Trump taps Treasury's Bessent as acting CFPB director

Bloomberg News

The Trump administration has named Treasury Secretary Scott Bessent to be acting director of the Consumer Financial Protection Bureau after firing CFPB Director Rohit Chopra over the weekend. Trump would be elevating an advocate of his 'American First' agenda to temporarily lead an agency that most Republicans want to eliminate.

CFPB Director Rohit Chopra was fired on Feb. 1. A press release posted on the CFPB's website said that Bessent was named acting director on Jan. 31.

Bessent said in the press release: "I look forward to working with the CFPB to advance President Trump's agenda to lower costs for the American people and accelerate economic growth."

President Trump waited nearly two weeks before removing Chopra because the administration was reportedly waiting for Bessent — and other possible nominees — to be confirmed by the Senate. The Federal Vacancies Reform Act requires that temporary heads of agencies can only be chosen from Senate-confirmed appointees or from top managers at the agency itself, which gave Republicans a very short list from which to choose.  

That short list included Bessent, 62, a billionaire hedge fund manager who founded Key Square Capital Management and a former chief investment officer at Soros Fund Management. Bessent was confirmed as Treasury Secretary a week ago and was sworn in on Jan. 28.

Bessent is a key advocate of extending trillions of dollars in expiring tax cuts by cutting funding to federal programs. He has said he would be open to releasing Fannie Mae and Freddie Mac from government conservatorship, one of the ways in which the Trump administration hopes to pay for re-upping the 2017 corporate tax cuts passed during Trump's first term. 

The administration is taking a page from the same playbook in Trump's first term by picking an acting CFPB director who holds two jobs at once. The first Trump administration named former Trump Chief of Staff Mick Mulvaney to lead the CFPB while he also headed the Office of Management and Budget. 

In both cases, Trump is picking a director who is expected to move quickly to freeze existing rules and enforcement actions, while also halting and starting to rescind all nonbinding interpretive rules, guidance and proposals. One of Mulvaney's first moves was to strip the agency's fair-lending office of enforcement powers, demoting the fair-lending division, which had previously been equal alongside supervision and enforcement. 

It is unclear what will happen to fair lending given the executive order Trump signed in his first week seeking to undo all diversity, equity and inclusion programs in the government, including equal employment opportunity offices. 

Several Democrats voted against Bessent's Treasury confirmation including Sen. Elizabeth Warren, D-Mass., ranking member of the Senate Banking Committee and the architect of the CFPB, citing his attitude toward financial deregulation. 

"We don't need less oversight of the giant banks and Wall Street movers and shakers," Warren said on the Senate floor. Bessent's final confirmation vote was 68-29. 

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Though the CFPB was created as an independent agency whose single director could not be fired by the president except "for cause," the Supreme Court handed the agency's opponents a victory in 2020 by ruling that the president could fire the CFPB's director at any time without cause. As a result, though the CFPB director typically is given a five-year term, the position now changes hands when a new party comes into power.

Banks are expected to cheer the change because the Trump administration wants to dramatically scale-back, if not kill the CFPB outright. Under a Trump appointee, the CFPB is expected to back off of penalties for corporate wrongdoing, provide less restitution given to consumers, and stop targeting CEOs and top executives in lawsuits and consent orders. 

The banking industry has high hopes that a Trump CFPB will rescind several rules that were finalized in the past six months under Chopra. The Consumer Bankers Association has called for an acting director to halt the CFPB's $5 overdraft fee rule, $8 credit card late fee rule and 1033 open banking rule. Multiple banking trade groups want all three rules rescinded, and the effective dates of each extended, with new watered-down rules reproposed or even dropped. It also is unclear whether a Republican director will defend the CFPB's credit card late fee rule, which is currently in litigation.  

An aggressive rollback of the CFPB's recent actions could also run counter to President Trump's populist campaign rhetoric, in which he called for a proposed 10% cap on credit card interest rates. That conflict could be especially pronounced if the administration seeks to nullify rules under the Congressional Review Act, which allows Congress to rescind major rules issued by federal agencies.

Under that law, both houses of Congress must pass a resolution nullifying a rule within a relatively tight 60 legislative day time frame, meaning vulnerable lawmakers would have to affirmatively vote on nullifying a rule, which could be difficult with Republicans' narrow three-seat majority in the House.