Why Trump and Musk are shutting down the CFPB

The Trump administration's work to shut down the Consumer Financial Protection Bureau could hit American consumers in the wallet. It could also spare Elon Musk's business interests from unwanted federal attention.

Just a few days before Musk's DOGE agents targeted the CFPB, the social media platform X launched a new payment system — X Money — that the "agency might have scrutinized," said The Washington Post. The bureau has "vast powers" to go after "unfair, deceptive and predatory corporate practices," and it has used those powers to closely examine banks and tech giants that have offered digital banking-style services. Musk's work to dismantle the bureau is like a "bank robber trying to fire the cops and turn off the alarms before he strolls in the lobby," said Sen. Elizabeth Warren (D-Mass.).

Musk is "waging war on a key check on his business empire," said CNN. The CFPB shutdown alarms ethics experts who say there is a "glaring conflict of interest" in Musk's activities. X isn't the only Musk enterprise to benefit from weakening the regulatory efforts: Tesla has a financing arm that offers car loans. Now "Tesla's largest shareholder is front-and-center as the CFPB is being dismantled," said CNN.

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'Harassed, hectored and micromanaged'

One of the CFPB's "biggest wins over industry players" has been its work to limit bank overdraft fees, said NBC News. The revenue that American banks earned from such fees dropped by $6 billion over four years ending in 2023. That number was poised to rise even more: The bureau in December issued a rule capping the penalty at $5, "but its fate is now uncertain." A separate rule, which would have slashed credit card late maximum fees from $32 to $8, now appears dead.

Conservatives have long objected to the agency's existence, saying its rulemaking process oversteps constitutional bounds. Businesses have "found themselves harassed, hectored and micromanaged" under the CFPB's supervision, said David B. McGarry at the National Review. The agency, in existence since 2011, is a "new, failed experiment" that has had a tendency toward ridiculous overreach — it recently moved to extend banking regulations to video game currencies. It should be terminated for the "sake of sensible economic regulation," said McGarry.

A 'consumer cop on the beat'

The CFPB "touches all of our lives," said the National Consumer Law Center's Lauren Saunders to The Detroit Free Press. The agency was born in the aftermath of the 2008 financial crisis, given a mission of taking on "everything from ripoffs to tricks and traps in financial products," added Free Press columnist Susan Tompor. What became clear after the crisis is that "consumers don't stand a chance when there isn't a consumer cop on the beat." Now consumer complaints will be dumped by the Trump administration into a "digital trash can," said Tompor.

Even bankers are worried that losing the bureau "will cause chaos in consumer markets," said David Dayen at The American Prospect. The CFPB has "contributed to the smooth functioning of markets," Dayen said. Now industry trade groups are "alarmed" that functioning "could easily break."