Trump Weakens CFPB Watchdog, Raising Fears of ‘Open Season’ on Consumers

The Trump administration claimed in court last week that it is not dismantling the sole federal agency tasked with protecting consumers from unfair financial practices, despite ordering its employees to stop working weeks ago and firing more than a hundred.

Consumer advocates worry that paralyzing the Consumer Financial Protection Bureau will leave millions of Americans with little recourse if they face fraud, credit report errors, predatory lending and other financial abuses. The CFPB has halted work on dozens of enforcement actions that sought relief for consumers.

The CFPB’s estimated 38 pending federal lawsuits included a filing against Capital One, alleging the bank cheated customers out of $2 billion in interest payments. Last week, the agency dropped cases against Capital One and four other lenders.

“To me, it’s like open season on consumers. And apparently, this administration does not care,” said Dalié Jiménez, a former CFPB staffer who now teaches law at UC Irvine. “This completely incentivizes people who want to break the law.”

In December, the CFPB filed a lawsuit against Comerica Bank for “failing 3.4 million Direct Express cardholders, primarily unbanked Americans receiving federal benefits.”

The agency alleged the bank charged illegal ATM fees and mishandled fraud complaints, among other infractions. Millions of seniors and disabled Americans who receive their benefits on Comerica Bank’s prepaid debit cards were unable to access their funds or get timely assistance when trying to report unauthorized transactions, errors in their account or stolen cards.

For Joan, an East Oakland resident, a yearslong ordeal to resolve similar issues with Comerica was so taxing that she became rail-thin and lost her hair. Even now, speaking about her experience brings her to tears.

“I was hysterical. I was trying to figure out how I’m going to pay for this, pay for that. Where is my money at?” said the former postal service worker who has received disability benefits for more than a decade. “It’s stressful. You get depressed — crying — and you don’t know what to do.”

On March 3, 2022, the 63-year-old woman couldn’t withdraw her disability benefits from an ATM near her home. The $1,600 she receives monthly from the federal government is her only income. She couldn’t get through to a representative on Comerica’s helpline. She had to borrow money from friends to pay rent and bills.

She later learned a person in San Jose had fraudulently taken $1,000 from her account. Comerica declined her fraud claim. KQED is withholding the woman’s full name because she fears becoming a fraud target again.

Comerica filed a lawsuit against the watchdog agency, arguing it overstepped its authority. Conservatives have long targeted the CFPB, claiming it lacks accountability. Project 2025, a right-wing policy blueprint, called for the CFPB’s dissolution, referring to it as an unconstitutional and damaging agency.

Russell Vought, a Project 2025 co-author who was installed as the agency’s acting director on Feb. 7, ordered the bureau’s 1,700 full-time employees to cease investigations, litigation, enforcement actions, rulemaking and other work and closed the CFPB’s headquarters and regional offices.

The National Treasury Employees Union, which represents agency staffers, estimates 300 probationary and term employees were fired.

“Essentially, we’ve been told that the work we do every day to protect American consumers — no, we’re not allowed to do that,” said Solange Hilfinger-Pardo, a CFPB enforcement attorney in San Francisco for four years and an NTEU chapter 335 member. “And, of course, if we’re not there to do the work, then all of these cases just go away.”

Congress created the CFPB in response to the 2008 financial crisis to stop the kind of predatory lending practices that fueled the worst economic downturn since the Great Depression. Since it began operating in 2010, the bureau has recovered more than $21 billion for Americans, including monetary compensation and canceled debts.

The agency has collected an additional $5 billion in civil penalties to reimburse consumers after businesses that broke the law went bankrupt, closed down or didn’t have enough funds for restitution. Nearly $270 million was distributed to California residents.

A federal judge in Washington, D.C., temporarily halted the administration from mass firing more agency employees, deleting CFPB records and defunding the agency after the NTEU and others sued. In court documents filed Feb. 24, the Trump administration said it intends to keep the agency operating, but on a “substantially more streamlined form.” A hearing in the case was set for today.

In its lawsuit against Comerica, the CFPB alleged the bank had subjected benefits recipients to excessive phone wait times, sometimes for hours, and dropped nearly 25 million customer-service calls.

From 2008 until last year, Comerica had an exclusive contract for the Direct Express program. The bank, a subsidiary of Comerica Incorporated, reported total assets of about $84 billion in 2022 and deposits of more than $71 billion.

“We will continue to vigorously defend our record as the financial agent for the Direct Express program and remain committed to serving our cardholders,” Nicole Idzi Hogan, a Comerica spokesperson, said in a statement, adding that the bank has worked hard to address issues in the program.

“Throughout the CFPB’s investigation, we have cooperated by sharing information and data to illustrate the unique nature of this program and the fact that we operate with the oversight of the Fiscal Service,” she continued. “Despite our good faith efforts to provide this critical context, the CFPB has consistently ignored our arguments and documentation.”

In November, the Bank of New York Mellon Corporation was selected as the new Direct Express manager. Comerica signed a three-year contract extension to transition the services to BNY.

Joan said she tried for months to get Comerica to reimburse her. She was the fourth federal benefit recipient to seek help from the East Bay Community Law Center, according to Desiree Nguyen Orth, who directs the consumer justice unit at the Berkeley nonprofit.

Nguyen Orth was one of the lawyers who assisted her in filing a complaint with the CFPB, reaching a settlement last month after suing the bank. Nguyen Orth is concerned for consumers that small nonprofits like hers won’t be able to reach because they lack the kinds of resources, subpoena power and authority of the CFPB.

“We just cannot compete with banks who can afford to hire white-shoe law firms that have an endless supply of lawyers,” said Nguyen Orth, a lecturer at the UC Berkeley Law School. “There are millions of people who need this kind of help, and we are so far under-resourced.

“This is why the agency exists. This is why they are a watchdog. They are the resource that we pay for as taxpayers to hold companies accountable.”

California consumers can file complaints about financial products and services to local district attorneys’ offices, the Attorney General’s office and the California Department of Financial Protection and Innovation.

But, in general, national banks are primarily under the purview of federal regulators, though the state of California can pursue legal action in certain circumstances, Mark Leyes, a spokesperson with the DFPI, said in a statement.

“California has some of the most robust financial protections for consumers in the country. The Department of Financial Protection and Innovation (DFPI) is steadfast in its commitment to serve California communities using its broad authorities, regardless of potential changes in federal policy,” Leyes said.