How America’s Consumer Watchdog Became a Corporate Protector

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1:38Bloomberg Audio Studios. Podcasts. Radio. News. One of the first signs that the U.S. Consumer Financial Protection Bureau had a target on its back, came in the form of an emoji. If we go back about a year when Elon Musk was leading the Doge effort, he, in early February, deployed a couple of people to CFPB and tweeted out famously a post that said CFPB RIP, and then he put a tombstone emoji. — Noah Buhair is an investigative data reporter for Bloomberg News. He's been tracking developments at the CFPB, the federal agency that's tasked with enforcing consumer protections. — What happened is that very same night that that tweet went out, Trump installed Russell Vogt, his budget director, as the acting director of CFPB.

2:38And it's really been Vogt over the past year who's led this charge to overhaul the CFPB. Vogt's early plans to slash the CFPB staff by 90 percent were blocked by a federal judge. But a Bloomberg News investigation found that over the last 15 months, Vogt has overhauled the agency in other ways. He's sidelined the agency's attorneys, dismantled key regulations, and scrapped efforts to hold some of the country's most powerful financial institutions to account. NOAA and Bloomberg investigative data reporter Coulter-Jones found that since vote took over, the CFPB has abandoned dozens of settlements and lawsuits brought under past administrations and cut the number of open investigations in half.

3:28Our reporting really sort of focused on enforcement, what financial institutions were under scrutiny, maybe facing enforcement action, and what happened to those cases. And effectively, since the beginning of last year, that work came to a screeching halt. That's meant some of the country's biggest businesses have managed to avoid the consequences of their alleged wrongdoing. There's a lot of money that could have been returned to consumers that isn't going to happen now.

4:02I'm Sarah Holder, and this is The Big Take from Bloomberg News. Today on the show, how a key federal agency went from America's consumer protector to corporate protector.

4:17Noah, let's go back to the beginning of the Consumer Financial Protection Bureau. When was the agency created, and what was it supposed to do? So the CFPB was created by Congress as part of the 2010 Dodd-Frank Act, which was in response to the 2008 financial crisis and the mortgage meltdown that led to the Great Recession. And a lot of what Congress was trying to do is consolidate enforcement and supervision of the financial services industry, especially when it came to consumer products, under one federal regulator. Because prior to that, you sort of had this balkanized system where different federal regulators were in charge of different aspects of regulating consumer finance.

5:05So one of the CFPB's central roles is enforcing consumer finance regulation. The agency investigates and brings cases against financial institutions that it believes are violating the law. Coulter, since Russell Vogt took over the CFPB last year, what's changed about that enforcement work? Effectively, since the beginning of last year, that work came to a screeching halt. People went home. They haven't been working on those cases. If they were mid-investigation, the investigation effectively stopped. And a lot of those cases are enforcement actions that were either agreed upon with companies or were maybe in the middle of court cases.

5:48And a lot of those cases have been dropped or reversed. Coulter walked me through one of these cases, one the CFPB had been pursuing years before vote took over. It was against a financing branch of Toyota called Toyota Motor Credit, which sells insurance and maintenance plans to people buying cars. In complaints to the CFPB, consumers reported that salespeople had duped them into buying unwanted plants, which could add as much as$2 ,500 to the purchase price of their cars. There was a number you'd call and you had to try and, you know, cancel and jump through all these hoops. It sounds familiar, a familiar frustration that consumers might have.

6:31Yeah, I think anyone who's ever bought a car has sort of gone through the add-on process and then you're wondering, like, why am I paying for this thing? The CFPB alleged that when customers called to get out of their contracts, they'd reach something called a retention hotline. Then they'd have to ask to cancel three times before the company would inform them that they could only do so in writing. The Bureau alleged that Toyota Motor Credit had unfairly and abusively made it unreasonably difficult for consumers to cancel unwanted add-ons, among other alleged violations of the Consumer Financial Protection Act.

7:07The company didn't admit to any of the CFPB's allegations, but it did agree to a settlement. The company agrees to this consent order, which involves a monetary settlement and payments to customers. A refund of$48 million to affected customers and a$12 million fine.

7:30But after Toyota signed the settlement, Vought took over the CFPB. In our reporting, one of the things we were able to discover were internal emails from outside lobbyists and others sort of trying to talk to those at the CFPB. And in this particular case, a lobbyist, Dennis Potter, who had worked with Russell Vote, sends this incredibly friendly email to his friend. It's essentially asking, hey, what's going on with this case? And he follows up several times, even to the point when he's saying, like, there's some deadlines that are coming up. And that is when Toyota is likely having to make payments to customers.

8:09Does Russell Vote respond to Dennis Potter? We do not see any direct correspondence from Russell Vote. But people who worked under Vote sort of correspond and say that you should be talking to these other individuals about the case. We also know that executives from Toyota met with people at the CFPB right around the time when the consent order is dropped in reverse. Yeah. And I think that's a key point, too, because these aren't just necessarily fines that the company's paying. This is actually money that will go back to consumers who have been, you know, harmed in some form. So people would actually receive checks in the mail.

8:45There are real Americans who would have received money out of these cases. And what did the CFPB say about why this Toyota case ended up the way it did? Broadly, CFPB's point about casework that was done under prior leadership is that the agency was overreaching. They were using the law in ways that they shouldn't have been. In the specific case of Toyota, CFPB told us that this was an effort to go after auto dealers who CFPB does not have the right to regulate under Congress. But I think it's important to note at the same time that this settlement was not against any auto dealer in particular.

9:33It was against a division of Toyota that provides financing. And what did this financing arm of Toyota say? So Toyota did not directly respond to our questions about these emails, about sort of the particulars of the case. They largely said that, you know, they're happy to comply with the law and work with the CFPB, and we're happy to see the consent order reversed. And I just want to underscore one thing here. This was a legal settlement Toyota had agreed to. They had actually signed a document saying that they were going to agree to this consent order. And subsequently, they worked to get it reversed.

10:21In our understanding, this was highly rare. This was not something the CFPB did normally, though it was not unique to Toyota. Public filings show that the Toyota case was one of more than three dozen settlements and lawsuits that the CFPB abandoned over the past 15 months. Those included a settlement with a major credit union for allegedly charging egregious overdraft fees. Big banks also got out of a lawsuit that accused them of failing to protect consumers from scams. The thing that is really sort of shocking to people who follow the law are seeing the cases that are in court dismissed with prejudice.

11:03This is a legal term that means effectively they will not bring these particular charges ever again. In certain ways, it immunizes businesses from future litigation over this conduct. We found in at least 17 instances over the past year, ongoing litigation was dismissed with prejudice by the CFPB under Russell Vogt. It's interesting because Vogt, when he took over the CFPB and throughout his time there, he's talked about looking out for the little guy, right? Protecting mom and pop lenders and small financial institutions from what he sees as government overreach. But what did you find about what proportion of canceled settlements or lawsuits favored big companies?

11:49When we reviewed all these cases that had been reversed, we found that two-thirds involved companies making more than$500 million annually. That tally includes the revenue of the parent companies of the firms involved in these cases. And a third involved cases with companies in S &P 500s. These are not what the typical consumer would call a mom-and-pop operation. Noah and Coulter found that even when the cases abandoned by the CFPB involved mid-sized companies, those existing somewhere between the Fortune 500 and the mom-and-pop shops, the businesses were often backed by large financial institutions or had links to people in Trump's administration and orbit.

12:33A fintech firm backed by the venture capital firm of Trump megadonor Marc Andreessen had a penalty reduced by 98 percent. Brad Bondi, the brother of former Attorney General Pam Bondi, saw a lawsuit against one of his clients dismissed. And a business that added Donald Trump Jr. to its board after the 2024 election also had an ongoing investigation closed. So what do those cases tell you about the CFPB under Russ' vote? Well, I think they all call into question how justice and how enforcement is being meted out. And whether it's as simple as knowing who to call in the administration, who your connection is, the question at least is raised from our reporting of, is it who you know, you know, not necessarily what happened in these cases.

13:28What the gutting of the CFPB means for consumers. That's next.

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14:14So I want to talk about how this pullback in enforcement at CFPB has impacted consumers. In the most direct sense, what have the financial stakes been across the cases you've tracked? Like, how much money have companies gotten to keep that might have ended up in the wallets of consumers who made claims against them? We can draw a direct line to consumers missing out on promised refunds. Bloomberg's investigation found that the agency's decisions meant businesses could pocket millions that they'd already agreed to refund consumers. It's important to know, though, that that is very much the lower bound.

14:52Because what also happened were 17 lawsuits that were ongoing were dismissed with prejudice. The CFPB can no longer bring those cases again. And if you look at the allegations in those cases, they alleged billions of dollars in consumer harm. So we don't know an exact number of how much consumers would have gotten from those cases had CFP been successful. But it's 17 cases, so presumably they would have been successful in some of them. and that there would have been some sort of monetary relief provided to average people because of the conduct that the agency was alleging. I'm wondering what that means from a long-term perspective, too.

15:40You know, the CFPB is supposed to protect consumers from essentially getting taken advantage of by financial institutions. And if the CFPB is no longer enforcing some of these protections or is selectively enforcing them or is going back on decisions that previous administrations have made, does that open the door to future harm for consumers? I think that is exactly the question going forward is what cases are not being picked up and what type of practices are not being monitored in some form. This is particularly true of sort of non-bank lenders, where the CFPB is really, was acting as the primary enforcement and sort of supervision and oversight of those, as opposed to like a Wells Fargo or a big bank that might have, you know, the FDIC or another, the OCC.

16:29When we talk to enforcement attorneys, the big question they have is, why would anyone, you know, stop their practices? Our investigations, you know, were basically put on hold and we have no teeth in enforcement. And a lot of these cases also are supposed to send a message to the market or to other businesses in that space, right? There's supposed to be a ripple effect, at least that's the belief of these enforcement attorneys, to the other businesses in that space. You know, that every case sort of is not just about that one company, but what it says about the market overall. One thing that our reporting really does add to the public knowledge is the way in which companies capitalized on the change of leadership at CFPB to advance arguments that they should no longer be subject to existing settlements and that the lawsuits that were filed against them were examples of overreach.

17:28And we've seen that in statement after statement from companies when they've had these legal matters dismissed. They've used the opportunity to say that these were wrongful enforcement actions. And in a certain way, they've used it to vindicate themselves and try and clear their names. Are there any backstops to the CFPB? Are there any other bodies that could hold it to account for following through on settlements or taking enforcement actions? Well, I mean, Congress created the CFPB and should be oversight on some of these matters. And we've seen Elizabeth Warren, who helped create the CFPB. She has been very active in sort of requesting oversight and asking for information from the Bureau.

18:18But ultimately, what we're looking at, if the CFPB is not acting in this space, it's ultimately going to fall to the states. And that's what we're already seeing. We're seeing some states, you know, maybe like a New York or somewhere where there's a more active consumer protection from the attorney general's office. In other states, it's not. And the thought is the backstop is going to be an uneven set of enforcement and regulation. Depending on where you live, you may have better consumer protection in these cases. One very important point to underscore in our reporting is that when it comes to enforcement, the director of the CFPB has really wide latitude to decide what cases to pursue, whether to continue pursuing them.

19:02And the CFPB sent us a lengthy response, both to specific cases and more broadly about the findings of our reporting. And one of their broad points was that they are responding to what they saw as overreach by the prior administration. And what CFPB responded to us for this story is that the agency needs to work within the four corners of the law. And it saw a lot of those actions as operating outside of that authority. And because the director, the acting director, has pretty widespread authority to determine what enforcement actions to bring and how to dispose of them, we've seen Russell Vogt really impose his vision on the enforcement docket in a very striking way.

20:00I'm wondering, Noah and Coulter, what you see as coming next for the CFPB, because obviously there are a few more years left of the Trump administration. Russell Vote has proposed a new staffing plan that would call for an 80 percent reduction in enforcement staff and an overall cut of two thirds of the workforce. What would happen if that went through? If Russell Vogt's plan were to go through as proposed, it's effectively ending enforcement. I mean, that staffing level is shrunk down to the point where the types of cases that are brought forward would just be very difficult with that number of people.

20:38There's no way that that number of staff can bring any, you know, substantive type cases going forward.

20:54This is The Big Take from Bloomberg News. I'm Sarah Holder. To get more from The Big Take and unlimited access to all of Bloomberg.com, subscribe today at Bloomberg.com slash podcast offer. If you liked this episode, make sure to subscribe and review The Big Take wherever you listen to podcasts. It helps people find the show. Thanks for listening. We'll be back tomorrow.

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