Jamie Dimon, CEO of JPMorgan Chase, will leave the U.S. Capitol on Thursday, February 13, 2025 after meeting with Republicans from the Senate Bank, Housing and Urban Affairs Committee on issues of de-emergence.
Tom Williams | CQ-Roll Call, Inc. |Getty Images
For years, American financial companies have fought the Consumer Financial Protection Agency (US Consumer Financial Watchdog), a US consumer finance watchdog, portraying agents as illegal and unfairly targeting industry players.
Now, after the Trump administration issued a suspension work order and shutting down its headquarters, the agency has found itself in an unlikely alliance at the CFPB on life support.
That’s because if the Trump administration succeeds in reducing CFPB to its previous shell, banks compete directly with non-bank financial players, from big tech and fintech companies to mortgages, automobiles and payday lenders.
“It’s gone because the CFPB is the only federal agency that oversees non-duty agencies,” said David Silverman, a veteran banking lawyer who lectures at Yale Law School. “Payment apps like PayPal, Stripe, Cash App, and other things like that will get closer to free rides at the federal level.”
This shift could bring the clock back to its pre-2008 environment, where it was left mostly for state officials to prevent consumers from being destroyed by non-bank providers. The CFPB was created in the aftermath of the 2008 financial crisis caused by irresponsible loans.
However, since then, digital players have committed a significant breach by providing banking services via mobile phone apps. According to data from Cornerstone Advisors, Fintechs, led by PayPal and Chime, had roughly as many new accounts as all large and regional banks combined last year.
“If you’re a big bank, you certainly don’t want a world where non-banks have far more freedom and far fewer regulatory oversight than banks,” Silverman said.
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The CFPB and its employees have fallen into Limbo last month after superintendent Russell Vought took over and issued agency directives to the then 1,700 staff. Working with Elon Musk’s government efficiency operatives, Vought reportedly fired about 200 workers immediately, took steps to terminate the agency’s building lease, and cancelled contracts required for legally mandated duties.
In an internal email released Friday, CFPB Chief Operating Officer Adam Martinez detailed plans to remove around 800 supervisors and executive workers.
Senior CFPB executives shared plans for more layoffs to hire five employees to the agency, CNBC reports. It will organize the competence of the agency to carry out its duties of supervision and enforcement.
That appears to be beyond what even the Consumer Bankers Association, a frequent critic of the CFPB, would like. The CBA, representing the country’s largest retail bank, sued the CFPB over the past year, robbing rules restricting overdrafts and credit card deferral fees. Recently, we have focused on the role of CFPB in maintaining a level playing field among market participants.
In a statement provided to CNBC, Lindsey Johnson, president of CBA, said: “It’s importantly, the CFPB is the only examiner of a non-banking financial institution.”
Vought’s plan to sabotage government agencies was suspended by a federal judge. Federal judges are now considering the merits of the litigation brought by the CFPB union.
A hearing is set for Martinez to testify on Monday.
‘Good luck’
In the meantime, bank executives have now started to disappear from CFPB’s antagonists amongst those involved.
At a banker’s conference in late October in New York, JPMorgan Chase CEO Jamie Dimon encouraged his peers to “fight back” with regulators. A few months earlier, the bank said it could sue CFPB over an investigation into the peer-to-peer payment network Zelle.
“We’ve been suing regulators over and over again because things are becoming unfair and unfair, so they’re hurting businesses. Many of these rules hurting low-wage individuals.”
There is now a growing consensus that the first push to “delete” CFPB is a mistake. In addition to increasing the threat posed by non-banks, the current rules from the CFPB are still in the book, but no one will update them as the industry evolves.
If CFPB is gone, small banks and credit unions are at even greater disadvantage than their larger peers.
“Traditional wisdom is incorrect for banks to leave the CFPB or want the banks to integrate regulators,” said an executive at a major US bank who refused to identify talking about the Trump administration. “They want thoughtful policies that support economic growth and maintain safety and soundness.”
A senior CFPB lawyer who lost his position in recent weeks said industry cooperation with the Republican Party could have backfired.
“They live in a world where the entire non-bank financial services industry is unregulated every day, but the FDIC and the OCC are overseen by the Federal Reserve and the OCC,” the lawyer said. “It’s a world where Apple, PayPal, Cash App and X run wild for four years. Good luck.”
