Scam Nation

Big financial interests have wanted to kill off the Consumer Financial Protection Bureau since the moment it opened in 2011. Yet Republicans have a more devious idea: keep the CFPB around so it looks like there is still an agency to prevent financial scams—but eliminate most of the workforce and funding. In the opening months of the second Trump presidency, Republicans launched a two-pronged attack. While the administration attempted to fire most of the agency’s employees—a move being challenged in court—Republicans in Congress passed a budget bill that calls for a 46 percent reduction in the CFPB budget, which the president signed on July 4.

The U.S. Supreme Court in a July 8 decision gave Trump the temporary go-ahead to reduce staff at nineteen federal agencies, but the CFPB is not one of them. A statement from the union representing CFPB workers asserted that the high court’s decision does not apply to their case. The United States Court of Appeals in the D.C. circuit issued a temporary halt in late April to the layoffs. That court is expected to decide soon whether the executive branch can proceed with its layoff plan.

Created by the 2010 Congress in the aftermath of the 2008 financial crisis, the CFPB was meant to regulate banks and credit card companies, as well as “nonbank entities”—outfits like mortgage lenders, car-payment lenders, debt collectors, payday lenders, and online payment platforms. These are entities that loan money but aren’t allowed to take deposits like a regular bank does for checking and savings accounts. They’re sources of cash you can turn to when you have no other options. And they’re the types of companies that can trap you in debt and take you for all you’re worth. They’re a busy group—the total amount of money they’ve attempted to grab over fourteen years, and which the CFPB returned to its rightful owners, is $21 billion.

Such an agency is an existential threat to crooks; so naturally a trade association called the Community Financial Services Association—representing payday lenders—challenged the funding of the CFPB in 2018 as unconstitutional. In a 7-2 decision, the Supreme Court ruled last year that Congress’s decision to fund the independent agency through the Federal Reserve does not violate the Constitution’s appropriations clause.

Now, however, it’s a new world under the second Trump term, and he wants to refashion the CFPB in his own image. Instead of protecting consumers, he wants to protect shady financial interests. So he appointed his director of the Office of Management and Budget, Russell Vought, as acting head of the CFPB. Vought is a coauthor of the Heritage Foundation’s infamous Project 2025 document that became a blueprint for the new administration’s defenestration of government campaign. (He is also a self-described Christian nationalist who supports a total abortion ban.) The administration then installed Clarence Thomas’s BFF Mark Paoletta as the chief legal officer of the CFPB. Working with Elon Musk’s fake “government efficiency” agency, they attempted to fire about 1,500 workers, whose case is in the hands of the U.S. Court of Appeals. Meanwhile the two hundred or so remaining employees still at the CFPB are now working to undo its previous work.

The gutted CFPB will deemphasize regulation of nonbank entities, according to a memo from Paoletta. In describing its new priorities, the memo suggested less concern about medical debt and student loans, as well as taking less interest in statistical assessments of discriminatory lending. The protection of consumer data or investigation of digital payment platforms and peer-to-peer lending will be deprioritized. Critics in Washington speculated that Musk had a direct interest in weakening financial regulations because he wants to turn X into a payment platform without the aggravation of bothersome rules or regulatory supervision.

At a protest earlier this spring outside federal buildings in downtown Manhattan, CFPB workers voiced their frustration to the small crowd that gathered, demanding their jobs back and saying they feared what would happen if they weren’t on the beat.

“There are all these different types of products where there really is going to be no one, even as a watchdog, to make sure they’re not doing these bad behaviors,” one former CFPB worker, Eileen, told me on condition that I use only her first name. “It’s open season for the worst kinds of deceivers and there’s going to be no one to catch them and stop them and give people their money back.”

Workers at the protest spoke, too, of a repeat of 2008. “The fact that we exist keeps people on their toes,” said one person who spoke with me on condition of anonymity. She said scammers have their choice of people to victimize, given how many are struggling right now. “One thing I worry about is all the predatory behavior that led to the financial crisis,” she added. 

The threat of “predatory lending,” of course, is not something well-off people worry about. Shady lenders target those who lack the cash they need for basic amenities like transportation and housing. Con artists especially target people who speak little English, are elderly, or are connected to the military, CFPB workers said. Here’s what’s coming:

• Payday lending scams. These are small loans that are extremely expensive to take out and designed to trap people in debt. A borrower uses a post-dated check or grants access to their bank account as collateral, and if they can’t pay the loan back by the due date, they must renew it—or take another loan to cover the cost. Each loan is loaded with fees, and costs around 400 percent annually, according to the State of New York, which like several other states bans payday lending. A former CFPB worker said it’s common for payday lenders to set up shop right outside army bases or veteran services offices; they target not only veterans but service workers at those facilities.

• Auto title loan scams. Lenders give out what one CFPB worker described as a “balloon loan” specifically to buy a car. The lender charges a small amount of interest every month, but then a significantly bigger amount at the end of the year. These lenders target people who speak little English and who need a car for work; they often lie when they explain the terms of the loan verbally and then require the targeted person to sign a contract in English with different terms. CFPB workers said that’s a scam to watch for generally: contracts written in English that are different from the terms described verbally in a victim’s native language.

• Subprime mortgages. Like auto loans, these exploit a basic need, this time for shelter, and are the same type of loans that caused the 2008 financial crisis. CFPB workers pointed to a case earlier this year, in which the agency sued Vanderbilt Mortgage & Finance for trapping people in high-fee loans they couldn’t afford, specifically to buy mobile homes from an affiliated company. When borrowers missed payments, Vanderbilt charged them more and in some cases took away their homes. CFPB workers noted that this scam preys on the poor and the elderly, especially in rural areas.

• Debt refinancing scams. Here, hustlers prey on people already overloaded with debt, promising to help them get out of the hole but leaving them even worse off than before. CFPB workers pointed to their 2024 case against Strategic Financial Solutions, which alleged that the company ran a network to steal $100 million from people, under the guise of providing debt relief services. They promised lawyers would renegotiate lower loan payoff amounts when customers said debt collectors were coming for them, but there were no lawyers.

• Junk fees. These are fees that get tacked onto the total price tag of a product or service, often disguised or added at the last minute, like tips, fees, interest, or “other” costs. One former CFPB worker described a scenario where these fees are hidden within what appears to be medical approval forms dental patients sign on an iPad while in the dentist’s chair. The victim thinks they’re agreeing to medical terms and services but is actually being tricked into buying add-on products. The CFPB worker noted that some fraudsters use “deceptive design” to trick people via online transactions. They don’t necessarily lie, but they intentionally mislead the victim by hiding or confusing the information. The CFPB worker said this is most egregious in the medical field, and that people with low English proficiency are at high risk. Already, Vought, the acting head of the agency, has given this gambit a boost, when he repealed rules that eliminated certain types of junk fees like overdraft charges.

After the mass layoffs, unionized CFPB workers sued on the grounds that the layoffs will prevent the agency from performing its statutory work, not to mention that there was no way an accurate assessment of the employees’ roles could have been assessed in a short period. Attorneys presented oral arguments before the U.S. Court of Appeals on May 16. The case will determine whether the administration can get away with disabling agencies that are created by Congress and that can’t legally be eliminated by the executive branch—a question that also comes up in their desire to defund the Department of Education. Though the Supreme Court has ruled that the executive branch is within its authority to set staffing levels, that doesn’t necessarily sanction the effective dismantling of an agency—thus, the administration will pretend the CFPB will be allowed to continue its work.

For now, in addition to eviscerating staff, Vought has also dropped more than half of the agency’s pending enforcement actions, dismissing or withdrawing seventeen lawsuits and three civil investigative demands. Besides repealing rules for some junk fees, he’s also repealed rules that governed digital payments platforms, and protected peoples’ sensitive information from data brokers, like Social Security numbers. Be on the lookout for scams related to all these areas, too, CFPB workers said.

The possible loss of an agency that was meant to protect financially vulnerable people, coincides with new government efforts to restart student loan payments for the people least able to pay, when there are more unhoused people in the United States than has ever been recorded, and when Republican lawmakers just set up seventeen million people to lose their health insurance in service of tax cuts for the rich and a militarized terror campaign against immigrants. These are times when people will grasp at whatever lifelines are offered, not because they’re stupid and gullible, but because as every successful Wall Street executive knows, people make financial decisions based not on logic but on emotion. Often that emotion is fear because not having enough money can be a death sentence in America. Financial predators have a heavy advantage these days, and now Congress and the White House are strengthening their hands.