The Consumer Financial Protection Bureau (CFPB), once a formidable watchdog for American consumers, has undergone a significant transformation under the leadership of Russell Vought. This shift has sparked debates about the bureau’s effectiveness and its role in protecting consumers from financial missteps by companies.
In mid-July, Vought testified before Congress, highlighting the bureau’s new collaborative approach with financial companies. This change comes after Vought’s initial attempts to dismantle the CFPB were thwarted by federal courts. The new strategy focuses on deregulation and a more industry-friendly stance, a stark contrast to the bureau’s previous aggressive enforcement tactics.
Bilt’s Stumbles and the CFPB’s Response
The CFPB’s new approach faced its first major test with Bilt, a buzzy startup offering credit cards for rent and mortgage payments. In early 2024, Bilt experienced a rocky transition, leading to confusion and financial stress for its customers. The CFPB’s response was notably different from its past actions. Instead of deploying examiners or issuing subpoenas, the bureau took Bilt’s assurances at face value and posted a feel-good statement on its website.
However, two weeks after Vought’s testimony, Bilt faced another fiasco. Customers received mistaken debt collection notices, leading to a drop in credit scores. The CFPB was notably absent in this second incident, raising questions about the effectiveness of its new strategy. Current and former CFPB officials suggest that the bureau could have caught these issues had it followed its previous playbook.
The Bilt Phenomenon: A Startup’s Rise and Challenges
Bilt, founded in 2021, has quickly become a hotspot in the personal finance industry. With 7 million customers and nearly $1 billion in venture capital investments, Bilt’s valuation stands at an impressive $10.75 billion. Investors include private equity giant Blackstone and the Ontario Teachers’ Pension Plan. Bilt’s co-founder, Ankur Jain, has seen his wealth soar to an estimated $3.4 billion,
Despite its success, Bilt has faced significant challenges. In February, the startup relaunched its credit cards with new financial partners, but the rollout was plagued with issues. Customers reported late payments, double charges, and frozen cards. Bilt’s customer support struggled to keep up with the influx of complaints, leading to widespread frustration among users.
The CFPB’s Changing Landscape
The CFPB’s traditional approach involved two tracks: supervision and enforcement. Supervision involved periodic visits to financial institutions to ensure compliance with the law, while enforcement involved lawsuits or consent decrees against companies that allegedly broke the law. Under Vought’s leadership, the bureau has taken a different tack, relying more on political aides and less on nonpartisan career executives.
Current CFPB staffers have reported a significant reduction in policy attorneys and examiners’ access to primary source data. The bureau has also dismissed or resolved dozens of cases brought during previous administrations, bringing just one enforcement action since Trump took office. This lighter touch has raised concerns about the bureau’s ability to protect consumers effectively.
The CFPB’s handling of the Bilt incidents has been particularly alarming. The bureau did not open an investigation or conduct a root-cause analysis, instead issuing a press release that appeared to provide ‘air cover’ for the company. This approach has been criticized by consumer advocates and former CFPB officials, who view it as a deregulatory mindset similar to that of Ronald Reagan’s presidency.
As the CFPB continues to evolve under Vought’s leadership, the debate over its effectiveness in protecting consumers rages on. The Bilt incidents serve as a stark reminder of the potential consequences of a softer approach to consumer protection.
