Trump, GOP eye new limits on Consumer Financial Protection Bureau

President-elect Donald Trump and Republicans in Congress are weighing vast changes to the Consumer Financial Protection Bureau, seeking to limit the powers and funding of a federal watchdog agency formed in the wake of the 2008 banking crisis.

The early discussions align the GOP with banks, credit card companies, mortgage lenders and other large financial institutions, which have chafed at the CFPB under Democratic leadership and sought to invalidate many of its recent regulations, including its efforts to spare consumers from what the Biden administration calls “junk fees.”

By design, the CFPB has a broad mandate to protect Americans from unfair, deceptive or predatory financial practices. Its current Democratic leader, Rohit Chopra, has been aggressive, pursuing a host of rules to shield people from medical debt, make it easier for them to switch banks, and limit the fees they face from overdrawing their checking accounts.

Republicans have long opposed these policies, blasting the CFPB for harming businesses through regulatory overreach. But party leaders are beginning to devise ways to turn that rhetoric into policy, signaling they intend to use control of the House, Senate and White House next year to impose new restrictions on the agency, in some cases permanently.

“There will be a pretty significant change from the direction the agency has been going in, and I think in a positive way,” predicted Kathy Kraninger, who led the CFPB during Trump’s first term. She now serves as chief executive of the Florida Bankers Association, a lobbying group whose board of directors includes top executives from Bank of America, JPMorgan Chase, PNC and Truist.

Aides on Trump’s transition team have started considering candidates to lead the CFPB who are expected to ease its oversight of banks, lenders and tech giants. The early short list includes Brian Johnson, a former agency official; Keith Noreika, a banking consultant and former regulator; and Todd Zywicki, a professor at George Mason University’s law school who has previously advised the bureau, according to four people familiar with the matter.

The people, who spoke on the condition of anonymity to describe the confidential process, cautioned that the roster of potential CFPB leaders is ever-changing. Zywicki and Johnson did not respond to a request for comment, and Noreika declined through a spokesperson. A spokeswoman for Trump did not respond to multiple requests.

On Capitol Hill, meanwhile, Republican lawmakers have suggested they’ll pursue their own legislative overhaul targeting the bureau. In recent weeks, they have proposed to rethink the CFPB’s leadership structure, curtail its investigative powers and tweak its funding source, since the bureau derives its budget from the Federal Reserve in a unique arrangement meant to spare the watchdog from political wrangling and industry lobbying.

“With Republicans in control of both Congress and the Executive Branch, I look forward to restoring accountability at the Bureau and promoting commonsense reforms that increase innovation and actually support consumers,” said Sen. Tim Scott of South Carolina, the top Republican on the Senate Banking Committee, as he blasted the CFPB in a statement for having “acted outside the scope of its authority.”

Scott said that could include a rethinking of the agency’s budget “if necessary.”

The early talk underscores a widening chasm between the two parties over the future of financial regulation, nearly two decades after a crisis in the banking industry plunged the country into a recession. As the GOP prepares to assume the levers of power in Washington, some in the party have pledged to roll back a vast array of federal guardrails they now view as unnecessary after years of relative quiet and stability.

“The era of post-financial crisis regulation is over,” said Rep. Patrick T. McHenry, R-North Carolina, the soon-retiring chairman of the House Financial Services Committee, at a hearing on the issue this week. He faulted the Biden administration for a “regulatory onslaught amounting to a sweeping rewrite of the rules governing U.S. financial institutions.”

Congress created the CFPB as part of the 2010 overhaul of the nation’s financial regulations, colloquially known as Dodd-Frank, believing then that the patchwork of federal entities overseeing banks and lenders had failed to adequately protect consumers. Since then, the agency has evolved into one of the country’s most powerful watchdogs, having obtained more than $19 billion in consumer relief since it became operational in 2012.

Under Chopra, the CFPB has been especially active in coupling enforcement work with rules targeting the broader banking and lending ecosystems. The agency has looked to cap the fees that companies can charge consumers – for overdrawing checking accounts, for example, or falling behind on credit card bills—while instituting new oversight of lenders to ensure they do not discriminate against disadvantaged groups, including minorities.

Each of these actions has sparked broad, intense industry opposition, prompting lobbying groups representing Bank of America, Chase and Wells Fargo to sue the CFPB in cases that strike directly at its powers. The legal challenges haven’t deterred the agency, which on Thursday announced another set of rules: It opened the door for the government to subject Apple, Google and PayPal-owned Venmo to deeper scrutiny in a major expansion of the agency’s purview and power. The CFPB declined to comment for this article.

Technology companies are expected to the sue the CFPB over those regulations, adding to a growing number of legal battles facing new agency leaders once Trump takes office in January. Already, some major financial industry lobbying groups are encouraging the incoming administration—and the new Republican majority in Congress—to use the transfer of power to advance significant changes to the CFPB.

“Where you’ve seen the industry push back, and even litigate … [it’s] all areas where the CFPB overreached in its authority,” said Lindsey Johnson, the president of the Consumer Bankers Association, whose board of directors includes executives from Capital One, Chase and Wells Fargo. She added that the group is “very focused on explaining those implications … to the next administration.”

Trump rarely spoke about financial regulation on the campaign trail this year. At times, he even endorsed policies that could require more aggressive federal intervention – inveighing at one point against rising credit card interest rates while promising to cap them.

But some of Trump’s former aides have taken the opposite tack, even suggesting that Congress should eliminate the CFPB. That idea is a core element of Project 2025—the conservative blueprint for the Trump presidency prepared in part by his former advisers for the Heritage Foundation—which describes the bureau as “highly politicized, damaging, and utterly unaccountable.”

A spokeswoman for Heritage declined to comment. Trump previously has tried to distance himself from Project 2025, though he’s named a number of its authors and contributors to his incoming administration.

“I think you have people inside Congress that would just as soon see the CFPB not be in business, and have its powers and authorities go back to the federal [regulators] that previously had them, prior to the enactment of Dodd-Frank,” said Rep. French Hill, R-Arkansas, a contender to lead the House Financial Services Committee, which oversees the agency. He said other Republicans support “guardrails” on its enforcement and policymaking powers.

Those ideas have long drawn sharp opposition from Democrats, who contend that a Republican push to abolish the CFPB would only stoke widespread public blowback, citing the agency’s popular work to safeguard consumers from scams and save them money.

“The CFPB is here to stay,” said Sen. Elizabeth Warren, D-Massachusetts, who ran the agency under President Barack Obama. “So I get there’s big talk, but the laws supporting the CFPB are strong, and support across this nation from Democrats, Republicans, and people who don’t pay any attention at all to politics, is also strong.”

Many consumer watchdogs expect the CFPB under Trump to quickly “freeze all enforcement actions, making sure no new enforcement actions are started,” said Dennis Kelleher, the president of Better Markets, which advocates for stronger financial regulation. He said the agency would probably reevaluate its existing litigation over past regulations, and it would face a choice—to “settle it on terms favorable to the industry, or otherwise figure out how to stop the litigation.”

Such a strategy would mirror Trump’s approach during his first term. Shortly after entering the White House in 2017, the president tapped Mick Mulvaney, a close ally and former congressman, to lead an agency he once publicly derided as a “joke.” He soon submitted zeroed-out budget requests and settled some of the agency’s pending enforcement actions—in some cases for $1. Mulvaney did not respond to a request for comment.

His successor, Kraninger, later pursued her own deregulatory agenda, loosening federal restrictions on debt collectors and payday lenders, which offer high-cost, small-dollar loans, largely to lower-income borrowers. But the bureau also brought significant enforcement actions under her watch: It secured a $1 billion punishment against Wells Fargo for its handling of auto loans, for example, and joined other federal regulators in finalizing a $700 million settlement with the data broker Equifax after it exposed 147 million Americans’ private information.

In a sign of the shift on the horizon, the chief executive of Equifax—Mark W. Begor—told investors at a securities conference this month that Trump’s election could quiet the activity at the CFPB, describing the expected shift in oversight as “positive for us.”

“It will be a strong regulator going forward, but likely a bit different tone perhaps than it has been the last four years with Director Chopra,” he said.