CFPB Director Dismissed as Republicans Seek to Shut Off Agency’s Funding
Written By: Joel Palmer, Op-Ed Writer
Within days of the introduction of legislation to defund the Consumer Financial Protection Bureau (CFPB), the agency’s director was let go by President Donald Trump.
Neither action was surprising to those paying attention to the new administration or the Republican-controlled Congress.
The agency has been a point of contention in Congress since it was formed as part of Dodd-Frank in 2010. It was created in the aftermath of the 2008 financial crisis to overhaul financial regulation and to bring transparency to consumers, especially as it relates to mortgages and credit cards.
The constitutionality of the bureau was called into question in 2014 after then CFPB Director Richard Cordray, appointed by President Obama, levied a nine-figure fine against mortgage giant PHH Corp. The company argued that the CFPB’s governing structure violated the U.S. Constitution because it’s headed by a single director who has a fixed term and can only be removed by the President for cause. Furthermore, the bureau is not funded by Congressional appropriation but rather through the operating budget of the Federal Reserve system.
At the time of its formation, Republicans demanded the agency be governed by a five-person board instead of a single director and have its budget appropriated by Congress. Instead, Obama used a recess appointment to install Cordray as director for a five-year term.
During his first term, the Trump Administration’s Department of Justice filed an amicus brief asking the court to rule the CFPB’s leadership structure unconstitutional.
Last week, Sen. Ted Cruz (R-Texas) introduced the Defund the CFPB Act, which, if signed into law, could spell the end of the agency.
“The CFPB is an unelected, unaccountable bureaucratic agency that has imposed burdensome and harmful regulations on American businesses, banks, and credit unions,” Cruz said in a
The bill is co-sponsored by Sens. John Barrasso (R-Wyo.), Rick Scott (R-Fla.), Steve Daines (R-Mont.), Marsha Blackburn (R-Tenn.), Mike Rounds (R-S.D.), and Mike Lee (R-Utah). Rep. Keith Self (R-Texas) introduced companion legislation in the House of Representatives.
Over the weekend, Rohit Chopra was removed from his post as CFPB director. He was one of the key figures who helped launch the agency.
Chopra was appointed to the post by President Joe Biden shortly after Biden took office in 2021. Unlike some government posts that presidents can fill or replace at any time, the law governing the CFPB established five-year terms. Therefore, Chopra could have served another year before Trump appointed a new director. But the outgoing director publicly stated he would leave the job if Trump asked.
In a letter posted on his X account, Chopra seemingly warned against efforts to abolish the bureau.
“The global financial crisis that erupted in 2008 didn't just destroy trillions of dollars of family wealth. It also made Americans question whether regulators and law enforcement would hold companies and their executives accountable for their mismanagement or wrongdoing. Instead, many of the companies responsible for crashing our economy got bigger and more powerful -
with the help of taxpayer money,” Chopra wrote.
“That's what agencies like the CFPB work to fix: to make sure that the laws of our land aren't just words on a page. Those laws are intended to check the enormous influence that powerful firms have over our daily lives. With so much power concentrated in the hands of a few, agencies like the CFPB have never been more critical.”
About the Author
As an NAMP® Opinion Editorial Contributor, Joel Palmer is a freelance writer who spent 10 years as a business and financial reporter and another 10 years in marketing for the insurance and financial services industries. He regularly writes about the mortgage industry, as well as residential and commercial real estate, investments, and retirement income planning. He has also ghostwritten books on starting a business, marketing, and retirement income planning.
