What the CFPB Shut-Down Means for Debt-Collection

The Consumer Financial Protection Bureau (“CFPB”) is a federal agency that monitors financial markets to identify new risks to consumers, evaluates consumer complaints, and addresses unfair and deceptive trade practices by financial institutions, including banks, lenders, and credit card companies.[1]  The CFPB was created to protect consumers against the risky lending practices that caused the 2008 financial crisis.[2]  The CFPB has benefitted millions of Americans by helping homeowners facing foreclosure stay in their homes, curtailing banks from charging junk fees, and returning more than $20 billion to consumers nationwide.[3]  The agency also protects consumers impacted by institutional bias by enforcing anti-discrimination laws in consumer financing, investigating consumer complaints against companies, and providing oversight to ensure that companies do not engage in practices that disproportionately impact vulnerable consumer groups.[4]  These groups often do not have access to proper financial information and are taken advantage of through discriminatory practices, such as predatory lending.[5] 

In February 2025, Russ Vought became the director of the Office of Management and Budget and acting director of the CFPB.[6]  Under his direction, the CFPB fired hundreds of employees, ordered staff to work only with limited exceptions,[7] and placed most staff members on administrative leave.[8]   Vought stalled the CFPB because the “federal government is costly, inefficient, and deeply in debt.”[9]

The potential dismantling of the CFPB has harmful consequences for consumers.  First, without the CFPB’s oversight, the use of assembly-line litigation may increase.   Assembly-line litigation occurs when debt collectors and other corporate plaintiffs bring a high volume of low monetary value claims against individual natural-person defendants who are often unrepresented and do not appear in court.[10]  For example, Midland Funding, a debt-collector, filed 122,627 debt-collection cases in 2019.[11]  Wilf-Townsend’s pivotal paper on assembly-line plaintiffs describes the use of assembly-line litigation as a pervasive issue in civil justice, as it disproportionately impacts low-income consumers from marginalized communities.[12]  This problem was pervasive during the last administration, and will likely worsen without the CFPB’s regulatory function to monitor and penalize abusive collection practices done by financial institutions.

This tactic is especially concerning, as it often leads to an increase in default judgments.[13]  The CFPB noted in 2023 that civil judgments are more common than bankruptcy.[14]  In cases of  low-value claims, defendants often do not show up to court because it is more costly to hire a lawyer than to receive a default judgment.[15]  When defendants do show up to court, they are usually unrepresented.[16]   Additionally, many consumers are unaware of their debts due to improper service[17] or simply a lack of information about their legal needs.[18]  Receiving a default judgment can be incredibly damaging to individuals unaware of these judgments against them,[19] as it often gives creditors the right to pursue wage garnishment and asset seizures.[20]  A default judgment that could lead to debt garnishment harms particularly vulnerable low-income consumers from marginalized communities.[21] 

Although the CFPB does not individually help consumers manage their default judgments, its role as a regulatory agency can help identify companies that engage in predatory lending practices.[22]  By regulating debt collection practices and requiring transparency from financial institutions, the CFPB helps consumers avoid doing business with companies that participate in assembly line litigation.[23]  The CFPB helps bring light to companies that engage in these practices and hold them accountable. Although the CFPB typically provides resources on their website regarding individual’s rights and protections for debt collection, the agency has published no new information since the shutdown. The agency’s blog is one of the various sources of information and statistics provided by the agency.[24]  Consumers with an already limited ability to access information needed to handle these sorts of debts will continue to lose access to information without the CFPB oversight.

Further, without the CFPB, consumers may have fewer avenues for relief from potentially predatory lending practices that lead to debt.[25] The CFPB enforces laws that target discriminatory practices,[26]  such as the Consumer Financial Protection Act (“CFPA”), which prohibits unfair, deceptive, and abusive acts and practices.[27]  Through enforcement of the CFPA, the CFPB distributed $6 million to veterans harmed by illegal lending practices in 2024.[28]  These illegal lending practices included misleading veterans and other consumers into selling their pension and disability payments, which is prohibited under federal law.[29] 

The recently imposed constraints on the CFPB’s power will detrimentally impact enforcement of the CFPA. This impact stems from the Act specifically authorizing the CFPB as the federal government’s primary regulator of consumer products and services. The CFPB is charged with “administering, interpreting, and enforcing the ‘Federal Consumer Financial Laws,’ a category that includes the CFPA.[30] The halt of CFPB supervisory and enforcement activity creates regulatory leeway for companies previous targeted under the CFPA, allowing them to loosen their compliance obligations to the agency.[31]

[1] The CFPB, Cᴏɴsᴜᴍᴇʀ Fɪɴᴀɴᴄɪᴀʟ Pʀᴏᴛᴇᴄᴛɪᴏɴ Bᴜʀᴇᴀᴜ,  https://www.consumerfinance.gov/about-us/the-bureau/  Last Visited March 31, 2025 [https://perma.cc/7F9X-EBDD].

[2] Eric Petry & Ian Vandewalker, Who Benefits from Trump’s Move to Shut Down Consumer Financial Protection Bureau?, Bʀᴇɴɴᴀɴ Cᴛʀ. ғᴏʀ Jᴜsᴛ. (Feb. 25, 2025), https://www.brennancenter.org/our-work/analysis-opinion/who-benefits-trumps-move-shut-down-consumer-financial-protection-bureau [https://perma.cc/C8X2-9NZ6].

[3] Attorney General James Leads Multistate Coalition to Defend the Consumer Financial Protection Bureau, Oғғ. ᴏғ N.Y. Sᴛᴀᴛᴇ Aᴛᴛ. Gᴇɴ. (Feb. 20, 2025), https://ag.ny.gov/press-release/2025/attorney-general-james-leads-multistate-coalition-defend-consumer-financial [https://perma.cc/ZZ33-STGH].  Junk fees can include fees for overdraft or nonsufficient funds, late fees for not paying a bill on time, convenience fees, and prepaid card fees. These fees drive up overall costs for consumers. https://www.nerdwallet.com/article/finance/what-is-a-junk-fee#:~:text=Junk%20fees%20are%20pesky%20at,individuals%2C%20according%20to%20the%20CFPB [https://perma.cc/V8A3-98RP]. 

[4] Alicia Mercedes, NAACP Files Lawsuit to Protect Consumers, Challenging Disbandment of the Consumer Financial Protection Bureau (CFPB), NAACP (Feb. 13, 2025), https://naacp.org/articles/naacp-files-lawsuit-protect-consumers-challenging-disbandment-consumer-financial, [https://perma.cc/XZ8X-YFR3]; The CFPB, supra note 1.

[5] Id.

[6] Dylan Tokar & Brian Schwartz, Russell Vought Taking Over as New Acting Head of CFPB, Wᴀʟʟ Sᴛʀᴇᴇᴛ J. (Feb. 7, 2025), https://www.wsj.com/finance/regulation/russell-vought-taking-over-as-new-acting-head-of-cfpb-9650d338.  

[7] Trump admin denies plans to shutter CFPB, court papers say, Rᴇᴜᴛᴇʀs (Feb. 25, 2025), https://www.reuters.com/world/us/trump-admin-denies-plans-shutter-cfpb-court-papers-say-2025-02-25/.

[8] Kyle Cheney & Katy O’Donnell, Email trove reveals CFPB turmoil after Vought’s work stoppage, Pᴏʟɪᴛɪᴄᴏ (Mar. 5, 2025), https://www.politico.com/news/2025/03/05/cfpb-russ-vought-emails-00213429. 

[9] Memorandum from Russell T. Vought to Heads of Executive Departments and Agencies on Guidance on Agency RIF and Reorganization Plans Requested by Implementing The President’s “Department of Government Efficiency” Workforce Optimization Initiative (Feb. 26, 2025) https://www.opm.gov/policy-data-oversight/latest-memos/guidance-on-agency-rif-and-reorganization-plans-requested-by-implementing-the-president-s-department-of-government-efficiency-workforce-optimization-initiative.pdf.

[10] Daniel Wilf-Townsend, Assembly-Line Plaintiffs 135 Hᴀʀᴠ. L. Rᴇᴠ. 1706, 1709 (May 2022).

[11] Id. at 1732.

[12] Id. at 1708.

[13] Jessica K. Steinberg, Colleen F. Shanahan, Anna E. Carpenter & Alyx Mark, The Democratic (Il) Legitimacy of Assembly-Line Litigation 135 Hᴀʀᴠ. L. Rᴇᴠ. 359, https://harvardlawreview.org/forum/no-volume/the-democratic-illegitimacy-of-assembly-line-litigation/.

[14] Scott Fulford & Éva Nagypál, Office of Research blog: Who gets sued in civil courts? Civil judgments are not evenly distributed,  Cᴏɴsᴜᴍᴇʀ Fɪɴ. Pʀᴏᴛ. Bᴜʀᴇᴀᴜ (Apr. 26, 2023), https://www.consumerfinance.gov/about-us/blog/office-of-research-who-gets-sued-in-civil-courts-civil-judgments-are-not-evenly-distributed/, [https://perma.cc/2AXR-WG7Q].

[15] Wilf-Townsend, supra note 10 at 1717.

[16] Id. at 1717.

[17] Id. at 1749.

[18] Kathryn Young & Katie Billings, An Intersectional Examination of U.S. Civil Justice Problems 2023 Uᴛᴀʜ L. Rᴇᴠ. 487 (2023).

[19] Wilf-Townsend, supra note 10, at 1745.

[20]  Fulford & Nagypál, supra note 14.

[21] Wilf-Townsend, supra note 10.

[22] CFPB Uncovers Illegal Practices Across Student Loan Refinancing, Servicing, and Debt Collection, Cᴏɴsᴜᴍᴇʀ Fɪɴ. Pʀᴏᴛ. Bᴜʀᴇᴀᴜ (Dec. 16, 2024). https://www.consumerfinance.gov/about-us/newsroom/cfpb-uncovers-illegal-practices-across-student-loan-refinancing-servicing-and-debt-collection/ [https://perma.cc/B7TQ-UGP6].

[23] The CFPB Protects People From Abusive Debt Collection Practices, Nᴀᴛ’ʟ Cᴏɴsᴜᴍᴇʀ L. Cᴛʀ. (Jan. 29, 2025) https://www.nclc.org/resources/the-cfpb-protects-people-from-abusive-debt-collection-practices/#:~:text=The%20Consumer%20Financial%20Protection%20Bureau,illegal%20collection%20of%20such%20fees [ https://perma.cc/LCG3-NUKG].

[24] Consumer Financial Protection Bureau, Blog, https://www.consumerfinance.gov/about-us/blog/ [https://perma.cc/3F9T-H9JJ].   

[25] Jessica Merritt, Should You Be Worried About the CFPB Halt? Here’s What It Means for Banking, Us Nᴇᴡs (Feb. 12, 2025) https://www.usnews.com/banking/articles/should-you-be-worried-about-the-cfpb-halt.

[26] CFPB Targets Unfair Discrimination in Consumer Finance, Cᴏɴsᴜᴍᴇʀ Fɪɴ. Pʀᴏᴛ. Bᴜʀᴇᴀᴜ  (Mar. 16, 2022), https://www.consumerfinance.gov/about-us/newsroom/cfpb-targets-unfair-discrimination-in-consumer-finance/ [https://perma.cc/Y5VC-L7S6].

[27] Id.  

[28] CFPB to distribute nearly $6 million to consumers harmed by predatory loans to veterans, Cᴏɴsᴜᴍᴇʀ Fɪɴ. Pʀᴏᴛ. Bᴜʀᴇᴀᴜ (Jan. 2, 2024), https://www.consumerfinance.gov/about-us/blog/cfpb-to-distribute-nearly-6-million-to-consumers-harmed-by-predatory-loans-to-veterans/ [https://perma.cc/G5Q4-6NT7].

[29] Id.

[30] Authority to States to Enforce the Consumer Financial Protection Act of 2010, 87 Fed. Reg. 31940 (May 26, 2022) (to be codified at 12 C.F.R. ch. X), https://www.federalregister.gov/documents/2022/05/26/2022-11356/authority-of-states-to-enforce-the-consumer-financial-protection-act-of-2010#:~:text=I.-,Background,their%20own%20Bureau%20enforcement%20authority [https://perma.cc/44GP-5664].

[31] Richard M. Alexander, Robert C. Azarow, William Hallett Efron, Michael A. Mancusi, Meredith Osborn, Kevin M. Toomey, Christopher L. Allen, Anthony Raglani, Kara Ramsey & George Eichelberger, Trump Administration Seeks to Dismantle the CFPB Amid Legal Challenges, Aʀɴᴏʟᴅ & Pᴏʀᴛᴇʀ  (Feb. 18, 2025), https://www.arnoldporter.com/en/perspectives/advisories/2025/02/trump-administration-seeks-to-dismantle-cfpb [https://perma.cc/B2WU-VZT7].