What the CFPB Changes Under Trump Mean for Consumers

The Consumer Financial Protection Bureau (CFPB) was created to protect consumers from unfair financial practices and ensure a level playing field in the marketplace. But not everyone agrees on its role. Some critics, including politicians, argue that the CFPB has become more of a roadblock than a safeguard for consumers. Now, with the Trump Administration looking to scale back its influence, big changes could be ahead.

So, what does this mean for you? Whether you’re a homebuyer, mortgage borrower, or just someone managing your everyday finances, these changes could affect how you interact with banks, lenders, and credit card companies.

Keep reading to learn what experts are predicting and how you might be impacted.

The CFPB’s role

The CFPB was created after the 2008 financial crisis to protect consumers from unfair lending practices in the mortgage industry. It focuses on fair lending, product pricing, and preventing deceptive financial practices.

The CFPB’s mission is to ensure a fair financial marketplace by preventing harmful practices, promoting competition, and helping consumers make informed decisions. It works to make financial products clearer, investigates misconduct, and provides financial education.

Through its efforts, the CFPB has secured over $21 billion in consumer relief and imposed $5 billion in penalties on wrongdoers. It’s also helped reduce bank fees and made credit report changes that benefit millions of people. Additionally, the CFPB has processed over 6.8 million consumer complaints.

What the Trump Administration is doing to the CFPB

The Trump Administration has taken steps to limit the scope of the CFPB by making changes to leadership, halting enforcement actions, closing CFPB headquarters, and suspending the processing of consumer complaints.

“The administration argues that the CFPB is too powerful and overregulates financial institutions, making it harder for businesses to operate,” notes Steven Glick, director of Mortgage Sales for HomeAbroad. “The idea is that less regulation equals more lending, which could stimulate economic growth.”

The argument is that the agency has reached beyond its statutory limits and created excessive regulatory burdens, which the Trump Administration believes hampers financial innovation and promotes inefficiencies. Increased oversight also raises costs for lenders, which can limit borrowing options and increase fees. Many insist that the agency’s strict regulation has made it more difficult for small businesses and first-time home buyers to get loans – restricting financial flexibility instead of expanding it.

University of Maryland business professor Clifford Rossi, formerly managing director and chief risk officer for Citigroup’s Consumer Lending Group, explains that the CFPB has had a rocky experience since its inception and has been highly politicized on both sides of the aisle.

“Democrats have used the agency as a tool to reign in what they see as a financial services industry that takes advantage of consumers, while Republicans see the agency as a rallying cry for government over-regulation that has imposed unnecessary litigation and regulatory costs on the industry, which has stifled innovation and competition,” he says.

Per Rossi, the CFPB’s legacy is a mixed bag.

“Over the years, it has been the leading voice in advocating fair lending and business practices in the industry. But at the same time, it has been perceived to be overzealous in its pursuit of litigation and regulatory penalties of institutions, which has sent a chilling effect across the financial services industry,” he continues. “This has created unintended negative consequences for consumers by reducing certain types of products and services and/or making them more costly for consumers.”

How this will impact Americans

The experts say that dismantling the CFPB can have positive and negative effects on consumers. Here’s a breakdown of the possible consequences.

Pros and cons for home buyers and mortgage borrowers

Dennis Shirshikov, a professor of finance and economics at City University of New York/Queens College, cautions that, without a healthy CFPB in place, lax oversight may encourage lenders to permit transparency standards to slip, which can result in higher mortgage rates, hidden and increased fees, and longer loan terms.

“For instance, a slight bump in mortgage rates by only 0.5% would mean about an $88 increase a month on a $300,000 mortgage, potentially leaving a borrower with much higher total costs in the long run,” he says.

Without the CFPB enforcing fair lending rules, predatory loan products could return to the market.

“Without CFPB oversight, lenders might increase hidden fees or push risky adjustable-rate mortgages,” warns Glick. “A worst-case scenario is a repeat of the subprime crisis, where borrowers were approved for loans they couldn’t afford – leading to mass defaults.”

On the other hand, with fewer restrictions, more borrowers could potentially qualify for loans, especially those with non-traditional income sources.

“Lenders would have greater flexibility, offering new loan products tailored to different needs,” says Jason Ball, a Certified Financial Planner.

Pros and cons for bank, credit card, and financial account customers

A scaled-back CFPB could result in more competitive credit card and loan offerings, but also a return of higher overdraft and penalty fees.

“While some may benefit from better financial products, others might face higher costs if they don’t read the fine print,” Ball continues.

Glick believes overdraft fees could increase from $35 to $45 per occurrence, and credit card late fees could jump from $29 to $50 per missed payment.

“Banks could also reintroduce aggressive practices like double-cycle billing, where interest is charged on previous balances, making it even harder for consumers to pay off debt,” adds Glick.

Bruce Ailion, a Realtor and real estate attorney, says the real winners who stand to most benefit from the CFPB’s elimination will be businesses that provide financial products and services to consumers – like banks and credit card companies.

“If the regulatory burden is reduced, it’s doubtful it will result in cost savings to the consumer,” explains Ailion. “Consider that some credit card companies today charge interest rates higher than 30%. Without the CFPB, these rates would go even higher.”

Pros and cons for consumers overall

Minus a robust CFPB, Shirshikov expects higher borrowing costs and more consumer disputes with banks and financial account providers in general.

“At worst, a fully neutered CFPB would create a financially burdensome environment where exotic risk-financial products could propagate and proliferate without restraint, as happened in the run-up to previous financial crises,” he says.

Without the CFPB’s free complaint system that allows consumers to dispute unfair charges and recover lost money, many will likely have to pay for costly legal help if they want to fight disputes.

“Also, big banks and lenders would probably operate with fewer restrictions, raising fees and introducing more aggressive terms that cost everyday consumers thousands more each year,” Glick predicts. “Less regulation could mean increased payday loan interest rates, too, with some loans climbing to 400% APR, trapping lower-income borrowers in cycles of debt.”

Ball envisions drawbacks but also some benefits here.

“Less regulation overall would allow more financial innovation, but it also means weaker protections against predatory practices,” he says. “A competitive market could force businesses to improve transparency, but consumers will need to be more diligent when choosing financial products.”

Will the CFPB be eliminated?

Ask Ailion and he’ll tell you that the CFPB is a “dead agency walking. Killing this has been a goal of the financial lobbying crowd since its creation.”

Rossi, meanwhile, believes the CFPB will live on as an independent agency but have far less influence than it did under previous presidential administrations.

“I think it’s unlikely we will see the complete elimination of the CFPB,” says Shirshikov. “It’s more likely we will see the agency limp on in a reduced form with its powers diminished through budget cuts, leadership turnover, and statutory reinterpretation. We could see the creation of a hybrid model encompassing focused government oversight alongside self-regulation by private sector industries.”

Ball concurs that elimination is unlikely, but if the CFPB’s funding is cut, its role will diminish – shifting its emphasis to fraud enforcement instead of broad regulation.

Are the Administration’s actions warranted or overreaching?

There’s a strong argument to be made that decreasing CFPB oversight could result in lower compliance costs, more competition, and increased access to credit. Shirshikov understands this desire to cut red tape. But he cautions that history shows wholesale rollbacks often leave consumers vulnerable.

“The measures the Trump Administration has embraced serve to undermine vital consumer protections, which have become key bulwarks against abusive financial practices,” he says. “This CFPB debate highlights the age-old challenge of balancing innovation with consumer protection. There are great dangers in both over-regulating and under-regulating, and a more balanced, data-oriented approach might represent a way forward that protects consumers while also allowing the financial marketplace to flourish.”

Glick says he gets the argument that over-regulation can slow down businesses, but gutting the CFPB entirely feels like an overreach.

“We need some level of oversight to keep bad actors in check. Nobody wants a repeat of 2008, when loose regulations led to bad loans, foreclosures, and financial chaos,” he says. “Instead of shutting it down, a better approach would be refining its role – cutting red tape where necessary but keeping strong protections in place.”

Can we live without the CFPB? Yes, says Ailion.

“We could also live without traffic lights, stop signs, and speed limits,” he says. “Any time we as a society decide to put limits or roadblocks on activity, we do so to prevent personal and collective harm. This is a choice, and in this cycle voters, have decided to place no restrictions on business’ ability to make money.”