It is difficult to keep track of what is happening at the CFPB. It is even more challenging to understand how so much change is currently happening at the CFPB.

In this blog article, I will answer the most pressing questions collection agencies and debt buyers have about the state of the CFPB and provide the underlying rationale / explanation for the changes taking place at the agency every day.

Q1: Was the CFPB really shut down?

Yes, on February 10, 2025.

Explanation: On February 10, 2025, immediately after he was appointed Acting Director of the CFPB, Russell Vought ordered the closing of the CFPB’s Washington office, ordered a freeze on virtually all operations at the agency, confirmed all rulemaking activity will cease, ordered all supervision activity to stop (including investigations and examinations), and directed CFPB employees to cancel all engagements, meetings, and activities not otherwise required by law and to perform any mandatory work from a remote location.

Vought’s edict followed an earlier order issued by then temporary Acting Director Scott Bessent, to halt most of the agency’s work, including suspending the effective dates of all rules that have been issued but haven’t yet gone into effect.

Vought gave no indication as to how long the shutdown would last. However, it will not last indefinitely.

Q2: It appears the appointment of an Acting Director for the CFPB has been a revolving door of temporary appointments. Since the firing of Director Chopra, has a new Director of the CFPB been appointed?

The CFPB is currently under the temporary direction of Acting Director Vought. Once confirmed by the Senate, Presidential nominee Jonathan McKernan will serve as permanent Director of the CFPB.

Explanation: There has been a whirlwind of acting CFPB directors since President Trump was inaugurated on January 20, 2025. The tumult began on February 1, 2025, with the President’s firing of CFPB Director Rohit Chopra and his appointment of Senate-approved Treasury Secretary, Scott Bessent as Acting Director of the CFPB.

The Acting Director position is, by definition, a temporary position that can be filled by the President when a vacancy in a federal agency occurs. The President can legally fill vacancies in Executive Branch agencies, such as the CFPB, under the authority granted to the President by the Federal Vacancies Reform Act of 1998 (Vacancies Act). The Vacancies Act is designed to maintain continuity in governance. Only individuals who have already received Senate confirmation to lead a federal agency are eligible for an Acting Director post. With Bessent having been approved by the Senate as Treasury Secretary on January 27, 2025, President Trump was able to appoint him as the CFPB’s Acting Director.

However, Bessent’s acting directorship, though short lived, was impactful. Upon assuming the Acting Director position, he ordered a freeze on all rulemaking efforts by the CFPB. Days later, on February 7, 2025, Russell Vought took over as Acting Director of the Consumer Financial Protection Bureau a day after he was confirmed by the Senate to lead the Office of Management and Budget and ordered the shutdown of the CFPB.

On February 18, 2025, President Trump nominated Jonathan McKernan to be the new Director of the CFPB. If confirmed by the Senate, McKernan will replace Acting Director Vought, who currently serves as the head of the Office of Management and Budget. McKernan was reportedly on the Trump administration’s short list of potential candidates to lead the CFPB and is considered an ally of the financial services industry.

Q3: How is it possible the President has the authority to appoint individuals as directors of federal agencies, including the CFPB?

The President has appointment authority over federal agencies because like the President, federal agencies are part of the Executive Branch of the federal government rather than the Legislative Branch.

Explanation: The Executive Branch of the federal government consists of the President, his or her advisors, his or her cabinet and various departments and federal agencies. This branch is responsible for enforcing the laws of the land in line with the political platform of the President. As such, it is within the scope of the President’s executive authority to appoint Senate-confirmed individuals to directorship posts in the federal government and to fire at will the heads of his or her federal agencies

Students of the Constitution may find it interesting to learn that when enacting the Dodd-Frank Wallstreet Reform Act, Congress broke from tradition and intentionally limited the authority of the President to remove the Director of the CFPB only for cause. This was allegedly done for the single purpose of shielding the CFPB from political whims and influences of the President.

However, ultimately Congress’s plan to insulate the CFPB Director from the President failed Constitutional scrutiny. On June 29, 2020, in the matter of Seila Law v. Consumer Financial Protection Bureau, the U.S. Supreme Court ruled that the provision in the Dodd Frank Wallstreet Reform Act restricting the President’s authority to remove the Director of the CFPB only for cause violated the separation of powers clause of the U.S. Constitution.

In this 5-4 opinion issued by Chief Justice John Roberts in 2020, the Court explained that the limitation on the President’s authority to remove the CFPB Director is out of step with historical and legal precedent and “is incompatible with

our constitutional structure.” The Court concluded that the unconstitutional restriction could be separated from the rest of the law that created the CFPB.

Q4: Is it true President Trump issued a regulatory freeze?

Yes, on his first day in office, President Trump issued a wide-ranging regulatory freeze.

Explanation: By issuing a regulatory freeze, President Trump was able to slow down all rulemaking action by executive departments and federal agencies. Specifically, he directed them to:

• • Refrain from sending any proposed or final rules to the Office of the Federal Register (OFR) for publication in the Federal Register,
  • Withdraw from the OFR any proposed or final rules that have not yet been published in the Federal Register, and
  • Postpone or consider postponing for 60 days the effective dates of rules published in the Federal Register but that have not yet taken effect.
  • Consider further delaying or publishing new rules for notice and comment beyond the 60-day period.

This regulatory freeze delayed the effective dates of numerous rulemakings issued in the lame duck. One such example is the CFPB’s new rule prohibiting credit reporting agencies from including information about unpaid medical bills on consumer credit reports.

Q5: How does the CFPB receive its funding?

Unlike its sister federal agencies, the CFPB is part of the Federal Reserve and receives its funding from the Federal Reserve rather than through the Congressional appropriations process.

Explanation: The CFPB is an Executive Branch agency of the federal government with rulemaking, enforcement and examination authority. Created by Congress in 2011, in the wake of the 2008 financial crisis, Congress established the CFPB to enforce federal consumer financial laws and protect consumers in the financial marketplace.

Unlike other federal agencies that receive funding from Congressional Appropriations, in the case of the CFPB, Congress dictated the CFPB would receive its funding from the Federal Reserve subject only to a statutorily mandated, inflation-based cap. This means funding of the CFPB by the Federal Reserve is not subject to a Congressional budget approval process. Instead, the CFPB Director may request the amount of money believed necessary to fund the CFPB from the Federal Reserve. This change in the source of funding for the CFPB was once again an attempt by Congress to ensure the independence of the agency and to protect it from the political process.

In contrast to the Supreme Court’s ruling that the Dodd Frank Wall Street Reform Act limits the President’s authority to fire the Director of the CFPB only for cause failed Constitutional scrutiny. Congress’s mandate that the CFPB would receive funding through the Federal Reserve did pass Constitutional scrutiny in the matter of CFPB Community Financial Services Association. In this 7-2 opinion issued by Justice Clarence Thomas, the Court said the statute that funds the bureau through the Federal Reserve instead of congressional appropriations satisfies the U.S. Constitution’s appropriations clause.

Q6: Did Acting Director Vought defund the CFPB?

Not exactly.

Explanation: However, Vought did notify the Federal Reserve that the CFPB will not be taking its next draw of unappropriated funding because it is not “reasonably necessary” to carry out its duties. He explained that the CFPB has a current balance of $711.6 million which is in fact excessive in the current fiscal environment. It remains open to whether and to what extent future funding of the CFPB will be required.

Q7: What impact does the closing of the CFPB have on collection agencies and debt buyers?

The closing of the CFPB should have little effect on the day-to-day operations of collection agencies and debt buyers.

Explanation: First, only the Washington office of the CFPB, where supervision and enforcement activities take place, is technically closed. Second, although the rulemaking freeze does mean rules that have not yet taken effect are suspended, all other rules that have taken effect remain in effect.

Agencies and debt buyers in the midst of any investigations and enforcement actions will enjoy a reprieve until and unless the CFPB lifts the freeze on such activities. According to recent announcements, the Trump administration does not intend to shut down the supervision and enforcement arm of the CFPB.

Q8: Do collection agencies, collection law firms and debt buyers still need to comply with Regulation F?

Yes, Regulation F is alive and well and was not impacted by the freeze on rulemaking.

Explanation: Regulations previously passed and that have taken effect are not subject to the freeze on rulemaking. Nor are such rules subject to rescission by Executive Order. Final rules that have not taken effect must be reviewed and approved by Congress per the Congressional Review Act (CRA) subject to certain limitations.

The CRA was enacted to strengthen congressional oversight of federal agencies’ rules. CRA requires federal agencies to submit a report on each new rule to both houses of Congress and to GAO’s Comptroller General for review before the rule can take effect. For rules that qualify as “major rules,” GAO must submit a report to Congress identifying whether the agency’s submission complied with the required procedural steps. If Congress does not approve of a rule, it can enact a resolution of disapproval. In that case, the new rule has no force or effect.

Final rules, such as Regulation F, can only be modified or rescinded by the CFPB by following the procedures that it was required to follow under the Administrative Procedures Act (APA) for the rule to become final in the first place. The APA is a law that governs how federal agencies create and issue rules. It also outlines how courts can review agency actions. Agencies such as the CFPB must comply with the APA when promulgating, modifying or rescinding rules.

Q9: What can we expect to happen next?

The CFPB is not permanently closed, and its employees were not all fired. Only Congress can dissolve the CFPB through legislative action. And while possible, it is unlikely Congress will amend Dodd Frank and eliminate the CFPB altogether.

Explanation: During the temporary closure of the CFPB, the new administration will take its time to review the CFPB’s recent rulemaking efforts to determine if modifications are necessary and if so whether they can be modified or rescinded through Executive Order. The Administration will also evaluate whether it needs to quickly revise or rescind informal guidance with which they disagree, including potentially narrowing recent guidance that sought to informally broaden the definition of “unfair, deceptive, and/or abusive acts or practices” (UDAAPs) under Section 1031 of the Dodd-Frank Act.

Proposed rules are also likely to be placed on hold immediately. On the other hand, final rules not subject to the CRA look-back periods will require lengthier rulemaking processes to revise and/or rescind, as they are subject to traditional notice and comment procedures, including cost-benefit analysis, comment periods, and timing requirements for publication in the Federal Register prior to their effective date.

Collection agencies can expect narrower and less frequent rulemaking by the CFPB during the Trump administration but continued enforcement and supervision of existing law.

Q10: Will the medical debt credit reporting rule take effect in March?

Not likely due to the freeze placed on all rulemaking activity by the CFPB.

Explanation: The CFPB finalized a rule in January that would remove medical debt from credit reports. The agency had said the change could potentially improve the credit scores of millions of people and make it easier for them to get mortgages and other loans. The rule was set to take effect 60 days after its publication in the Federal Register but is now suspended. Publication in the Federal Register has not occurred and legal challenges place the entire rule in jeopardy.

Conclusion

More changes at the CFPB are yet to come. Changes to reduce the staffing at the CFPB are likely to come first. Changes to make the CFPB’s strategic objectives more business friendly are likely to come second. Changes to rulemaking through Guidance Bulletins and enforcement actions will likely come to a halt and a reduction in the amount allocated to fund the CFPB by the Federal Reserve is already underway.

While it may seem as though the industry is entering a period of relaxed regulation, do not be so sure. State legislatures and regulatory bodies such as California and New York are already gearing up to pass more consumer protection laws and regulations and many states will follow.