Delete the CFPB? No. Refresh it Instead

Mike G. Silver is a partner at Husch Blackwell in their Consumer Financial Services practice who joined the firm one year ago today. He previously served more than 12 years at the Consumer Financial Protection Bureau (CFPB). There, Mike played key role in building and growing the agency and drafting numerous rules and guidance, including two Dodd-Frank mortgage rules, the 2017 small-dollar lending rule, and the abusiveness policy statements. Mike leverages his CFPB insider experience and a breadth of consumer finance law expertise to help established and emerging companies navigate the labyrinths of federal and state regulatory regimes and the CFPB’s evolving agenda.

Can a federal agency be “deleted”?

This is the question facing the Consumer Financial Protection Bureau (CFPB). The 13-year-old agency has weathered many legal and political controversies in its brief life, including two constitutional challenges at the Supreme Court. After the last case against it failed,^[1] many (including me) believed that the existential threat had abated.

But elections have consequences. Director Rohit Chopra was relieved of his post on February 1st,^[2] with Treasury Secretary Scott Bessent being named acting CFPB director two days later. And now, Elon Musk is wielding wide policy influence through the Department of Government Efficiency (DOGE), and arguing for a radical agency restructure.

I served in the CFPB’s regulations office from September 2011 to February 2024. In 12+ years, working under six directors and three Presidents, I saw it all. I passionately believe in the CFPB’s mission and have enormous respect for agency career staff.

It is from this perspective that I say: absolutely do not delete the agency. But please refresh it. 

Agency Capture, But Not What You Expect 

As I argued in another publication last year, the CFPB needs to grow up.^[3] To paraphrase President Reagan’s famous quip when debating Walter Mondale, we shouldn’t hold the CFPB’s youth and inexperience against it.

At the same time, the macro political environment has nurtured a dogmatic debate between those on the left who think the CFPB is infallible (but only under Democratic-appointed leadership), and those on the right who think it is illegitimate (but not under Republican-appointed leadership). This split is evident in the immediate aftermath of Chopra’s firing, with the hot takes falling along hardened and predictable lines.^[4]

The CFPB can and should be a technocratic agency that seeks balance in advancing its mission – a notion that eludes the partisans. But it’s too young to have developed the institutional guardrails and processes to insulate itself and its work from political pressures.

This vulnerability renders it susceptible to capture. 

Dodd-Frank’s drafters set up the CFPB to avoid industry capture. Hence the no-appropriations, only-fire-the-director-for-cause setup that has caused such consternation among critics. The explicit premise was that the prudential regulators were lulled to sleep at the wheel in the mid-2000s by the very banks they were meant to regulate and let mortgage-backed securities, collateralized debt obligations, and other exotic products metastasize into a worldwide financial crisis. A truly independent regulator – the CFPB – was the cure. 

The implied premise was that the CFPB would be allied with consumers – but also with interest groups considered proxies for consumers (consumer advocacy organizations, legal aid attorneys, progressive attorneys general). In other words, the CFPB would be subject to the right kind of capture. 

This principle, however, is discordant with the CFPB’s structure, statutory authorities, and day-to-day responsibilities as an independent regulator. Even after Dodd-Frank, consumer protection and bank regulation in the United States remains a giant Venn diagram of overlapping authorities and jurisdictions at both the federal and state level. The CFPB has primary supervisory authority over very large banks and certain nonbanks, but not small or mid-sized banks. The CFPB only has supervisory authority over some nonbanks, but has the power to expand that perimeter through larger participant rules. Moreover, a laundry list of exclusions in Dodd-Frank proscribe the CFPB from doing things like regulating auto dealers and setting usury limits. 

It is also important to remember that under Dodd-Frank, the CFPB has a heterodox mandate. Its statutory purposes include protecting consumers from unfair, deceptive, and abusive acts or practices (UDAAPs) and discrimination – but also facilitating credit access and innovation, providing more timely and understandable information about transactions, ensuring a level playing field among banks and nonbanks, and reducing unwarranted regulations.^[5]

Consumer protection can and should animate all aspects of the agency’s work. But the CFPB needs to balance these imperatives in a way that leads to legally defensible, practical, and durable policies – and that cements the legitimacy of the agency itself. 

“There Goes My Hero. Watch Him as He Goes”

In a recent speech at University of Michigan (delivered in a personal capacity), CFPB’s General Counsel called consumer and worker advocates, legal aid attorneys, and government workers his “heroes.” These heroes face off against “the zealots and extremists who weaponize the law in support of their political ideology, and the many more lawyers who enable them.”

From my pro bono work with the DC Legal Aid Society, I can attest to legal aid attorneys possessing selflessness, wicked smarts, and the willingness to fight any battle to benefit the less fortunate.

At the same time, is it really appropriate for any regulator to be lavishing praise on these individuals while trashing their industry counterparts? Or to intersperse these remarks with a denunciation of conservative judges and bank lobbyists for abusing administrative law? The Administrative Procedure Act (APA) gives everyone a seat at the table, not just the CFPB General Counsel’s allies.

A speech like this only validates the criticisms that the CFPB in recent years has put a thumb heavily on the scale in favor of one set of stakeholders. Combined with other actions, it is hard not to draw an inference that regulatory capture from the other side was at play. The CFPB’s No-Action Letter policy changes, bizarrely issued just days before Inauguration Day after two years of dormancy, and without notice and comment, are a prime example. In addition to numerous poison pill conditions (e.g., even small startups must consent to CFPB supervision), it bans ex-CFPB lawyers from applying on behalf of applicants for life.^[6] These changes dovetail with consumer groups’ long-standing criticisms of the 2019 NAL policy – which, it should be noted, did go through notice and comment. 

Incentives That Would Make Malcolm Gladwell Proud

I don’t fault the CFPB or its leadership for its actions or words under President Biden. They were just operating under the incentive structure set up for them by the Supreme Court in Seila Law.^[7] By limiting some of the CFPB’s independence by making the Director fireable by the President for any reason, the Court also put the agency on a perpetual four-year political clock. Agency leaders lose control of anything that runs into the next administration, such as the 2017 payday rule. To avoid this possibility, they have every reason to use more expedient means to advance the agenda of the day – as the CFPB did in recent years by “rethinking” long-term rulemakings and, instead, releasing a plethora of non-rulemaking guidance deliverables and liberally using the “bully pulpit” through speeches, press releases, tweets, and other tools.

Don’t hate the player, hate the game, right?

Director Chopra can take credit for using his perch to convince the largest banks to lower overdraft and NSF fees, and the credit bureaus to remove medical debt from their reports, even before the CFPB tried to lock in those changes through rulemaking. And the CFPB extended its reach through releasing a seemingly never-ending barrage of deliverables, accelerating after the election to such a crescendo that I expected a press release to include the line “Say Hello to My Little Friend!” 

“I Coulda Been a Contender”

We now see what CFPB leadership can accomplish when they have a clear vision of what they want to achieve during a finite time period, doggedness and creativity in executing it, and fearlessness about taking on legal risks. 

This zero-sum approach to consumer protection, like devouring a giant bag of Cheetos, may feel good for a moment. It generates headlines, attaboys from allies, and the perception that the agency is flexing its muscles and helping consumers in more ways than ever before. 

But then, the acid reflux and remorse set in. It produces short-term wins that are fleeting. It frames advancement of policy goals through a “perfect is the enemy of the good” lens. And it damages the CFPBs long-term credibility and ability to mature as an institution.

Furthermore, while the zero-sum approach is not a one-way ticket to Palookaville—the CFPB still commands attention – it deepens politicization. Prior CFPB leadership’s actions have set a precedent for the next leadership to utilize the same tactics or worse; treat even legitimate deliverables during the past four years as illegitimate; and pursue its own short-term focused goals that benefit neither consumers nor industry, nor the agency itself. 

Call me a radical centrist, but I think pursuing targeted policy improvements that will be sustainable – by seeking consensus where possible and not demonizing those with different views, and by developing a solid evidentiary record – work best for both advancing consumer protection objectives and enhancing the agency’s legitimacy in the long run.^[8] Most folks working in financial services are not bad people. They just want to know what rules to follow and consistency in how those rules are implemented and enforced. In fact, many of them get angry that the CFPB doesn’t do more to enforce its rules against their competitors. 

The process may take a while and get messy, and nobody may be fully happy with the outcome. But it will be worth it to return the CFPB to its early years, where, with a few exceptions, we focused on solving complex problems through long-term rulemakings and the policy outcomes were nuanced and sometimes idiosyncratic. And the CFPB should use guidance judiciously and when warranted, not as a substitute for legislative rules.^[9]

Time for a Refresh

CFPB’s Biden-era leadership swam with Seila Law’s tide to reach the shores of a more politicized agency, rather than fighting for the less partisan and more lasting institution that Dodd-Frank created and consumers and industry need. It’s my fervent hope that the new administration will resist the same temptation. They should approach their task with a scalpel rather than a saw. They can count on the help of agency career staff, who are consummate professionals with enormous expertise and institutional knowledge, not deep staters.

So no, Mr. Musk, do not delete the CFPB. The agency has been a resounding success for consumers and deserves a chance to grow up and flourish. It just needs to get on a more sensible path.

It needs a refresh.

The opinions shared in this article are the author’s own and do not reflect the views of any organization they are affiliated with.

^[1] CFPB v. Cmty. Fin. Serv. Ass'n of America, 601 U.S. 416 (2024). 

^[2] Counter to expectations of pretty much the entire financial services and DC political ecosystem, it took 12 days following Inauguration Day for the expected denouement of the Biden-era CFPB leadership. On the positive side, this surprising development allows me, as a Generation X New Jersey kid, to incorporate a Clerks reference.

^[3]  Note, this is behind a paywall. Unlike Open Banker, which is, well, open. Ashwin and John have feelings about paywalls.

^[4] For example, see the dueling reactions from Representative Maxine Waters and Senator Tim Scott. 

^[5] See 12 USC 5511(b). 

^[6] Remember the early 90s ads where Michael Jordan and Larry Bird played a game of H-O-R-S-E and kept hitting shots with progressively more absurd degrees of difficulty? That’s what CFPB leadership did with this provision. In one fell swoop, they somehow managed to alienate and impugn the integrity of hundreds of former employees and current staff, whom they think are so easily manipulated by former colleagues that they need extra protection from themselves. This touched a nerve on social media even among typically demure ex-CFPB attorneys. But that provision, as offensive as it is to many, is still the “shiny object” distracting from the more substantive flaws of the new policy.

^[7] Seila Law LLC v. Consumer Financial Protection Bureau, 591 U.S. 197 (2020).

^[8] By targeted, I don’t mean low-impact. There’s a misnomer that incremental change means playing small ball. If you make a series of surgical changes to existing consumer laws that cut across credit markets or that impact large institutions more than small, on net that approach will have equal or greater beneficial impacts on consumers than sweeping changes to a narrower market segment. I analogize this to the FTC Act and Dodd-Frank unfairness standard, which finds conduct to be injurious when it affects a large number of consumers in small ways or a small number of consumers in large ways.

^[9] Guidance can provide helpful clarifications to complying parties when the laws or rules are murky, and sometimes industry stakeholders have asked for it. And in my view, some of the guidance issued under prior CFPB leadership was both appropriate and defensible. They just badly overused the tool.

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