But by seeking to fire 90 percent of the Consumer Financial Protection Bureau (CFPB)’s staff, dismantling the Justice Department’s National Cryptocurrency Enforcement Team and Consumer Protection Branch, and dropping or settling cases with more than 100 corporations that scammed or abused consumers, the Trump administration is instead inviting a golden age for scammers and corporate abuse.
As the federal government retreats from protecting consumers, it is up to states to step up, including through the creation of state-level CFPBs.
In January, I left the White House after coordinating the federal government’s consumer protection efforts. This work has become more important as certain businesses have gotten more deceptive and scammers have found more tools than ever to con Americans out of their hard-earned money. From text message scams and dubious crypto meme coins to innocuous “resort” fees on your hotel bill, it's not your imagination that tricks have grown more prevalent. Toll-road scams have swept the nation — even in states without tolls.
Nevertheless, the Trump administration has aggressively pulled back from consumer protection. When it comes to cryptocurrency, for instance, the Justice Department’s withdrawal from the pursuit of white-collar crimes diminishes oversight of business practices in an industry premised on decentralized networks and anonymous transactions.
This retreat coincides with the Trump family’s recent investments in crypto, such as its partnership in a digital currency trading portal. Perhaps even more problematic are the his-and-her meme coins issued in the name of the president and first lady. These coins lost 80 percent of their value within weeks, inspiring fraudulent phishing campaigns targeting Trump supporters, before the president juiced up the value of the $Trump coin by offering a private dinner to the top 220 investors.
Historically, investigations by federal regulators like the Securities and Exchange Commission (SEC) and the CFPB unearthed abuses and led to lawsuits that resulted in payments to make victims whole. In February, the SEC dropped its lawsuits against Binance and Coinbase while ending investigations against other cryptocurrency companies. Meanwhile, the CFPB has dropped a slew of cases against mortgage lenders, big banks and predatory student lenders.
This is all bad news for consumers. But there is worse to come. Federal regulators don’t just put rules in place to protect consumers — they also respond to complaints on behalf of consumers and inspect firms to prevent abusive practices before they blow up the economy. The Trump team is pulling back from both. In addition to illegally trying to gut the CFPB’s staff, they’ve ordered the agency to reduce its inspections of financial firms by half, though if the layoffs proceed it will fail to meet even this target.
With these moves, the president is laying the foundation for the next financial crisis. Shady mortgage practices helped instigate the 2008 financial meltdown, and the Trump administration’s war on the CFPB invites a sequel that nobody wants to see. Separately, Congress is considering eliminating the major financial oversight changes that were enacted in response to the 2008 crisis.
What States Can Do
States can fill the vacuum and some have already shown what can be accomplished at that level. Under the Biden administration, for example, the White House and federal agencies worked with states to launch a broad, nationwide crackdown on hidden junk fees that has resulted in four states enacting comprehensive bans on these fees and similar bans proposed in at least 10 states.
The CFPB also worked closely with state attorneys general to force student loan servicer Navient out of the student loan business and provide restitution to borrowers for abusively steering more than 1 million of them away from affordable loan repayment options.
In 2020, California created its own variation on the CFPB to fill the gap left by the first Trump administration. An Illinois state senator has proposed legislation to do the same in that state, and more states should follow suit because the federal Consumer Financial Protection Act authorizes states to enforce federal laws and rules.
And it is important for states to remember that federal consumer protection law is a floor, not a ceiling. Some states have already prohibited the inclusion of medical debt on credit reports, put guardrails in place around riskier paycheck advance loans or required companies to make it easier to cancel subscriptions. But more should be done, and states should look to a CFPB playbook released this January for ideas.
Americans deserve better than to be left on their own against scammers, and states have a tremendous opportunity to step forward.
Michael Negron is a fellow at the Groundwork Collaborative, a progressive think tank and advocacy group. He served as a special assistant to President Joe Biden for economic policy and oversaw that administration’s whole-of-government approach to consumer protection policy.
Governing’s opinion columns reflect the views of their authors and not necessarily those of Governing’s editors or management.
