New Acting CFPB Director Shuts Down Supervision and Funding and DOGE Takeover: Is Musk Finally Going to “Delete CFPB”?
New Acting CFPB Director Shuts Down Supervision and Funding and DOGE Takeover: Is Musk Finally Going to “Delete CFPB”?
A lot can change in a weekend. It was reported on Friday, February 7, 2025, that the CFPB received a new Acting Director, just days after the appointment of Treasury Secretary Bessent (which I wrote about here): newly Senate-confirmed OMB Director Russell Vought. Russel Vought is known for his involvement in the Heritage Foundation-organized Project 2025 and his position in the first Trump administration as OMB Director after Mick Mulvaney was made Trump’s Chief of Staff. The CFPB had been largely paused since former Acting Director Bessent reportedly directed staff to pause work in several major areas of the CFPB (including litigation, enforcement investigations, new rulemakings, and public communications) and to suspend effective dates for pending final rules. On Saturday, February 8, new Acting Director Vought is reported to have taken the pause a step further and sent an email to the CFPB’s staff telling them to “cease all supervision and examination activity,” and posted to X (formerly Twitter) on Saturday that he “notified the Federal Reserve that CFPB will not be taking its next draw of unappropriated funding because it is not ‘reasonably necessary’ to carry out its duties,” and that the “spigot…is now being turned off.”
In addition, Elon Musk’s Department of Government Efficiency (DOGE) is now reportedly inside the CFPB doing their thing. Reportedly, three DOGE staffers walked into the CFPB’s headquarters building and asserted themselves into agency operations, securing access to its files, networks, and equipment. DOGE officials have reportedly been granted read-only access to the CFPB’s financials, HR records, procurement systems, and internal operations—essentially everything needed to evaluate the agency from the inside out. Also on Friday night, DOGE reportedly deleted the CFPB’s X account, and Musk posted on X “CFPB RIP” with a tombstone emoji. Although dismissed by many, Musk’s prior post on X calling to “Delete CFPB” may have actually been the mission statement for the second Trump administration.
End of the Line for the CFPB?
The CFPB was created by an act of Congress, and it would take an act of Congress to “delete” the agency. Neither a post on X, nor a “pause” of its work, can officially kill an agency. Notably, Project 2025’s section on the CFPB (which was not authored by Vought, but a different former Trump appointee) did call for Congress to abolish the CFPB. Specifically, Project 2025 states that:
Congress should abolish the CFPB and reverse Dodd–Frank Section 1061, thus returning the consumer protection function of the CFPB to banking regulators and the Federal Trade Commission. Provided the Supreme Court affirms the Fifth Circuit holding in Community Financial Services Association of America, the next conservative President should order the immediate dissolution of the agency—pull down its prior rules, regulations and guidance, return its staff to their prior agencies and its building to the General Services Administration.
It appears that Project 2025 assumed that the CFPB’s funding mechanism was unconstitutional. But we know that the Supreme Court actually overturned the Fifth Circuit’s decision in CFSA v. CFPB and held that the CFPB’s funding was constitutional (which I wrote about here). It’s not entirely clear that the Project 2025 document calls for the abolishment of a constitutionally funded CFPB, though I suspect the authors probably still do want to see it abolished as a policy matter. But those behind Project 2025 can call for the abolishment of the CFPB all they want. I believe it is highly unlikely that there are 60 votes in the Senate to abolish the CFPB. In addition, the abolishment of the CFPB leaves many policy questions that Project 2025 did not answer, such as: (1) what about the CFPB’s rules that industry may want to retain over the old regulatory regimes, such as the TRID rule (who wants to go back to the old GFE and HUD-1?); and (2) what about the Dodd-Frank Act’s other changes to the underlying statutes, like TILA and RESPA, and the rules that implemented and clarified (or exempted) the statutory changes? Those underlying statutes would remain on the books even if the CFPB were abolished. And what about the opportunities for regulatory reform, such as in the area of RESPA Section 8 or fair lending? Are we leaving those on the table? This may be a time when a scalpel is a better tool than a sledgehammer.
Plus, the potential blowback from the general public from abolishing an agency designed to protect everyday consumers could be viewed as too great a political price. This is a different situation from agencies like USAID, which have esoteric, internationally-focused missions and do not provide tangible, understandable benefits to individual consumers. The other side of the aisle would likely use this more understandable agency’s demise to their advantage. A lot of people do remember the financial crisis that caused the creation of the CFPB.
Further, the legality of ceasing all of the CFPB’s functions indefinitely is highly questionable. The Dodd-Frank Act provides that the CFPB “shall require reports and conduct examinations on a periodic basis” of certain non-banks, including mortgage companies. This is a “shall,” and not a “may.” There are also plausible legal arguments that Acting Director Vought’s immediate request for $0 from the Federal Reserve violates the Dodd-Frank Act, which arguably requires the Director to determine the amount of funding “reasonably necessary to carry out the authorities of the Bureau” (how could he make such a determination one day after becoming Acting Director?). Other functions of the CFPB potentially affected by these “stop work orders” also potentially run afoul of statute, because many of the CFPB’s functions are mandated by Congress, using the word “shall.” The APA section 706(1) enables courts to “compel agency action unlawfully withheld or unreasonably delayed.” This was the basis of the consumer advocacy groups’ litigation against the CFPB to push the CFPB to finish its Dodd-Frank Act section 1071 small business loan data collection rule. Without changes from Congress either abolishing the agency or deleting these statutory mandates, there could be litigation heading the CFPB’s way trying to force it to carry out its mandated activities. Because of the potentially costly legal challenges from a de facto shutting down of the CFPB’s functions without changes from Congress (to me this wouldn’t seem to gain much in the area of government efficiency) that the CFPB would need to defend, I think these moves could actually be intended as a bargaining chip for the Trump administration to seek significant structural changes to the CFPB.
For these reasons, it is worth looking at what Project 2025 said Congress should do about the CFPB, if the CFPB is not abolished. Project 2025 stated that until the CFPB can be abolished, Congress should:
Ensure that civil money penalties (CMPs) go to the Treasury rather than CFPB’s own civil penalty fund.
Repeal Dodd-Frank Act section 1071, which requires the CFPB’s rule requiring reporting on small business loan applications, including the demographics of the business owners (I wrote about the rule implementing this statutory section here).
Prohibit CFPB funding of enforcement actions that are not based on an Administration Procedure Act (APA)-compliant rulemaking.
Require that administrative action respondents be allowed to elect between an administrative or judicial proceeding.
Specify the nature of “deceptive, unfair, and abusive” practices to define the scope of the CFPB mission more precisely.
These all sound pretty reasonable to me!
My Thoughts on Other Necessary Changes to the CFPB
In addition to these reasonable changes to the CFPB discussed above, I would personally add even more items to the list of changes, such as:
Replace the CFPB’s current single-director structure with a board or commission.
Place the CFPB under Congressional appropriations.
Strengthen oversight of the CFPB’s rulemaking function by limiting its general interpretive authority in underlying statutes, such as the Truth in Lending Act, Real Estate Settlement Procedures Act, and the Dodd-Frank Act. The CFPB’s underlying statutes are run amok with limitless general rulemaking authority that allows the agency to essentially create new law out of thin air. The only way to stop such rules is costly litigation challenging such rules (and the courts seem very willing to allow such lawless rulemakings, as we saw in the Townstone litigation, which I discuss here).
Ban the CFPB from prohibiting certain contract terms and practices, and limit its rulemaking authority to disclosure rules. This way, the CFPB can help consumers make informed choices, rather than the CFPB making choices for consumers.
Greater protections for targets of CFPB investigations.
Require timely responses to requests for advisory opinions and other regulatory relief (such as no-action letters).
After years of working at the CFPB, leading its largest rulemaking to date, and defending many companies against the CFPB, I have seen its best and its worst. But with these changes (and other ideas – perhaps they should call me!), I think the CFPB could be turned into an agency that is more palatable to Republicans, and that can still provide meaningful benefits to consumers.
How Should Financial Institutions React?
With the CFPB’s future now hanging in the balance, financial institutions and other organizations subject to its oversight face a period of immense regulatory uncertainty. But while the agency’s funding and authority could be significantly scaled back—or even eliminated entirely—this doesn’t mean companies should ditch compliance in the hopes that the CFPB will cease to exist. It is true that, if the Acting Director or DOGE’s actions result in a reduction of the agency’s funding or operations, companies may see fewer enforcement actions, shifting regulatory priorities, or even a fundamental restructuring or abolishment of the CFPB. However, regulatory obligations don’t disappear overnight. As noted above, the underlying statutes will still exist. Those statutes have private rights of action for consumers, and in large part can also be enforced by state authorities and other federal banking agencies. States have shown a willingness to pick up the enforcement baton. While this uncertainty could complicate compliance strategies and internal messaging about compliance risks, it would be prudent for businesses to continue to maintain compliance operations and monitor for developments. If a company is currently in the midst of a CFPB examination or investigation, these potential changes should be considered as part of the company’s response strategy.
We will continue to follow and provide updates as this critical situation unfolds. If you have questions or would like to discuss, please reach out to me at rich@garrishorn.com.
