A Judge Rescued the CFPB From Being Dismantled. Is It Too Late for the Consumer Watchdog?

If the Consumer Financial Protection Bureau doesn't prioritize protecting consumers, does it matter if the watchdog agency still exists? It might seem like a philosophical question, but this could be the CFPB's final chapter.

On Friday, a federal court blocked the Trump administration from dismantling the agency with a temporary injunction, ordering employees be reinstated. But some of the damage has already been done. The CFPB has suspended most operations and started unwinding regulations, a move that experts say could leave millions of consumers vulnerable to unfair and abusive practices.

In its latest move, the CFPB announced it was reducing payday loan enforcement to "instead keep its enforcement and supervision resources focused on pressing threats to consumers, particularly servicemen and veterans," according to a post on its website. 

Relaxing payday loan regulations could give lenders free rein to increase their already excessive fees and sky-high interest rates, according to Todd Christensen, education manager at the nonprofit debt relief agency Money Fit.

"Unregulated payday loans are predatory traps for the financially vulnerable who could end up stuck in an endless financial hardship," he said in an email. 

The CFPB emerged in the wake of the 2008 financial crisis with the mission of "enforcing federal consumer financial laws and protecting consumers." As of December 2024, the CFPB reported it had recovered up to $21 billion in compensation, debt cancellation and other forms of relief for American consumers. 

Dismantling the CFPB could mean fewer consumer safeguards and looser banking regulations, experts warn. Here's what you can do to protect yourself.

What happens if the CFPB is eliminated?

According to a Supreme Court ruling in June 2020, the CFPB's funding is protected by laws that can only be rescinded by Congress. But even if the agency can't be eliminated, hampering the bureau's work could still impact consumers who rely on it to protect them from fraud, financial abuse and predatory lenders.

Over the past couple of months, the CFPB's capacity as a consumer watchdog has been reduced in several ways:

• Last week, the US Senate voted to overturn the CFPB's $5 cap on bank overdraft fees. The measure now goes to the House for a vote.
• The agency has dropped multiple lawsuits, including cases alleging Capital One misled its customers and operators of Zelle skipped important safety features. Last week, the US Senate voted to strip the agency of its power to monitor digital payment platforms, including Elon Musk's recently announced X payment platform. 
• The CFPB is expected to rescind a BNPL rule that would reclassify Buy Now, Pay Later lenders as credit card lenders subject to consumer protection regulations.

"In the long term, reduced oversight at the CFPB may erode trust in financial institutions and threaten economic stability for American consumers," said Leslie H. Tayne, finance and debt expert and founder of Tayne Law Group. 

Relaxing regulations on banking industries is risky, especially as BNPL apps and peer-to-peer payment services become more popular and competitive.    

What options do you have if the CFPB is gone?

Experts say there are still options for filing a complaint, but you might have to do some more research to find help.

"Consumers can take refuge in consumer class-action attorneys, many of whom are already going after the financial institutions the CFPB let off the hook," consumer advocacy lawyer Danny Karon, of Cleveland-based law firm Karon, said in a written response. "They may also contact the consumer-protection divisions of their state attorneys' general."

All states and the District of Columbia have their own attorney general, which typically fields consumer complaints through an online form or hotline. You can find your state's attorney general on the National Association of Attorneys General website. 

You can also file fraud and identity theft reports with the Federal Trade Commission.

And if you're facing financial hardship, Christensen warned against using payday loans, which can trap borrowers in a cycle of debt. He instead recommended negotiating your bills, using safer borrowing options or reaching out to local nonprofits or community organizations for assistance with necessities like food, rent and utilities.

For now, the CFPB website and its complaint process are still operational, although the video on its homepage explaining how the complaint process works is currently unavailable.