Elon Musk recently posted that he’d like to “delete” the Consumer Financial Protection Bureau. If you haven’t heard of the CFPB, but you’re a consumer who spends money in America, it’s worth knowing a bit about what it does, why President-elect Donald Trump's allies want to get rid of it and what’s technically possible under federal law.
The CFPB — created to protect consumers from predatory and abusive practices in the financial sector — has drawn Republicans' ire since it was signed into law in 2010. It now has the attention of Musk, a co-leader of Trump's "Department of Government Efficiency" — a nongovernmental group created to help “slash excess regulations, cut wasteful expenditures, and restructure Federal Agencies," according to his statement.
For now, simply “deleting” government agencies isn’t possible. Nor is it possible for a president to issue an executive order eliminating the CFPB; that could violate the Constitution, which states that the president is obligated to ensure that the nation’s laws are faithfully executed, legal experts say.
“If somebody wanted to get rid of a government agency that is created by statute, you have to pass a new statute to get rid of that agency,” Noah Rosenblum, associate professor at New York University School of Law, told Salon.
“That's the baseline,” he said. “Now, of course, there are lots of workarounds.”
What is the CFPB?
The CFPB was established when Congress passed and President Barack Obama signed the Dodd-Frank Wall Street Reform and Consumer Protection Act into law. The statute was enacted to prevent the events that led to the 2008 Great Recession, the most profound economic crash and downturn since the 1929 Great Depression.
Dodd-Frank tightened regulations on mortgage lending and other financial products, added new levels of oversight on financial institutions and strengthened protections for banking industry whistleblowers. The CFPB is an independent agency tasked with protecting consumers from “unfair, deceptive or abusive” practices in the financial industry, and to take action against companies breaking the law.
The CFPB has collected more than $17.5 billion for consumers in the form of compensation, cancelled debt, loan reductions and other forms of relief, according to its website. More than 50 million online users have accessed answers to common personal finance questions on the agency’s Ask CFPB database, like “How will shopping for an auto loan affect my credit?” and “What should I do when a debt collector contacts me?”
In one of the agency's most notable cases, it fined banking giant Wells Fargo $100 million for the behavior of 5,300 employees who since 2011 had opened fake banking and credit card accounts and created online banking profiles in order to meet Wells Fargo's quotas.
One of CFPB's newest rules capped credit card fees at $8, but a federal judge put it on hold after business lobbyists and banks protested the policy as unconstitutional.
Why delete it?
In his post, Musk said “there are too many duplicative regulatory agencies.” But it’s worth noting that the CFPB is the first and only governmental agency whose mandate isn’t simply to make sure banks aren’t doing anything illegal, but to specifically monitor them and other financial institutions for violations against consumers. Before the CFPB’s founding, the responsibility of consumer financial protection was spread across seven different federal agencies.
Wall Street and Republicans have largely rallied against the agency, arguing that it represents too much government overreach and is a “rogue” agency because it isn’t funded by tax dollars. CFPB receives funding from the Federal Reserve in order to keep it out of the political process.
“It’s going to punish every banker in America for the sins of a few on Wall Street,” John Boehner, then the House Minority Leader, told reporters in 2010. In 2017, Texas GOP Rep. Jeb Hensarling called the agency "arguably the most powerful, least accountable agency in U.S. history,” according to CNN.
Another Republican rub is that Sen. Elizabeth Warren (D-Massachusetts) proposed the agency in 2007 and was deeply involved in its creation alongside Obama. Her support of left-leaning political ideologies has made the CFPB a target for conservative attacks, said Shayak Sarkar, a law professor at The University of California at Davis.
“A lot of the rhetoric just tries to tie this agency to a particular person, namely Elizabeth Warren, who has a lot of salience in the popular imagination,” Sarkar told Salon. “But it reflects not only the social movements of Occupy Wall Street and the precipitating financial crisis of 2008, but a lot of different stakeholders. Thinking of it as any senator’s pet agency is just oversimplifying the demand and need for it.”
Could it be eliminated?
The "workarounds" that could be used to delete the agency are hypothetical and could meet legal challenges. But they represent the possible routes that a second Trump administration may take to defang or dramatically reduce the agency’s regulatory impact.
One could include passing legislation to reduce or eliminate the agency’s funding in budget reconciliation, a special procedure that’s meant to let the U.S. Senate more easily pass tax and spending legislation with 51 votes instead of 60, experts said. The procedure can also be used “as a mechanism to avoid the filibuster and pass partisan legislation, usually with a slim majority,” according to The Center for American Progress.
Another scenario could include Trump “short staffing” the CFPB by laying off employees and hindering the agency’s ability to enforce consumer protections, Rosenblum said. Trump could also appoint a new agency head who shares Republicans’ disdain for the administrative state.
“A director who disagrees with CFPB’s mission is likely to de-prioritize some of the things that a Biden administration might have made a priority,” Nicholas Bagley, professor of law at University of Michigan and former chief legal counsel to Michigan Gov. Gretchen Whitmer, told Salon.
How has the CFPB survived?
Earlier this year, the Supreme Court rejected a legal challenge to the CFPB that argued the agency’s funding structure violates the Constitution. The effort was backed by all Republican state attorneys general, reported The Hill.
But in 2020, the Supreme Court ruled that the president is free to fire the director of the CFPB without cause — a partial win for conservatives. The Court stopped short of dismantling the agency.
A report shared exclusively with Salon in 2020 found that the vast majority of amicus briefs filed in support of the case were done so by parties with an "axe to grind" against the CFPB.
Conservatives who frame the CFPB as an institution for consumers, and therefore against financial institutions, imply that regulation and oversight is bad for business, Sarkar said.
“The Consumer Financial Protection Bureau, in protecting consumers, is also protecting the integrity of our financial markets,” Sarkar told Salon. “You need to have financial market integrity in order for us to allow for meaningful and healthy choice, because meaningful and healthy choice in a market without integrity isn't really meaningful choice at all.”
