The Consumer Financial Protection Bureau (CFPB), long a target of criticism from American financial companies, finds itself in an unusual predicament. While it has faced opposition in courts and media, it now garners support from unexpected allies—banks that previously resisted its regulations. This shift comes as the Trump administration attempts to significantly reduce the agency’s influence. Bank executives, once antagonists of the CFPB, express concern over its potential dismantling, as they fear the consequences of competing directly with unregulated non-bank financial players.
The Trump administration took decisive action against the CFPB by issuing a stop-work order and closing its headquarters. Adam Martinez, the CFPB's Chief Operating Officer, announced plans to cut approximately 800 supervision and enforcement positions. This move places the agency and its employees in a state of limbo, especially following Acting Director Russell Vought's appointment. Vought issued numerous directives to the agency's 1,700 staff members, but a federal judge intervened to halt his plans.
"Good luck"
— A senior CFPB lawyer who lost his position in recent weeks
In response to these developments, the CFPB union is seeking a preliminary injunction to prevent the agency's dismantling. The union argues that if the Trump administration succeeds in reducing the CFPB to a mere shadow of its former self, banks will face increased competition from non-bank financial entities. These entities, including big tech and fintech firms, currently operate with far less federal scrutiny than institutions backed by the Federal Deposit Insurance Corporation (FDIC).
The CFPB plays a crucial role as the sole examiner of non-bank financial institutions, ensuring a level playing field among market participants. Despite past grievances with the agency, bank executives now recognize the importance of its oversight in maintaining fair competition.
"The conventional wisdom is not right that banks just want the CFPB to go away, or that banks want regulator consolidation"
— An executive at a major U.S. bank who declined to be identified
Industry insiders highlight potential repercussions if non-bank financial services are left largely unchecked.
"They're about to live in a world in which the entire non-bank financial services industry is unregulated every day, while they are overseen by the Federal Reserve, FDIC and OCC"
— A senior CFPB lawyer who lost his position in recent weeks
This sentiment echoes concerns about payment apps like PayPal, Stripe, and Cash App receiving minimal federal oversight.
"Payment apps like PayPal, Stripe, Cash App, those sorts of things, they would get close to a free ride at the federal level"
— David Silberman, a veteran banking attorney
The Consumer Bankers Association (CBA), however, has not always aligned with protecting the CFPB's interests. In recent months, the CBA filed lawsuits against the bureau to challenge rules limiting overdraft and credit card late fees. Additionally, JPMorgan Chase CEO Jamie Dimon urged his peers to resist regulatory pressures during a bankers convention in New York.
Despite past conflicts, banks now find themselves advocating for the CFPB's continued existence. Without its regulatory oversight, they risk encountering unregulated competitors who enjoy less stringent scrutiny.
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