danijelala / AdobeStockThe Consumer Financial Protection Bureau (CFPB) was created in 2011, an outsized and clumsy attempt by intellectuals in Washington D.C. to respond meaningfully to the mortgage crisis that crippled the financial markets worldwide just a few years earlier. The massive Obama-era Regulator is duplicative and outdated and should be at the top of the list for the new Department of Government Efficiency to review for governmental overstep and waste.
Though Senator Elizabeth Warren promised that the CFPB would bring “greater transparency and streamlined disclosure to the consumer financial markets,” the reality is that the agency’s leadership focuses on advancing partisan policies, unproven scholarly theories, and targeted enforcement actions that are at odds with the typical consumer financial experience in the United States.
Further, many of the actions taken by the CFPB over the past decade duplicate efforts by the individual States and other agencies while the CFPB steadfastly refuses to engage in the fundamental priorities of a typical regulator, such as creating a registry of all debt collectors for consumers to access. Thus, the time is now to abolish the CFPB.
The CFPB Focuses on Partisan Issues and Scholarly Theories Instead of Real Consumer Harm
Congress and the Courts Deny the CFPB’s dubious claims of “disparate impact”
Since its inception, the CFPB has sought to identify and remediate consumer inequities in our financial system through the use of data. While this premise sounds promising, the reality is that much of the data necessary for conducting such analyses does not exist. For example, the CFPB sought to prove its theory that there is pervasive “disparate impact” in lending practices that negatively impact consumers of certain racial and ethnic backgrounds. Since there is insufficient data to determine the actual race or ethnic background of borrowers, the CFPB approximates a borrower’s race and ethnic background using census data and the consumer’s last name in what college academics refer to as a Bayesian analysis.
In 2018 the United States Congress engaged a rare exercise of its authority under the Congressional Review Act and overturned CFPB guidance on disparate impact, holding in essence that this CFPB rule was contrary to the Congressional will.
Undeterred by the rebuke from Congress, in 2022 the CFPB issued new guidance in its financial services examination manual inserting “disparate impact” requirements. In September 2023, a Federal Court in Texas struck down this renewed CFPB guidance on disparate impact, writing: The March 2022 manual update is beyond the agency’s constitutional authority based on an Appropriations Clause violation and beyond the agency’s statutory authority to regulate ‘unfair’ acts or practices under the Dodd–Frank Act.
The CFPB’s fixation on the disparate impact theory and justification of its Bayesian analyses detracts attention from the largest single issue facing consumers today: security of financial data. Recent studies suggest that more than one billion consumers have been impacted by data security breaches in 2024. The CFPB had an opportunity to address and remedy the epidemic of data security breaches in October 2024 when it issued final rules on personal financial data rights. While this nearly 600-page CFPB rule includes platitudes about consumer choice and prohibits already banned data sharing, the rule fails to provide any meaningful guidelines, audit requirements or even recommended best practices for covered entities to identify, prevent or minimize the impact from security breaches. Thus, it appears that the CFPB requires a covered entity to focus more effort on avoiding disparate impact than avoiding a data security breach.
The CFPB’s recent Rule banning credit reporting of medical debt is popular with consumers, but the Rule is beyond the agency’s authority and inadequate compared to State efforts.
In June 2024, the CFPB proposed a 182-page rule that would prohibit credit reporting on medical debt, citing a series of studies and reports about the negative impact of such reporting. While the Rule provides the CFPB talking points for the media, the CFPB’s approach is one-dimensional and ineffective. In the last two years, more than 17 States enacted legislation to protect consumers from the impact of unpaid medical debt, with many more set to address it. As these State laws demonstrate, credit reporting on medical debt is only one facet of consumer problems with health care debt. Issues persist with insurance billing, Medicaid, Medicare, worker’s compensation, State assistance programs, charity care and community assistance. Further, the financial stability of health care providers and access to care remain priorities to address.
It is unusual that the CFPB, a regulator tasked with overseeing financial institutions, chose to issue guidance regulating the health care industry. The Department of Health and Human Services, along with State legislatures, are certainly well-equipped to regulate health care providers without interference from the CFPB. In November 2024, ACA International filed a lawsuit challenging the CFPB-proposed rule regarding credit reporting on medical debt. Here again, the CFPB has expended substantial resources on an issue beyond its authority that is adequately addressed by HHS and the States.
The CFPB Complaint Portal Causes Consumer Harm
The CFPB has an online consumer complaint portal designed to allow consumers to file complaints that the CFPB will forward to creditors, similar to the State Attorneys General, state collection agency regulators and the Better Business Bureau. While the CFPB portal provides an outlet for consumer disputes, the CFPB acknowledges that the portal has become a tool used by unscrupulous debt settlement companies to issue mass frivolous disputes that frustrate both consumers and creditors without providing any benefit.
The CFPB’s insistence on duplicating the dispute communication platform already available to consumers through State regulators and the Better Business Bureau is wasteful. Further, the most common dispute that consumers have about debt collectors is that they do not recognize the debt collector. The CFPB should serve consumers and eliminate the most common consumer dispute today by finally publishing a list of all debt collectors, including the address and dispute contact information. Every jurisdiction that regulates debt collectors publishes a list of these entities for consumers to review, yet the CFPB has refused for more than a decade to publish the list of debt collectors it regulates without explanation.
Conclusion
As the Department of Government Efficiency considers agencies and programs for consolidation, the conversation will continue about whether the CFPB should be eliminated.
