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A dramatically reduced Consumer Financial Protection Bureau will still operate, but with a drastically narrower enforcement focus, payments experts say.
Notices went out late Thursday to CFPB employees that the agency plans to lay off about 90% of its workforce, which would reportedly be about 1,500 employees, leaving the CFPB with a staff of about 200. Employee access to the agency’s systems and email will reportedly end Friday evening.
The notice, sent by CFPB chief legal counsel Mark Paoletta, stated that in addition to the layoffs, the CFPB will shift resources away from enforcing and overseeing consumer-protection laws that can be handled by the states, such as medical debt, student loans, and digital payments. One area where the bureau will reportedly focus its remaining resources is fraud.
The shift in the CFPB’s enforcement focus leaves an agency that will be less political in nature, says Eric Grover, principal at the consultancy Intrepid Ventures. A “depoliticized CFPB,” won’t be as “hostile to the financial-services industry and [will] end absolutist paternalism that reigned under Director Chopra,” Grover says by email. Rohit Chopra was fired by President Trump in February after serving as CFPB director since October of 2021.
“While the massive headcount cut won’t render the CFPB absolutely toothless, it does mean it will have to focus its limited resources on egregious fraud and not much more,” Grover adds.
What remains of the agency will essentially be “window-dressing” to fend off possible legal challenges to gutting the consumer-protection legislation that led to the bureau’s creation, Steve Mott, principal of consultancy BetterBuyDesign, says by email.
“It is tragic that the expertise and analytical data accumulated and the mostly constructive behavioral changes that resulted from the bureau’s efforts will likely be lost,” Mott says. “One could argue that some of the aggressive initiatives the bureau pursued in the past couple of years, such as proposing banks write blank checks to anyone claiming a victim-assisted scam, were counterproductive, but who’s left now to examine and figure out what’s right or what’s wrong with consumer finances–especially in the wild frontier of digital transacting?”
Despite the massive layoffs, it is unlikely the Trump administration, which has targeted the agency for reductions since taking office in January, will eliminate it all together.
“Congress created the CFPB, only Congress can eliminate it,” Grover says. “While it can dramatically rein in the CFPB, the Trump administration cannot shutter the agency. There is little to no chance that this Congress will eliminate the CFPB.”
And, despite the massive layoffs, a future administration could choose to replenish the agency’s resources once President Trump leaves office, Grover adds.
