Trump’s funding cuts put America’s consumer watchdog on the brink of collapse

by Douglas Gillison

WASHINGTON, Dec 30 (Reuters) – When Bianca Jones, a 33-year-old special education teacher from Memphis, Tennessee, decided she wanted to buy a home several years ago, she started reviewing her Experian credit report. He was shocked by what he found.

His student debt had been counted twice, making it look like he owed a quarter of a million dollars and putting homeownership out of reach. Jones disputed these items multiple times in writing and by phone with Experian, one of the leading credit reporting agencies, to no avail.

“They kept saying it was verified, verified… They never looked into it. They never tried to take it down,” Jones said in an interview.

Jones eventually filed a complaint with the Consumer Financial Protection Bureau, a federal watchdog created by Congress in 2010 to protect consumers in their financial dealings, and helped her show a judge how much effort her lawyers had made to mitigate the damage to her credit, according to legal documents and a copy of the complaint. This paper trail eventually helped Jones successfully sue Experian to set the record straight.

Jones bought a house in the Memphis suburb of Millington for $300,000 in January.

“If I didn’t have this agency to go to, I don’t think I would be home right now,” Jones said. “It actually changed my life.”

Experian and the CFPB did not respond to a request for comment on Jones’ case.

AGENCY AGAINST CLOSURE

In interviews, consumers who have fallen on hard times or known hardships, lawyers and credit counselors who work with the poor, told Reuters that the CFPB is a lifeline for people facing hardships, and that without it they fear many consumers will be left unprotected from financial predators.

The CFPB, designed by Sen. Elizabeth Warren to police the type of lending that fueled the 2008 financial crisis, has long been a target of conservatives and industry. Congress created the agency in 2010 as part of post-crisis reforms as the sole federal body tasked primarily with protecting consumer rights in the financial market.

The CFPB is now in danger of extinction under the second administration of President Donald Trump. This administration says the agency is a political weapon for Democrats and a liability to free enterprise.

Speaking to reporters at the White House in February, Trump said it was “very important to get rid of the agency” and claimed without evidence that Warren was “using this as her little personal agency to go around and destroy people.”

In an interview, Warren dismissed the criticism as a sign that the CFPB was doing its job. “This isn’t about vendettas. This is about enforcing the law as it’s written so that billionaires and billionaire corporations aren’t cheating on American families. I think that’s a pretty good thing,” he said.

White House Budget Director Russell Vought, a staunch CFPB critic and the agency’s acting head, told “The Charlie Kirk Show” podcast in October that he planned to shut down the CFPB. While the management is fighting in court to fire 90 percent of its employees, it plans to refer ongoing investigations and cases to the Ministry of Justice.

The agency says it will run out of money in early 2026, and Vought says the Federal Reserve can’t legally ask for more until it returns to what management considers “profitability,” a view experts dispute. Congressional Republicans also cut the CFPB’s maximum authorized funding in July.

The administration, congressional Republicans and industry-backed lawsuits collectively struck down decade-old CFPB rules on issues ranging from medical debt to student loans, credit card late fees, overdraft charges and mortgages.

The agency also withdrew or paused its investigations and enforcement actions and stopped overseeing consumer financial industries, leading to a series of resignations.

The CFPB and the White House did not respond to requests for comment.

Warren said that as a law professor who studies bankruptcy, she sees consumer protections as weak and fragmented, and that America needs a single federal agency dedicated to protecting consumers from unfair, deceptive and abusive practices.

“I am stunned by the number of people who are in financial distress, losing their jobs or falling ill, but at the same time being deceived by one or more of their creditors,” he told Reuters. “Consumer protection was not a top priority for any agency, somewhere between fifth and tenth, which meant there was no police. If the CFPB wasn’t there, people had nowhere to go when they were deceived.”

CRITICS COMPLAIN ABOUT OVERREACH

Republicans said the agency was unnecessary, that there were federal bank watchdogs such as the Office of Supervisors of the Exchange and Federal Deposit Insurance Corporation and state regulators that already looked out for consumers, and that the agency’s funding and leadership structure was unconstitutional. Like other banking regulators, the CFPB’s funding is not determined annually by Congress and does not come directly from taxpayers. Rather, the agency draws from the Federal Reserve, and its director was until recently protected from removal at the president’s request.

Republicans accused the CFPB’s first director, Richard Cordray, a Democrat, of using those powers to crush small banks and businesses through overzealous enforcement and complex regulations and of overstepping the agency’s legal authority by trying to regulate companies such as auto dealers that he exempted from oversight by Congress.

Conservative and industry groups have tried several times to restrict or eliminate his powers through the courts. In 2020, the Supreme Court gave the president the power to fire the director, which he has used ever since. Critics on the political right accused former director Rohit Chopra, a Democrat, of overstepping his authority, violating federal rulemaking and harming consumers with ill-conceived crackdowns on financial firm fees.

Thomas Hoenig, who served as the FDIC’s deputy chairman from 2012 to 2018, said he was skeptical of some of the CFPB’s work under previous administrations, but that it still served an important purpose.

“If you eliminate them completely, you will be exposed to more abuse, not less,” he said. “I am disappointed to see the CFPB disappear.”

“IT IS VERY IMPORTANT TO ME”

But for some, the agency has been a lifeline. Millions of Americans like Jones, struggling with credit reporting errors, predatory lenders, debt collectors, fraud, discrimination or other challenges, now file complaints with the agency each year, encouraging companies to fix problems, sometimes by paying complainants or explaining themselves.

When companies repeatedly violate the rules, the CFPB penalizes them and tries to make their customers whole. According to CFPB data, it has returned $21 billion to consumers to date.

Morgan Smith, a 31-year-old single mother and social worker from Issaquah, Washington, turned to these resources when she realized she was the victim of identity theft.

After his wallet and ID were stolen from his car, he said, he discovered someone had opened a series of accounts in his name: a crashed rental car, an unpaid storage unit and a hotel room at an amusement park. Reuters could not independently verify Smith’s account.

“I went directly to the CFPB and was directed to the consumer education tab where I could learn how to deal with fraud and fraud. This gave me all the information I needed to know…my rights,” he said.

“Having this resource was very important to me.”

Without the CFPB, consumer groups say, borrowers would once again rely on a hodgepodge of federal, state and other local agencies that lack the CFPB’s resources, expertise and legal authority.

“Before the CFPB came along, we had to say ‘write to your attorney general, write to the FTC,’ whoever it was, and it turned into kind of a letter-writing campaign,” Sam Hohman said. Nebraska Foundation for Credit Counselors, a nonprofit that helps people get out of debt and provides consumer education services.

As a result, people like 49-year-old Virginia resident Michael Johnson may have fewer options when they get into trouble in the future.

After a kidney transplant and leg amputation a few years ago left Johnson unable to work, he said he racked up credit card debt to cover basic expenses. This summer, he received subpoenas from creditors seeking to collect on old debt, according to court records.

“I unintentionally got in over my head,” Johnson said in an interview.

Using a CFPB database of credit card terms and conditions, Johnson learned that his creditors would have to seek arbitration rather than suing in court, which could cost more than the underlying debts. Johnson represented himself in court and said so far one creditor has dropped its complaint while another is weighing its options.

“Understanding your rights adds credibility to your defense,” Johnson said. “Life happens to everyone.”

(Reporting by Douglas Gillison in Washington; Editing by Michelle Price and Michael Learmonth)