over the agency while ensuring that it would continue to fulfill its statutory duties,' Paoletta wrote. 'Many of you understood this and continued to perform functions required by law and sought approval from me to perform work, which I have promptly granted.' 'It has come to my attention, however, that some employees have not been performing statutorily required work,' he continued. 'Let me be clear: Employees should be performing work that is required by law and do not need to seek prior approval to do so.' After acting CFPB director Russell Vought was appointed in early February, he initially directed employees to cease 'all supervision and examination activity' and 'shareholder engagement.' However, he quickly expanded his order days later, telling agency staff to 'stand down from performing any work task' unless they received approval from Paoletta. Employees were also told not to come into CFPB headquarters, and the building's lease was later cancelled. As CFPB staff attempted to comply with the work stoppage, confusion emerged over whether they could send emails, attend meetings with other agencies or, for the legal division, review certain documents, the emails show. Employees also appeared unclear as to whether they could perform statutorily required activities. In an email last week, the associate director of the Office of Fair Lending asked if they were permitted to perform statutory functions, such as supporting fair lending examinations and enforcement activity and completing a report for Congress. The team responding to records requests under the Freedom of Information Act (FOIA) at CFPB similarly asked for permission to continue their work, noting that it was required by law and halting the work posed a 'risk of litigation.' Both requests were approved. Adam Martinez, CFPB's chief operating officer, also sent an email to staff in the Division of Research, Markets and Regulations last week, saying they wanted 'to ensure that you are aware that statutorily required work and/or work required by law are authorized.' He sent a similar missive to the team handling supervision at CFPB. However, he also confirmed that Vought's order to cease all supervision and examination activity was still in force. Following Paoletta's Sunday email, the supervision team sought clarification from Martinez, who responded that the newest directive 'does not change the specific work stoppage' laid out in Vought's initial email. As a result, Cassandra Huggins, the principal deputy assistant director of Supervision Policy and Operations, sent out an email to supervision staff Monday. She noted that Paoletta's message 'was not intended to authorize the reinstatement of supervision/examination activity, even though the Bureau is required by law to carry out these activities.' In a lengthy response to Huggins and supervision staff, Paoletta slammed the email, emphasizing that all CFPB staff are authorized to perform statutorily required work. 'I am concerned that you sent out an internal agency communication on such an unfounded basis that is false and directly contradicts my March 2nd message without first getting confirmation directly from me,' he wrote. 'Your actions severely undermine the Agency leadership's ability to supervise the agency staff and to ensure that statutorily required duties are being performed,' Paoletta added. Huggins responded, noting that she 'did not intend to undermine the new administration's ability to supervise agency staff.' '[M]y only intention was to ensure that our staff did not act against the direction in the February 8 email from Acting Director Vought to cease all supervisory and examination activity,' she said. Other actions taken by the new CFPB leadership have also sowed confusion. After the agency's social media accounts were deleted in early February, staff warned that they might be in violation of records retention requirements, the emails show. The issue was compounded by a push to terminate more than 100 contracts, one of which held backup records of the CFPB's social media. The emails were submitted as part of a lawsuit brought by the National Treasury Employees Union, which represents CFPB staff, and several outside groups. They have accused the Trump administration of attempting to dismantle the agency. Administration lawyers have denied the allegations that they plan to eliminate the CFPB, emphasizing President Trump's nomination of Jonathan McKernan for CFPB director. The Senate Banking Committee voted to advance McKernan's nomination Thursday. However, CFPB employees have pushed back on the administration's claims. In a series of court declarations last week, staff said they were told by officials that they plan to 'wind down' the agency, eliminating all but five employees and transferring its statutorily required functions to other agencies.
NBC News
27-02-2025
- Business
- NBC News
CFPB moves to drop suit accusing Capital One of cheating customers out of $2 billion
The Consumer Financial Protection Bureau is moving to drop a suit against Capital One brought during the Biden administration just last month that accused the bank of cheating customers out of a collective $2 billion. A one-line court filing Thursday said the agency was seeking to voluntarily dismiss its suit with prejudice, meaning it would not be revived. An agency spokesperson did not immediately respond to a request for comment. In a statement, Capital One said: 'We welcome the CFPB's decision to dismiss this action, which we strongly disputed.' Former CFPB director Rohit Chopra brought the suit in January, accusing the banking giant of "conflating" two similarly named savings accounts and failing to notify them that one of them paid out substantially more in interest payments. 'The CFPB is suing Capital One for cheating families out of billions of dollars on their savings accounts,' Chopra said at the time. 'Banks should not be baiting people with promises they can't live up to.' Capital One had vehemently denied the allegations. 'We are deeply disappointed to see the CFPB continue its recent pattern of filing eleventh hour lawsuits ahead of a change in administration," it said in a prior statement. "We strongly disagree with their claims and will vigorously defend ourselves in court,' the company said in a statement." The move is the latest sign that the agency under Trump plans to scale back Biden-era actions while the future of the agency's existence continues to be debated. Earlier Thursday, the CFPB dismissed a suit against a student loan servicer it had accused of illegally collecting on student loans discharged in bankruptcy. Last week, it dropped a case against an online lender it previously accused of deceiving borrowers about loan costs. Meanwhile, Trump's nominee to head the agency, Jonathan McKernan, told a Senate committee earlier Thursday that he believed the CFPB had recently overstepped the bounds of its mandate, and that — assuming it continues to operate — it should become more streamlined and accountable. McKernan's nomination process has come amid calls by Trump administration officials to dismantle the CFPB outright. OMB head Russell Vought, who has nominally been put part in charge of the agency, issued a directive earlier this month to suspend all work there. And Elon Musk, the figurehead of Trump's Department of Government Efficiency, has stated his desire to "delete" the bureau.
CNN
12-02-2025
- Business
- CNN
From credit cards to medical debt: What may happen to some key consumer protection rules under Trump
The Consumer Financial Protection Bureau, the so-called cop on the beat protecting Americans from financial abuse, is now under strict orders to do nothing. 'Please do not perform any work tasks,' Russell Vought, the acting director, wrote on Monday to CFPB staff in an email obtained by CNN that announced the headquarters would be closed this week. That is on top of an expanded freeze on activities that he ordered Saturday night instructing staff to stop a host of efforts, including 'all supervision and examination activity.' Vought's order comes a week after the prior acting director, Treasury Secretary Scott Bessent, had ordered a somewhat narrower freeze. The freeze means the bureau — which was created by Congress under the 2010 Dodd-Frank Act to protect consumers from financial abuses and to regulate providers of various financial services and products — cannot engage in hiring, rulemaking, active lawsuits, enforcement actions or investigations. The agency is also suspending the effective dates of recently finalized new consumer protections. And it also will 'cease all shareholder engagement.' The wide-ranging freeze — particularly in enforcement and supervision — worries consumer advocates because it leaves Americans even more vulnerable to financial predators. Democratic Sen. Elizabeth Warren at a Senate Banking Committee hearing Tuesday put it bluntly: 'There are now zero cops overseeing the $18 trillion consumer lending market. Zero cops. Investigations into illegal foreclosures and auto repossessions – canceled. Exams of giant credit card issuers to weed out unlawful junk fees – canceled. Probes of illegal debt collection practices – canceled. Rules to save people billions of dollars – canceled.' There is no indication how long the freeze will last. 'As long as CFPB's work is halted, bad actors go unpunished. It doesn't mean risks stop occurring just because the bureau decided to take its foot off the gas,' said Adam Rust, director of financial services at the Consumer Federation of America. It's impossible to predict with certainty what will happen to various consumer protections and enforcement actions going forward. But agency watchers think the new leadership at CFPB may table or slow-walk some rules and enforcement efforts, including some that were part of the Biden administration's effort to crack down on 'junk' fees. Here is just a sampling of what may be at risk: Banning medical debt on credit reports: Take the recently finalized rule banning the inclusion of consumers' medical debt on their credit reports and banning lenders from using certain medical information to make loan decisions. The rule was set to take effect on March 17, according to the Federal Register. 'Medical debt rulemaking is on the chopping block,' said Meredith Osborn, a partner at the law firm Arnold & Porter who served as an attorney in enforcement during the CFPB's earliest days. House Financial Services Committee Chairman French Hill has already signaled his opposition. And in mid-January, industry groups for credit bureaus and debt collectors sued to stop the rule. Capping credit card late fees: The CFPB under previous head Rohit Chopra finalized a rule in March of last year that capped most credit card late fees at $8, down from an average of $32. The CFPB estimated the rule would save families roughly $10 billion a year, or $220 each on average annually for the 45 million people subject to such fees. But the cap was blocked from taking effect by a federal judge in Texas, who issued a preliminary injunction until the lawsuit contesting the rule, which was brought by banking and business groups, is resolved. Both Osborn and Jaret Seiberg, financial services policy analyst at TD Cowen Washington Research Group, think the $8 cap is now vulnerable, as the agency may decide to drop its defense of it in court. But this rule and others highlight the tension between the Trump administration's desire for greater deregulation and Trump's populist rhetoric, said Aaron Klein, a senior fellow in economic studies at the Brookings Institution. For example, the president has expressed support for a 10% interest rate cap on credit cards. 'Does Trump want to live in a world with a 10% rate cap and $35 fees for everything?' he said. Capping bank overdraft fees: In December, the CFPB finalized a rule capping most bank overdraft fees at $5, down from the typical $35. It is not set to take effect until October. The CFPB had estimated the rule would save Americans up to $5 billion a year, or $225 annually on average for families that have incurred overdraft fees. Banking and credit union associations have sued the agency over the rule, alleging it has exceeded its regulatory authority and that the rule will 'harm the consumers who most benefit from the access to liquidity enabled by overdraft services.' As with the credit card cap, Seiberg predicts the new management at CFPB may decide not to defend it in court. Making it easier to switch banks: In October, the CFPB finalized a so-called 'open banking' rule, which aims to make it easier, more secure and always free for customers to switch accounts or to simply transfer or share their financial data from their banks, credit card issuers and other financial service providers upon request. And it limits third parties' use of consumers' personal finance data to only those purposes requested by the consumer. The rule would create more of a competitive playing field between traditional banks and non-bank financial technology companies, or fintechs. 'It benefits non-bank institutions, by taking customers away from big banks,' Osborn said. Banking associations immediately filed a lawsuit against the agency, alleging the rule puts consumer privacy and account security at risk. Because the rule's effective date isn't until 2026, 'CFPB could reverse it. But it benefits fintech, which has supported Trump. (This is) one where there may be less of an immediate push to jettison it,' Osborn said. Suing banks for Zelle fraud: In late December, the CFPB sued JPMorgan Chase, Bank of America and Wells Fargo for not doing enough to prevent fraudulent transactions on Zelle, the most widely available peer-to-peer payment system. The CFPB alleged that hundreds of thousands of customers at the three banks, which co-own Zelle with four other banks, have lost more than $870 million over the past seven years, an estimate Zelle disputes. Given the freeze at the agency on enforcement and lawsuits, Osborn doesn't expect resolution of the issue anytime soon. What the bureau might look like after the freeze is lifted is anyone's guess. But given events in the past several days, CFPB employees and others worry that the Trump administration is trying to severely gut the agency's ability to do its work. One federal employee told CNN they think the agency's ability to deliver real benefits to working class Americans won't be continued under the Trump administration. Trump on Monday confirmed that his goal is to 'totally eliminate' the CFPB. Elon Musk has effectively called for its death – posting 'CFPB RIP' on his social media platform X on Friday. And members of Musk's team at the 'Department of Government Efficiency,' which has created chaos across the federal government, were granted administrative access to CFPB's systems last week. What's more, when Vought was asked by CNN on Tuesday whether it's legal to dismantle agencies like USAID and CFPB, he replied, 'Everything we do is legal.' He would not, however, answer when asked whether the administration would abide by Supreme Court decisions should such issues come before it. All that said, the CFPB was created by Congress. And, Osborn noted, 'until Congress passes a law rescinding in part or in whole the Dodd-Frank Act, there will be a CFPB. How energetic and impactful it will be is an open question.' Warren, who originated the idea for CFPB before she became a lawmaker, made it clear in a post on X Saturday night that the agency has prevailed despite significant of Republican opposition over the years. 'The Consumer Financial Protection Bureau has returned over $21 billion to families cheated by Wall Street. Republicans have failed to gut it in Congress and in the courts. They will fail again.' Either way, the speed and severity with which the administration is trying to shutter the agency may come at a cost to everyone, according to Thomas Kingsley, director of financial services policy at the center-right think tank American Action Forum. 'Over the past two decades, the CFPB has supplanted a significant body of existing consumer protections at other federal regulators. Halting operations at the CFPB without a plan for replacing these protections is not without risks to both consumers and the administration,' Kingsley wrote in an analysis. – CNN's Manu Raju and Ted Barrett contributed to this report
