The Trump administration came to Washington last year seeking to shutter the Consumer Financial Protection Bureau, the watchdog agency that had survived industry anger, Republican opposition, and years of legal challenges.
A year in, a much smaller bureau is still standing and has been remade to advance the president’s political goals.
The bureau has begun to probe a class of smaller, mostly nonprofit lenders that Russell Vought, the acting director of the bureau, has characterized as unduly “woke.”
On Friday, the bureau issued guidance that could make it harder for immigrants in the country illegally to obtain mortgages and credit cards. Meanwhile, the bureau’s public website invites consumers to complain if they have been refused service — or “de-banked” — for political or religious reasons, reflecting a priority of the administration and its allies in the conservative movement and the crypto industry.
The moves represent a reorientation of an agency that had previously focused on aggressively policing larger financial institutions on behalf of ordinary consumers. Republicans and much of the financial services industry had long accused the bureau of its own brand of politicization under Democratic leadership, charging that it targeted industries and practices liberals hated.
The Trump administration says it is correcting overreach during the Biden administration. They say the CFPB, under former director Rohit Chopra, bullied businesses and individuals it viewed as political enemies, pursued questionable legal theories, and imposed costs that ultimately fell on ordinary Americans.
“We are fixing that, bringing the agency back to operating within statute and away from breaking the law, and making cases right to help small businesses and Americans who were victims of this thuggery,” a spokesperson for Vought said in a statement.
Critics say the result is a bureau that has gone easy on the powerful while training its firepower on smaller targets.
“Their first attempt was to kill the agency,” said Aaron Klein, a senior fellow at the Brookings Institution, a centrist think tank. But courts blocked the administration’s attempts to lay off almost all of its staff. Now, Klein and other critics say, Vought has found a different use for the agency.
“Rather than hold themselves to a higher standard, they seem to be committing the same political persecutions they allege happened to them,” said Klein, who served in the Obama Treasury Department.
The pivot is visible in the bureau’s recent scrutiny of community lenders — smaller banks and firms that operate in low-income rural and urban communities that are typically underserved by large Wall Street banks. In late April, the bureau’s chief legal officer, Mark Paoletta, sent questionnaires to at least four such lenders, according to people familiar with the probe. One of the questionnaires, reviewed by the Washington Post, demanded a broad swath of financial records, compliance documents, and business details.
The bureau has legal authority to send such requests for market-monitoring purposes, but the lenders are typically far too small to be subject to CFPB supervision, falling beneath a $10 billion asset threshold.
Among those targeted was Self-Help Ventures Fund, an arm of a Durham, N.C., lender with roughly $5 billion in assets. Self-Help, which traces its origins to a $77 bake sale in the early 1980s, is affiliated with the Center for Responsible Lending, a consumer advocacy group that has been a vocal opponent of the administration’s efforts to dismantle the CFPB.
Self-Help and CRL declined to comment for this article. The bureau’s interest in Self-Help has not been previously reported.
Vought — who simultaneously runs the CFPB and the White House budget office — has made no secret that he holds negative views of the community lenders in question. At a House Budget Committee hearing in April, he said they “continue to be pushing an ideology that is very harmful.”
The Trump administration has repeatedly sought to eliminate or drastically cut a federal program that funds and certifies community lenders. Bipartisan congressional majorities have rejected those efforts, but Vought has nevertheless withheld hundreds of millions of dollars Congress directed toward the program.
When asked about the community lenders probe, administration officials sought to minimize the review, saying it represents only a tiny fraction of the bureau’s overall work, and declined to discuss any of the individual targets. A spokesperson for Vought attacked the lenders, saying they had directed money to LGBTQ health clinics, a transgender-themed fashion show, and a group that, she said, had threatened violence against federal immigration officials.
The scrutiny of smaller community lenders contrasts with what the bureau has done, or stopped doing, elsewhere. Since taking office, the administration has dropped litigation and unwound settlements against some of the largest financial institutions in the country. In some cases, it halted checks that were set to go out to consumers. In other cases, it permanently gave up the right to reopen the claims against some companies in the future.
In one such case, the watchdog dropped a lawsuit, filed in the waning days of the Biden administration, against the operator of the Zelle payment-transfer network and three of its owner banks — Wells Fargo, Bank of America, and JPMorgan Chase — over allegations that customers lost nearly $1 billion to fraud on the platform.
The banks called the suit politically motivated, arguing the CFPB was stretching existing law to hold them responsible for payments customers had authorized themselves.
The Consumer Bankers Association, which represents large retail banks, said it is encouraged by the bureau’s new direction, praising its focus on “identifiable victims, measurable harm, and clear legal standards” over what it called novel legal theories.
Even if the community lenders currently under investigation had engaged in misconduct, the scale of the wrongdoing would look like a rounding error in comparison with potential misconduct by the largest financial institutions that are currently getting a pass, said Mike Pierce, who worked at the CFPB from 2011 to 2018 and is now the executive director of Protect Borrowers, a nonprofit advocacy group.
“Some of the biggest corporate bad actors in America have gotten a pass from this agency,” Pierce said. “And now it’s focused on little guys that are doing things the Trump administration finds politically unpalatable.”
Sen. Elizabeth Warren of Massachusetts, who conceived of the bureau, called the bureau’s pivot a betrayal of Trump’s own promises. “Donald Trump promised to lower costs ‘on day one,’” she said in a statement. “Instead, he’s co-opting the financial cop on the beat to rip away billions in relief for Americans scammed by giant banks and corporations and execute his extreme agenda.”
Solveig Singleton, a policy analyst at the Cato Institute, a libertarian think tank, said the administration appeared to have discovered that the bureau could be “retargeted against its political opponents,” with broad discretion that makes it easy to frame such targeting as legitimate “policy spin.”
She also warned that cutting staff could backfire because career employees facing performance pressure might well gravitate toward investigating smaller, easier targets that lack the resources to fight back.
The longer-term solution, she said, requires Congress to curb the bureau’s unchecked discretion and ensure greater accountability over federal programs.
