CFPB on the chopping block?

Elon Musk wants to put the Consumer Financial Protection Bureau on the chopping block. He made his feelings known in a Nov. 27, 2024, post to his social media site, X. "Delete the CFPB. There are too many duplicative regulatory agencies," the presumed co-head of a proposed Department of Government Efficiency wrote.

The CFPB was created by the Dodd-Frank Act in the aftermath of the 2008 financial crisis. The crisis was seen as having devastated the financial lives of millions of Americans, leading to calls for stronger accountability for financial services firms and better safeguards for consumers.

Prior to its creation, consumer financial protections were fragmented across multiple agencies, which were focused primarily on regulating financial institutions, not safeguarding consumer interests. The CFPB's mission was to focus exclusively on consumer protections like deceptive and abusive financial practices, along with promoting financial literacy.

The bureau is charged with supervising banks, credit unions and non-bank providers of financial services (like payday lenders, mortgage brokers and debt collectors) to ensure compliance with consumer protection laws. It also operates a consumer complaint portal, where consumers can report issues with financial products.

The CFPB has taken numerous actions of note since its inception. These have included:

• Recovering billions of dollars for consumers, including $2 billion from Wells Fargo Bank, alone, for wrongful foreclosures, "surprise" overdraft fees, and other illegal activity affecting over 16 million consumer accounts.

• A payday lending rule, requiring certain notices and prohibiting certain actions, such as attempting to withdraw payments after two consecutive attempts have failed due to insufficient funds.

• An interpretive ruling asserting that buy now pay later lenders are credit card providers, and that BNPL customers are protected by the same legal rights and protections as credit card customers. These include the ability to dispute charges; BNPL companies are required to investigate such disputes and issue refunds when appropriate.

• Establishing guardrails for open banking. The idea is to provide consumers with greater control over what organizations can have access to their critical banking information, and to what extent.

• Most recently, issuing a ruling that puts Big Tech companies offering digital payment apps (like Amazon, Apple, Google, PayPal and Square) under its regulatory oversight. This puts these firms under the same oversight as financial institutions offering payment services.

Mired in controversy

The CFPB has been mired in controversy from the get go. Republican lawmakers have criticized the agency for regulatory overreach, arguing that it interferes with free-market dynamics.

The agency's structure – it falls organizationally under the Federal Reserve, and is funded, like the Fed, from monies collected from financial institutions for services like payment processing – has been challenged in court. That challenge went all the way to the Supreme Court, which upheld the agency funding mechanism earlier this year.

Republican lawmakers have been some of the staunchest critics of the CFPB. Representative Patrick McHenry, R-N.C., chairman of the House Financial Services Committee, has been especially vocal. In a committee hearing last year, he accused the consumer watchdog agency of vilifying "entire sectors of the financial services industry."

Republicans have proposed numerous bills to reduce the CFPB's power, including restructuring proposals that would replace the single director head with a bipartisan committee.

The X factor

Musk, who has been named by President-elect Trump to lead a government efficiency drive, would eliminate the CFPB entirely. The nascent Department of Government Efficiency (DOGE, for short) to which Musk has been named is expected to operate like a commission or advisory board, meaning it will have no authority to directly implement any of its recommendations, according to a blog post by the advisory firm Capstone.

While some have championed Musk's idea to deep six the CFPB, it was also met with significant opposition on the X platform. "I participate in many personal finance discussions. That is literally ONE functioning government organization that consumers can appeal to for help and get results," an individual who goes by the X handle Crazy Fenak, wrote in response to Musk's post.

"This is what defund the police really looks like. It's defund the corporate police," responded The Decoder.

"Get rid of the CFPB so we can have another financial crisis," DoubleKay posted in response to Musk.

"Name 5 duplicates and how you plan to stop another bank collapse FIRST," responded IfYouCareAsk.

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