Special Report: Russel Vought, Project 2025, and the Death Knell of the Little CFPB Engine that Could Fight Goliath and Win But Couldn't Survive an Email
Detailed Examination of the Project 2025 plans for the CFPB. Are Russel Vought's Complaints and Actions Justified? Or is a Tiny Consumer Watchdog an Early Victim in a Strategic Coup?
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This is a detailed examination of the Project 2025 plans for the CFPB. In it I am seeking to answer the questions:
Are Russel Vought's Complaints and Actions Justified?
Who Benefits from Dismantling the CFPB?
Is a Tiny Consumer Watchdog an Early Victim in a Strategic Coup?
Iâll present the facts and cite my sources. You decide. Are we witnessing a mighty victory or a terrible defeat?
Current Situation at the CFPB
Russel Vought was confirmed as the director of the Office of Management and Budget on Thursday, February 6th, 2025. He was then named acting director of CFPB.
On Friday, February 7th, Elon Musk and his DOGE team setup shop inside the CFPB.
On Saturday, February 8th, 2025, Vought ordered all employees of the Consumer Financial Protection Bureau to cease âall supervision and examination activityâ and âall stakeholder engagementâ effective immediately.
On, February 11th, 2025, Jonathan McKernan was nominated as Director of CFPB. He is likely to be approved by the Senate.
So the first question is, Why did Russel Vought effectively abolish the CFPB almost immediately after being confirmed as the head of the director of the Office of Management and Budget?
Russel Voughtâs Project 2025 Plans for the CFPB
Chapter 27 of the "Mandate for Leadership: The Conservative Promise" by Project 2025, the section starting on page 9 provides a detailed critique of the Consumer Financial Protection Bureau (CFPB) and outlines specific recommendations for its reform or dissolution.
Critique of the CFPB:
Unaccountability & Leadership Structure: The CFPB is described as a "highly politicized, damaging, and utterly unaccountable federal agency." The single-director leadership model of the CFPB is criticized for concentrating power and lacking accountability.
Constitutional Concerns: The document argues that the CFPB operates outside the traditional checks and balances of the federal government, raising constitutional issues.
Funding Mechanism: The CFPB's funding, which comes from the Federal Reserve rather than congressional appropriations, is highlighted as a significant concern, as it limits congressional oversight.
Regulatory Overreach: The CFPB is accused of imposing burdensome regulations that may stifle innovation and limit consumer choice.
Recommendations:
Abolition of the CFPB: The primary recommendation is for Congress to abolish the CFPB and transfer its consumer protection functions to existing banking regulators and the Federal Trade Commission (FTC).
Interim Reforms: Until abolition can be achieved, the document suggests several interim measures:
Redirect Civil Penalty Funds: Ensure that unused civil penalty funds are directed to the Department of the Treasury to prevent potential misuse.
Repeal Specific DoddâFrank Act Sections: Target sections that impose burdensome requirements on financial institutions.
Enforcement Based on Rulemakings: Mandate that enforcement actions be based on rulemakings that comply with the Administrative Procedure Act.
Choice of Adjudication Venue: Allow respondents in administrative actions the choice between adjudication in an administrative law court or a federal court.
Clarify Definitions: Define terms like "deceptive, unfair, and abusive" practices more precisely to limit regulatory overreach.
These proposals reflect a broader strategy to restructure financial regulatory agencies, aiming to enhance accountability, reduce regulatory burdens, and ensure that consumer protection is balanced with the need for financial innovation and economic growth.
Who Benefits from Dismantling the CFPB?
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Late last year, the CFPB finalized rules establishing its authority to supervise digital payment apps that handle more than 50 million transactions.
Elon Musk has long stated that a goal for his platform X is to become a digital payments processor. Is it a coincidence that less than a week after announcing a new partnership with Visa that paves the way to rolling out digital payments on X later this year, Muskâs DOGE team has a hand in dismantling the CFPB?
What Does the Financial Industry Think of the CFPB?
Itâs not really a surprise that the Financial Industry as a whole isnât really in the cheering section of the CFPB. Thatâs just natural. Rules and regulations are cumbersome, costly and eat into Profit Margins. No business likes them, even when they are willing to admit that they are necessary and good for ensuring ethics. Itâs important to take the opinions of industry representatives with a grain of salt and remember their number one priority is probably the bottom line, not holding the line of ethical practices.
âICBA and the nation's community bankers thank Director Vought for taking on the role of acting CFPB director.
âAs part of our âRepair, Reform, and Thriveâ plan for the new Congress and administration and our recent open letter to the 119th Congress, ICBA is advocating a variety of reforms to CFPB regulations.
âWe look forward to working closely with Director Vought, the Trump administration, and the 119th Congress to implement needed CFPB regulatory reforms to help community banks meet the needs of local communities.â Press Release
I think it is important to note that the Independent Community Bankers of America (ICBA) isnât just screaming out praise in sycophantic idolatry, they are coming to the table with a lot of very specific ideas about the changes theyâd like to see. Those ideas are detailed in their open letter to the 119th Congress.
The American Bankers Association recently has this to say:
âWe applaud President Trumpâs decision to name Treasury Secretary Scott Bessent acting director of the Consumer Financial Protection Bureau. While we have always supported the CFPBâs consumer protection mission, we have disagreed with many actions the Bureau has taken in recent years that have exceeded its statutory authority, harmed our economy and imposed significant costs on American consumers.
âWe urge Secretary Bessent to begin reversing the damage caused by these misguided regulatory actions and stand ready to support his efforts to chart a better course for the Bureau. Appropriately tailored regulation is the key to lowering costs for consumers and ensuring Americaâs banks can play their essential role in accelerating economic growth. We look forward to working with Secretary Bessent and other stakeholders to ensure the CFPBâs work helps â rather than harms â American consumers going forward.â ABA Press Release
Has the CFPB Provided Important Protections to Consumers?
Over the past five years, the Consumer Financial Protection Bureau (CFPB) has undertaken several initiatives to protect consumers in the financial marketplace:
1. Enforcement Actions Against Major Financial Institutions:
Wells Fargo (2022): The CFPB ordered Wells Fargo to pay over $3.7 billion for violations in auto loans and mortgages, which caused consumers to lose their homes and vehicles. Consumer Federation of America
Bank of America (2023): The bureau took action against Bank of America for charging multiple non-sufficient funds fees for the same transaction and other violations, resulting in over $100 million returned to customers. Consumer Federation of America
2. Addressing Predatory Student Loan Practices:
Navient Settlement (2024): The CFPB reached a $120 million settlement with Navient over allegations of illegal student loan servicing practices, including misleading borrowers and steering them into costly repayment plans. Politico
3. Regulation of Credit Card Fees:
Late Fee Cap (2024): The bureau proposed a rule to cap credit card late fees at $8, aiming to reduce the $12 billion consumers spend annually on such fees. Consumer Financial Protection Bureau
4. Oversight of Big Tech in Financial Services:
Payment Systems Inquiry (2021): The CFPB initiated an inquiry into large technology companies operating payment systems in the U.S., such as Amazon, Apple, Facebook, Google, PayPal, and Square, to understand their practices and ensure consumer data protection. Consumer Financial Protection Bureau
5. Advocacy Against Junk Fees:
Public Inquiry (2023): The bureau launched an inquiry into junk fees, resulting in tens of thousands of consumer complaints and leading to proposed rules to curb excessive fees in financial services. Consumer Financial Protection Bureau
These actions reflect the CFPB's commitment to enforcing consumer protection laws and promoting fairness in the financial marketplace.
How has the CFPB Protected Buyers and Sellers of Real Estate?
Over the past five years, the Consumer Financial Protection Bureau (CFPB) has implemented several measures to protect consumers within the real estate industry:
1. Enforcement Actions Against Discriminatory Practices:
Townstone Financial Settlement (2024): The CFPB settled with Chicago-based mortgage lender Townstone Financial over allegations of discouraging Black applicants and neglecting African American neighborhoods. The company agreed to pay a $105,000 fine, underscoring the CFPB's commitment to combating discriminatory lending practices. Reuters
2. Legal Action Against Unlawful Referral Schemes:
Rocket Homes Lawsuit (2025): The CFPB filed a lawsuit against Rocket Homes, alleging the company engaged in a kickback scheme that incentivized brokers and agents to refer homebuyers exclusively to its affiliate, Rocket Mortgage. This action highlights the bureau's dedication to maintaining fair competition and transparency in real estate transactions. WSJ
3. Ensuring Fair and Accurate Real Estate Valuations:
Proposed Rule on Automated Valuation Models (2023): In collaboration with other federal financial regulators, the CFPB proposed a rule to ensure the credibility and integrity of real estate valuations, particularly those developed using algorithms or automated models. This initiative aims to promote fairness and accuracy in property valuations, benefiting both consumers and industry stakeholders. Consumer Financial Protection Bureau
These actions reflect the CFPB's ongoing efforts to uphold fairness, transparency, and consumer protection in the real estate sector.
Has the CFPB Been Enforcing RESPA on Behalf of HUD?
Yes.
The Consumer Financial Protection Bureau (CFPB) has been actively enforcing the Real Estate Settlement Procedures Act (RESPA), which was originally administered by the Department of Housing and Urban Development (HUD) until the CFPB assumed enforcement authority in 2011. Wikipedia, the free encyclopedia
In August 2023, the CFPB took enforcement action against a residential mortgage lender and a real estate brokerage for alleged violations of RESPA's Section 8(a), which prohibits giving or accepting any fee, kickback, or "thing of value" in exchange for referrals related to real estate settlement services. The CFPB alleged that the mortgage lender provided free subscription services, hosted and subsidized events, and entered into marketing services agreements (MSAs) with real estate agents and brokers in exchange for mortgage referrals. The real estate brokerage was accused of accepting these incentives in return for steering clients to the lender. The consent orders resulted in penalties of $1.75 million for the mortgage lender and $200,000 for the real estate brokerage. Husch Blackwell: Trusted Legal Leaders
This action marked the CFPB's first public enforcement of RESPA's Section 8 since 2017, signaling a renewed focus on preventing illegal kickbacks and ensuring compliance within the real estate industry. Orrick | A Global Law Firm
Additionally, the CFPB has issued guidance to help industry participants understand and comply with RESPA and its implementing regulation, Regulation X. This includes compliance bulletins, advisory opinions, and examination procedures to ensure that entities involved in mortgage lending adhere to RESPA's requirements. Consumer Financial Protection Bureau
These actions and resources demonstrate the CFPB's ongoing commitment to enforcing RESPA statutes and protecting consumers in the real estate market.
How Do Project 2025âs Complaints About the CFPB Stack up Against The Evidence?
Project 2025 critiques the Consumer Financial Protection Bureau (CFPB) on several grounds, including its structure, accountability, and regulatory impact. While some criticisms are rooted in ideological perspectives, there is evidence supporting certain concerns.
Unaccountability & Leadership Structure
The CFPB is described in Project 2025 as a "highly politicized, damaging, and utterly unaccountable federal agency." The single-director leadership model of the CFPB is criticized for concentrating power and lacking accountability.
How does the CFPB actually stack up?
Leadership and Oversight: The CFPB's single-director structure has been a point of contention. Critics argue that vesting significant authority in one individual can lead to unchecked power and potential overreach. This concern was highlighted during Mick Mulvaney's tenure as acting director, where he implemented substantial changes in the bureau's operations, including halting investigations and reducing enforcement actions. Such actions underscore the potential risks associated with the bureau's leadership structure.
Wikipedia, the free encyclopedia Forham Journal CFSA Congressional Research Service
In Seila Law LLC v. Consumer Financial Protection Bureau, the U.S. Supreme Court addressed the constitutionality of the CFPB's leadership structure. The CFPB, established by the Dodd-Frank Act, is led by a single Director appointed for a five-year term, removable by the President only for cause (i.e., inefficiency, neglect of duty, or malfeasance). In 2017, the CFPB issued a civil investigative demand to Seila Law LLC, a law firm specializing in debt-related services. Seila Law challenged the demand, arguing that the CFPB's single-director structure violated the separation of powers principle. The Supreme Court, in a 5â4 decision, held that the CFPB's leadership by a single Director removable only for cause is unconstitutional, as it infringes upon the executive authority vested in the President. However, the Court also determined that this unconstitutional provision could be severed from the rest of the Dodd-Frank Act, allowing the CFPB to continue operating with the Director being removable by the President at will.
This is settled law. CFPB leadership is accountable directly to the President.
Constitutional Concerns
The Project 2025 document argues that the CFPB operates outside the traditional checks and balances of the federal government, raising constitutional issues.
How does the CFPB actually stack up?
Following the 2007â2008 financial crisis, Congress carefully designed the CFPB as a new, independent regulator to carry out its important mission free from political interference.
CFPB is accountable to the President. Seila Law LLC v. Consumer Financial Protection Bureau
âIn designing the agency, Congress intentionally set up guardrails to ensure the CFPB could carry out its mission free of political influence. For instance, Dodd-Frank states that the agency must be led by a single director who can only be removed by the president for cause. Unfortunately, in a narrowly decided opinion, the Supreme Court found this provision unconstitutional in 2020; the director can now be removed by the president at will.â American Progress
CFPB has been sued in court on a number of occasions. Sometimes it won, sometimes it lost. It is accountable to the judicial branch.
CFPB holds lengthy public comment periods on proposed rules and regulations providing at least some level of accountability to consumers and industry.
Regulatory Overreach
The CFPB is accused by Russel Vought and Project 2025 of imposing burdensome regulations that may stifle innovation and limit consumer choice.
Before we examine the regulatory reality, it is important that a distinction is drawn between the concept of regulatory burden and the phrase unduly burdensome. Whereas regulatory burden is about the costs associated with a regulation, unduly burdensome refers to the balance between the benefits and costs of a regulation. For example, some would consider a regulation to be unduly burdensome if costs are in excess of benefits or if the same benefits could be achieved at a lower cost. But the mere presence of regulatory burden does not mean that a regulation is unduly burdensome.
Overestimating regulatory burden can lead to policies that would repeal or change regulations that may have positive net benefits for consumers, banks, and the broader economy. Underestimating regulatory burden, however, could result in further consolidation in the banking industry, the migration of activity outside the banking system to the shadow banking system, and reduced access and higher cost of credit for rural and underserved areas and small businesses that are customers of small banks. Accurately assessing regulatory burden and determining whether the burden rises to the level of being unduly burdensome, therefore, is important for policymakers to make informed judgments. This complexity illustrates the importance of a slow, deliberative, collaborative process in law making, policy making, and even the decision to dismantle rules, regulations, and agencies.
How does the CFPB actually stack up?
Operational Challenges: Some financial institutions have reported that CFPB regulations increase compliance costs and operational burdens. For example, the implementation of certain rules has required banks to invest heavily in compliance infrastructure, which can be particularly challenging for smaller institutions. These increased costs may lead to reduced credit availability for consumers. Wikipedia, the free encyclopedia
Increased Compliance Costs: Financial institutions have reported that CFPB regulations lead to higher compliance expenses. A report by the U.S. Chamber of Commerce highlighted that the CFPB's broad interpretation of its authority has resulted in uncertainty and increased costs for businesses striving to comply with evolving regulations. Consumer Finance Monitor
The Congressional Research Service (CRS) report titled "An Analysis of the Regulatory Burden on Small Banks" (R43999), published on April 22, 2015, examines the impact of post-financial crisis regulations on small banks. The report acknowledges that while regulations aim to enhance financial stability and consumer protection, they may impose significant compliance costs on small banks. It notes that many new rules include exemptions or tailored provisions to mitigate these burdens. However, the report also highlights the challenge in quantifying regulatory burden due to limited data, making it difficult to assess whether the costs outweigh the benefits. The CRS emphasizes the importance of balancing effective regulation with the operational capacities of small banks to ensure that regulations are not unduly burdensome.
Funding Mechanism
The CFPB's funding, which comes from the Federal Reserve rather than congressional appropriations, is highlighted as a significant concern in Project 2025, as it limits congressional oversight.
How does the CFPB actually stack up?
After holding more than 50 Congressional hearings following the 2007-2008 financial crisis, Congress decided that independent funding was essential and specified the source of funding as the Federal Reserve to purposefully shield if from political gamesmanship. And it indicated how the CFPB is supposed to use that funding. The Restoring American Financial Stability Act of 2010
Constitutionality of Funding: The CFPB's funding mechanism has faced legal scrutiny. In CFPB v. CFSA, the plaintiffs argued that the bureau's independent funding violates the Constitution's separation of powers. On May 16, 2024, The Supreme Court, in a vote of 7-2, rejected a challenge to the constitutionality of the structure used to fund the Consumer Financial Protection Bureau. In a 22-page bipartisan opinion, Judge Thomas explained that when the Constitution was ratified in the late 18th century, âappropriations were understood as a legislative means of authorizing expenditure from a source of public funds for designated purposes.â Center for American Progress Scotus Blog
The Congressional Research Service (CRS) report titled "The Consumer Financial Protection Bureau Budget: Background, Trends, and Policy Options" (R48295, December 2024) indicates that the CFPB's funding cap has been adjusted annually for inflation, increasing from $597.6 million in FY2013 to $823 million in FY2025. This represents a nominal increase of approximately 37.7%. However, when adjusting for inflation, the real increase is more modest, reflecting the bureau's efforts to align its budget with economic conditions.
In terms of staffing levels, the CFPB has experienced fluctuations over the years. According to the CFPB's Financial Report for FY2024, staffing levels increased from 1,677 employees in FY2023 to 1,758 in FY2024, marking a 5% increase. This rise in staffing corresponds with the bureau's budget adjustments, suggesting a deliberate scaling of personnel to meet its regulatory and consumer protection mandates.
CFPB: The Little Engine that Could Fight Goliath and Win
While some of Project 2025 criticisms are based in facts, it is critical to look at the broader picture to understand the nuance of the causes for the creation of the CFPB in the first place, Congressâs intentions when they created the CFPB, case law that has both shaped the CFPB since itâs creation and case law that supports Congressâs intended goals in the first place, and, of course, the real life impact that the CFPB has had on both industry and consumers.
I think it is undeniable that the CFPB has taken on some the biggest, most powerful businesses in our country and come out with wins for consumers, sometimes big wins. It has also created additional regulatory burden on businesses and the smaller the business, the more it will struggle to comply.
There are never simple solutions to complex problems and the Case of the CFPB certainly illustrates that. Rarely are situations strictly right and wrong. A big picture understanding and an inclination toward balance are keys to creating a government that serves the best interests of the people they represent, and by extension, the businesses they own and work for.
Iâm not sure what the ultimate fate of the CFPB will be, but as a business consultant and title agent who saw the 2007-2008 Financial Crisis coming long before the so called experts cried foul the day after the big collapse, watched friends become homeless, clients lose everything theyâd worked to build, watch careers and lives destroyed and now almost 2 decades later - never recover, I for one, would like to see the good work of the CFPB continue uninterrupted and without interference. On the whole, I believe they have carried out a tremendous amount of good and any true problems that exist - are fixable, but thatâs just my humble opinion. I hope Iâve provided you with enough information to do your own critical analysis of the situation and create your own informed opinion.
Stay Wicked,
Cheryl
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