Trump’s funding cuts have pushed America’s consumer watchdog to the brink of collapse

By Douglas Gillison

WASHINGTON, Dec 30 (Reuters) – When Bianca Jones, a 33-year-old special education teacher in Memphis, Tennessee, decided she wanted to buy a home two years ago, she started searching her Experian credit report. She was surprised by what she found.

His student loans were double counted, putting a quarter of a million dollars in debt to pay off and home ownership out of reach. Jones disputed the items several times in writing and over the phone with Experian, one of the major credit reporting agencies, but got nowhere.

“They were saying it’s been proven, it’s been proven…they never investigated. They never tried to take it down,” Jones said in an interview.

Ultimately, Jones complained to the Consumer Financial Protection Bureau, the federal watchdog agency created by Congress in 2010 to protect consumers in their financial dealings, according to her lawyers, legal documents and a copy of the complaint, helping a judge go to lengths to minimize the damage to her credit. That paper trail eventually helped Jones successfully sue Experian to correct his record.

Jones closed on a $300,000 home in the Memphis suburb of Millington in January.

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

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

Facing agency closures

In interviews, lawyers who work with hard-time or known hardship consumers, the poor and credit counselors told Reuters that the CFPB had been a lifeline for people facing hardship and that they feared that without it, many consumers would remain vulnerable to financial predators.

The CFPB has long been a target of conservatives and industries, envisioned by Senator Elizabeth Warren as the kind of lending police that fueled the 2008 financial crisis. Congress created the agency as part of post-crash reforms in 2010 as the sole federal agency charged primarily with protecting the rights of consumers in the financial markets.

The CFPB now faces extinction under the second administration of President Donald Trump, who says the agency has become a political weapon for Democrats and a burden on free enterprise.

Speaking to reporters at the White House in February, Trump said it was “very important to get rid of the agency,” claiming, without spelling out evidence, that Warren had “used it as his little personal agency to destroy people.”

In an interview, Warren dismissed the criticism as a sign that the CFPB is doing its job. “This is not about retribution. This is about enforcing the law as written, so that billionaires and billionaire corporations don’t cheat American families. I think that’s a very good thing,” she said.

White House budget director Russell Vought, a staunch CFPB critic and acting head of the agency, told “The Charlie Kirk Show” podcast in October that he plans to close the CFPB. The administration is fighting in court to fire 90% of its employees, while planning to take the pending investigation and case to the Justice Department.

The agency says the money will run out as early as 2026, and Vote says he cannot legally seek more unless the Federal Reserve returns to what the administration considers “unprofitable,” a position experts dispute. Congressional Republicans also reduced the CFPB’s maximum allowable funding in July.

Together, the administration, congressional Republicans and industry-backed lawsuits have overturned a decade of CFPB rules on matters ranging from medical loans and student loans to credit card late fees, overdraft fees and mortgage lending.

The agency also dropped or paused its investigative and enforcement functions, and stopped supervising the consumer finance industry, leading to a string of resignations.

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

Warren said that as a law professor studying bankruptcy, he saw that consumer protections were weak and fragmented, and that America needed a federal agency dedicated to protecting consumers from unfair, deceptive and abusive practices.

“I was surprised by the number of people in financial trouble who had lost their jobs or got sick but who had also been defrauded by one or more of their creditors,” she told Reuters. “Consumer protection was not the number one priority for either agency, it was somewhere between fifth and tenth, which meant there were no cops in the pit. If there was no CFPB, people would have nowhere to turn when they were defrauded.”

Critics complain of overreach

Republicans said the agency was unnecessary, as federal bank watchdogs, the Office of the Currency and the Federal Deposit Insurance Corporation, and state regulators were already investigating consumers, and that its funding and leadership structure were unconstitutional. Like other banking regulators, the CFPB’s funding is not set annually by Congress and does not come directly from taxpayers. Instead, the agency draws on the Federal Reserve and its director has until now been protected from removal at will by the president.

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 rules, and accused the agency of encroaching on the agency’s legal authority by trying to regulate companies that Congress exempted from its oversight, such as auto dealerships.

Conservative and industry groups tried several times to block its powers or extinguish them entirely through the courts. In 2020, the Supreme Court gave the president the power to fire the director, which he exercised. Critics on the political right accused former director Rohit Chopra, a Democrat, of overstepping his authority, violating the federal rulemaking process and harming consumers with an ill-conceived crackdown on financial firm fees.

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

“If you take them out of the picture completely, you get more abuse, not less,” he said. “I’m disappointed to see the CFPB just gone.”

“very important to me”

For some, though, 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, are now filing complaints with the agency every year, prompting companies to fix the problems, sometimes by paying the complainants, or explaining themselves.

When companies repeatedly break the rules, the CFPB punishes them and tries to make their customers whole. To date, it has returned $21 billion to consumers, according to CFPB data.

Morgan Smith, a 31-year-old single mother and social service worker in Issaquah, Washington, turned to those resources when she learned she was the victim of identity theft.

After her wallet and ID were stolen from her car, she learned someone had opened a string of accounts in her name, she said: a rental car that ended up in an accident, an unpaid storage unit and a hotel room at an amusement park. Reuters could not independently confirm Smith’s account.

“I went directly to the CFPB and was navigated to their consumer education tab where I was able to find out how to deal with fraud and scams. It gave me all the information I needed to know my rights,” she said.

“Having this resource was very important to me.”

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

“Before the CFPB came along, we would have to say, ‘Write your attorney general, write the FTC,’ whatever, and it became this kind of letter-writing campaign,” said Sam Hohman, who runs the Nebraska nonprofit Credit Counseling Foundation, which helps people get out of debt and provides consumer education services.

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

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

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

Using the CFPB database of credit card terms and conditions, Johnson learned that his creditors needed to use arbitration instead of suing in court, which could cost more than the underlying debt. Johnson represented himself in court and said so far one creditor has dropped his complaint and another is considering its options.

“It adds credibility to your defense that you understand your rights,” Johnson said. “Life happens to everyone.”

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