Washington, D.C. (April 17, 2025) |
A memo sent to Consumer Financial Protection Bureau (CFPB) staff on Wednesday calls for a seismic shift away from supervising non-banks and Big Tech financial companies, including payday lenders, student loan servicers, digital wallets and payment apps, and a majority of the mortgage market. The memo also says the Bureau will deprioritize many issues that cause significant harm to people across the country, including medical debt, consumer data protection, and digital payments.
The memo is feeding rumors that as many as 1,500 people will be subject to sweeping layoffs, leaving the CFPB with a skeleton staff. Firings appear to already be underway.
“The Administration cannot simply ignore congressional mandates and slash the Consumer Financial Protection Bureau, which has spent more than 15 years as an essential financial watchdog, returning $21 billion to over 200 million consumers and protecting people and honest businesses when companies deceive and abuse consumers,” said Lauren Saunders, associate director of the National Consumer Law Center. “Nonbanks’ shoddy business practices were a significant driver of the financial crisis of 2007, causing millions of people to lose their homes, jobs and savings. By focusing solely on large banks, and ignoring the statutory mandate to supervise nonbanks and enforce the law across its entire jurisdiction, this Administration is clearing the way for unscrupulous companies to once again violate the law and take advantage of ordinary people.”
“Congress created the CFPB to address the gaps that allowed nonbank mortgage lenders, student lenders, payday lenders and other nonbank companies to escape accountability,” said Saunders. “The CFPB cannot simply shirk the consumer protection responsibilities Congress gave it and expect states to enforce federal law.”
Nonbanks’ dominance of the mortgage market has been growing since the mortgage crisis, now originating 70% of mortgages and servicing more than 50% of outstanding loans. Until recently, the CFPB was holding mortgage lenders and servicers accountable when they harmed consumers. For example, the CFPB ordered Fay Servicing to pay $2 million in penalties for failing to offer borrowers mortgage assistance options that were available to them and trying to foreclose on borrowers seeking help paying their mortgage. The CFPB also brought cases against Rocket Homes, which provided kickbacks to real estate brokers and agents in exchange for steering homebuyers to Rocket Mortgage’s loans, and against Berkshire Hathaway-owned Vanderbilt Mortgage and Finance, for setting families up to fail when they borrowed money to buy a manufactured home by ignoring obvious red flags that the borrowers could not afford the loans. Both of those cases were dropped by the Bureau in February.
“Without the CFPB's oversight, homeowners across the nation will face many more unfair and unaffordable loans, and it will be harder for them to get help when they need it,” said Alys Cohen, senior attorney at the National Consumer Law Center.
The firings appear to be happening in departments that the memo states the CFPB will “deprioritize.” Those departments include medical debt, student loans, digital payment apps, evasive peer-to-peer payday loan platforms like SoLo Funds, remittances, consumer data, and initiatives for justice-involved individuals who have served their sentences and are reentering society.
The student loan market is also replete with non-bank lenders and servicers. In a 2024 report, CFPB examiners highlighted how private lenders offering to refinance federal student loans engaged in deceptive acts or practices by claiming that refinancing federal loans might not result in forfeiting access to federal forgiveness programs, when, in fact, it would disqualify borrowers from protections federal loans offer.
The Administration's decision to deprioritize digital payment apps comes just weeks after Congress voted to overturn the CFPB’s Big Tech Payment App Oversight Rule, which would have allowed the CFPB to ensure compliance with fraud, privacy and other laws by Big Tech payment apps like Venmo, CashApp, and Elon Musk’s soon-to-launch X Money. In February, the CFPB dropped its case against the tip-based payday lender SoLo Funds over accusations it deceived borrowers and illegally extracted fees, with many loans carrying an APR in excess of 300%.
Meanwhile, medical debt has become one of the most disputed forms of debt, disputed three times more frequently than credit card debt.
The memo also said the CFPB would focus primarily on servicemembers, veterans, and their families, but it’s unclear how many staff members will be left to carry out this important work. And VA loans in particular are disproportionately likely to be made and serviced by nonbanks.
“While servicemembers and veterans are an important part of the CFPB’s mission, inadequately staffing the CFPB and abandoning oversight of the companies that handle VA mortgages, while ignoring the problems of the rest of the country, would completely violate Congress’s mandate for the CFPB,” said Saunders.
The memo also says the CFPB will deprioritize work on behalf of justice-involved individuals. “Abandoning the important work the CFPB has done to help address the significant financial challenges and barriers to housing and employment that people who have interacted with the criminal justice system face will only serve to undermine reentry and public safety," said Ariel Nelson, senior attorney at the National Consumer Law Center.
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