Exclusive: Waters presses big banks on CFPB oversight gap

Bloomberg News

WASHINGTON — House Financial Services Committee ranking member Rep. Maxine Waters, D-Calif., sent a letter to a pair of bank trade associations representing large banks asking whether they have initiated any internal compliance changes in response to the dismantling of the Consumer Financial Protection Bureau. 

"Given the unlawful and unconstitutional actions of the Trump Administration to force the Consumer Financial Protection Bureau (CFPB) staff to stop all work, including supervising the largest banks for compliance with consumer financial protection laws, there are no financial cops on the beat supervising national banks for consumer compliance," Waters said. "Furthermore, CFPB staff have been ordered not to finalize any pending litigation, several of which involve cases alleging wrongdoing by some of your member banks." 

The Trump administration's effective shuttering of the CFPB has caused outrage among Democratic lawmakers, consumer groups and federal workers in Washington. The bureau, which was created via legislation, can only be eliminated by an act of Congress, but the bureau's offices have been closed and its employees placed on administrative leave for weeks on the orders of acting Director and Office of Management and Budget Director Russell Vought. 

The Department of Justice said in a court filing Monday that the administration will not seek to terminate the bureau, but instead said that it closed its offices and placed its workers on administrative leave in response to a rally at the bureau headquarters. However that rally, attended by many Democratic lawmakers including Waters, occurred after the bureau was effectively closed.

The Bank Policy Institute, in a statement to American Banker, said that banks are "well-regulated and dedicate significant resources to safeguarding their customers." 

"In addition to the CFPB, regulators such as the Federal Reserve, OCC and FDIC continue to layer on duplicative consumer compliance examinations," the group said. "This overlap has led to an unnecessarily complex regulatory environment for banks without additional benefits to consumers. To enhance consumer protection, it is imperative to streamline regulations for well-regulated banks and require nonbank financial services providers, who currently operate with minimal oversight, to be subject to the same supervisory efforts."

The Financial Services Forum had similar sentiments. "The nation's leading banks are highly regulated and deeply committed to servicing consumers in a safe and fair manner. Banks are accountable to and examined by several regulators for compliance with consumer protection laws. We have received the letter and will respond."

Federal Reserve Chairman Jerome Powell said earlier this month in a Senate Banking Committee hearing in response to questions from the panel's ranking member Sen. Elizabeth Warren, D-Mass., that there is currently no federal regulator examining large banks for consumer compliance.  While the Fed can enforce antidiscrimination and consumer protection laws against all the entities it supervises, it only has examination teams for banks with less than $10 billion of assets.

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"Consumers should enjoy equal treatment and protection under the law. Given the Trump Administration's reckless decision to try to go around Congress to unilaterally 'delete' the CFPB, however, they have created an unlevel playing field where community banks and credit unions are being scrutinized for consumer compliance while megabanks are not," Waters said in the letter, shared with American Banker. 

Waters sent the letters to the Financial Services Forum, which represents the largest banks, and the Bank Policy Institute, whose membership roster includes large and regional institutions. Waters asked the groups to provide information on whether member banks have reduced the number of employees handling consumer compliance, if any of the banks had submitted tips to the CFPB's tip line to identify whether the CFPB enforcement or supervision staff complied with the stop-work order, whether the banks have pending litigation dismissed and other details on how the banks are handling consumer compliance. 

Waters also asked if the trade groups or the banks are considering legal action to make sure that sensitive data, including supervisory confidential information, about the banks providing payment services isn't shared with White House advisor and ostensible leader of the Department of Government Efficiency Elon Musk in light of the billionaire's plans with X Money, a payments service tied to Musk's social media platform. 

"No one has been able to independently verify what information they've got and what they've done with that information," Warren told American Banker earlier this month regarding DOGE's access to the CFPB's data. "This is a kind of conflict that we have literally never seen at the federal government level."