Consumer Financial Protection Bureau (CFPB), a bank inspection body created after the collapse of subprime mortgages and the 2008 global financial crisis, was launched in chaos while the Trump government works to drastically limit its operations.
Last month, CFPB workers were instructed to stop working, effectively closing the agency, although this order was challenged by a federal judge.
Although the agency – which has the task of ensuring that banks, creditors and other financial companies are fair to consumers – is severely weakened, Americans should not worry about a repetition of the subprime mortgage crisis that led to their creation, experts told the experts CNN. Creditors and banks are currently regulated more rigorously than they were in the years preceding the crisis, and Americans who borrow money are more protected.
Still, with the fragility of an agency that often acts as a security network for consumers, Americans may need to become their own advocates by dealing with creditors of all kinds.
“CFPB’s mission is to protect individuals. After the financial crisis, we saw that many people had been harmed, ”said John Griffin, finance professor at the University of Texas in Austin, who argued that unbridled fraud played a role in the financial crisis. “But I don’t think CFPB would be able to prevent another financial crisis.”
The agency, which was conceived by Democratic Senator Elizabeth Warren when she was a law professor at Harvard, was created as part of Dodd-Frank, a 2010 federal law passed on an attempt to correct the financial vulnerabilities that contributed to the global financial crisis.
Since then, CFPB has delivered US $ 19.7 billion in consumer relief, with 195 million people eligible for this relief, according to the agency.
“Estribute protections to the consumer and, at the same time, allowing financial companies to take higher risks is a dangerous combination,” Warren told a statement to CNN. “Working families cannot afford to luxury that policy formulators repeat the mistakes of the past.”
The CFPB did not respond to a positioning request on the impact of its recent changes.
Safer real estate loan market?
Buying a home is usually the largest purchase Americans make in their lives. Although it has always been important to completely understand the terms of a loan when making a mortgage, this can assume even greater importance if the CFPB is decreased.
Still, the real estate loan market is safer now than before, said Ira Rheingold, executive director of the National Association of Consumer Defenders.
“When Dodd-Frank was approved, it included the renovation of mortgages,” Rheingold said. “The types of loans that were being made and created the subprime crisis can no longer be made, because they would be violating the law.”
The 2008 real estate collapse occurred in part because banks and creditors gave risky real estate loans to people who could not pay. These mortgages were then grouped into complex financial products that collapsed when the owners began to stop paying their loans.
This scenario led to a drop in real estate prices and millions of mortgage executions.
Real estate loans that required little or no proof of income were common before 2008, but today these loans are rare, said Laurie Goodman, founder of the Urban Institute’s Housing Finance Center.
“Before the financial crisis, income was not adequately documented, you kind of accepted the word of the borrower,” she said. “Today, a loan ‘without documentation’ would be extremely strange.”
Real estate protections coded by law in the years after the financial crisis also include stricter loan standards and lighter disclosures for loan holders.
What you should know
However, the weakening of the CFPB would still remove essential protections for consumers, said Griffin.
“Estricting an organization like CFPB harms investors in minor financial transactions where they can be used,” he said. “CFPB has played an important role in providing additional inspection to combat unfair fees or abusive financial transactions.”
By hiring real estate financing, Americans should pay close attention to the terms of the loan, ensuring that there are no hidden fees or relationships. At a time when mortgage rates are around 7%, borne must search among many creditors to ensure the most favorable terms.
The agency, however, protects consumers not only from predatory loans for the purchase of real estate. Its broad purpose is to protect against financial abuse in general, including those from credit card companies, car loans and student loans.
Rheingold has recommended that consumers continue to register complaints with CFPB when they have problems with financial products or services. If the CFPB does not take immediate action, the attorney general of its state or legal services programs can still open a lawsuit against companies that adopt abusive practices, as long as consumers report the problems, he said.
Some fear that financial companies can be increasingly encouraged to engage in predatory practices such as hidden fees and unjust loan terms, although it is difficult to predict exactly what these abuses would be.
“Will we come back and make exactly the same mistakes we make in the past? Probably not. But we will make a different set of errors, ”said Goodman.
“CFPB RIP”
Last month, after Russell Voyt, an author of the 2025 project and director of Trump’s management and budget office, became interim director of CFPB, he promptly ordered agency workers to stop all tasks. After a federal judge blocked the stoppage, this order was reversed to some employees.
Under Vought, the agency recently removed execution actions against several companies accused of stealing Americans, including the capital One and Rocket Homes, a unit by the Warren Buffet Berkshire Hathaway.
Voyt said the consumer protection was “transformed into a gun” by CFPB and exceeded the agency’s legal term.
“CFPB Rip,” posted Elon Musk, who leads the Trump’s department of government efficiency, or doge) at the X last month. According to a source informed the CNNDoge obtained administrative access to internal CFPB systems.
This week, CFPB’s director of operations, Adam Martinez, witnessed in court that the involvement of Vought and Mark Paletta, an important legal consultant, led to a “slower” rhythm of decision -making that began in February.
However, Martinez also witnessed that the agency is still operating.
Matt Egan, CNN Shalton and Tierney Sneed contributed to the report.
