The Trump administration is scrapping a credit card payment cap as well as offloading student loan oversight in an effort to reshape America's consumer watchdog, according to a recently leaked memo.
Mark Paoletta, the chief legal officer at the Consumer Financial Protection Bureau – an organization created in the aftermath of the 2008 financial crisis – sent the divisive email to his employees on Wednesday, laying the groundwork for a new Trump agenda, according to a copy of the note obtained and seen by Reuters.
The news followed the landmark ruling by a Texan federal judge who declared Tuesday that a government-set $8 limit on a majority of credit card late fees would no longer apply. The judge ruled that the fee limit illegally stretched the agency’s budget – a stance advocated by a group of U.S. banks, according to The New York Times.
Last month, the Trump administration attempted to dismantle the bureau after canceling $100 million in contracts and firing 70 employees.
The CFPB adopted the credit fee cap in 2024 as part of a cost-saving effort. However, a cluster of banking and business trade groups objected and sued to block the rule, arguing that the bureau had acted beyond its jurisdiction. The group was granted an injunction, which prevented the CFPB’s fee cap from taking effect.
Banks and lenders, who normally charge an average of $32, were delighted at the reversal, calling it “a win for consumers and common sense,” the lawsuit’s plaintiffs declared in a joint statement.
The plaintiff group included the American Bankers Association, the Consumer Bankers Association, and the United States Chamber of Commerce, along with three Texas business associations, according to The Times.
Paoletta’s CFPB memo, however, stated that the "Bureau will focus on its enforcement and supervision resources on pressing threats to consumers, particularly service members and their families, and veterans.”
It went on to add that it would shift its priorities to “focus on tangible harms to consumers” and “redirect resources from enforcement and supervision that can be done by the states."
The CFPB is also going to focus on channeling funds back to its consumers rather than imposing penalties on companies.
One employee told Business Insider that overseeing companies "is literally the reason the agency was created" and is not something states should or can be left to do themselves.
Thus, the agency will now aim to prioritise threats to military personnel and will branch away from managing student loans, medical debt, digital payments, and consumer data, reports Reuters.
Just days before President Trump took office, his predecessor, Joe Biden, made the decision to cull the student loans of over 150,000 borrowers, bringing the total number of individuals who had their student debt cancelled by the CFPB to over 5 million during his administration.
The former administration accused multiple student-loan services of engaging in exploitative methods.
Navient, for example, was one of America’s largest student loan providers before it was permanently banned from servicing federal student loans and forced to pay a $120 million settlement.
The news of the consumer watchdog’s shift comes in tandem with the prediction that millions of students are set to default this year on their loans, due to some critical protections expiring, according to the New York Federal Reserve Bank.
Last month, U.S. District Judge Amy Berman Jackson blocked Trump’s request to dismantle the bureau for good, arguing that the court “can and must act” to prevent its closure.
CFPB is responsible for protecting U.S. consumers from financial fraud and deceptive practices. It typically receives consumer complaints and scrutinises banks to ensure student loan borrowers are treated fairly.
The Independent contacted the CFPB for comment.
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