According to the parties’ joint status report, the CFPB renounced an order that initially directed the agency to oversee Google’s payment division. The status report additionally included that Google Payment agreed to drop its lawsuit against the CFPB that originally challenged the order.

The initial order was issued by the CFPB under the former CFPB Director, Rohit Chopra. It represented the agency’s broader effort in exerting pressure on larger tech companies by supervising their consumer financial activities. Such efforts were a priority of the Biden Administration, especially in regulating non-bank financial institutions such as digital wallets and payment application such as Venmo and Zelle.

However, the Trump administration has taken a different stance on such regulation efforts. Since President Trump took office in January, the CFPB has dropped numerous cases against payment application companies and other financial companies. In February, the agency dropped a lawsuit against Rocket Homes that alleged the company of offering kickbacks to brokers who referred customers to Rocket Mortgage. In March, the agency dropped a lawsuit against Zelle, Wells Fargo, and other major banks that alleged the companies of failing to protect consumers from widespread fraud.

Under the leadership of the now acting Director of the CFPB, Russell Vought, the CFPB retracted the Google Payment order on the basis that “extending Bureau supervision to GPC would be an unwarranted use of the Bureau’s powers and resources,” according to the Withdrawal Notice.

The agency continues to display its opposition to payment application regulations and enforcement actions in line with the Trump administration’s agenda. This latest dismissal could lead to additional challenges against regulations aimed at oversight of tech companies.

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According to the bill, the CFPB’s budget would take a big hit as well as its penalty money obtained from enforcement actions. The funds received from these enforcement actions will be used for victim compensation with the leftovers being sent to the Treasury. Specifically, the legislation will require that “if the Bureau makes payments to all of the direct victims of activities for which that civil penalty was imposed, the Bureau shall transfer all amounts that remain in the Civil Penalty Fund with respect to that civil penalty to the general fund of the Treasury.”

Essentially, the CFPB’s budget would decrease around 60% and its funding from the Federal Reserve would be capped at 5% of the central bank’s operating expenses under the proposal — down from the current limit of 12% as laid out in the Dodd-Frank Act.

The Legislation Represents Larger Effort to Cut Government Spending

The CFPB has come under a significant amount of fire since the start of the Trump administration. There have been many efforts by President Trump to dismantle the agency such as attempted mass firings, an order to suspend agency operations, and so on.

This legislation represents a broader effort by Republicans to create at least $1.5 trillion in spending cuts in order to pass a $5 trillion tax cut as part of President Trump’s policy agenda. “For too long, government spending has been on a one-way ratchet,” House Financial Services Committee Chairman French Hill, R-Ark., said at the start of Wednesday’s markup. “We are here with one purpose, to do our part to put our nation back on a responsible fiscal trajectory.”

Republicans are in support of this funding as they see it as a means towards diminishing “reckless government spending.” Meanwhile Democrats perceive the bill as hypocritical in that such substantial spending cuts themselves are “reckless.” Accordingly, many Democrats believe that the CFPB runs a profitable business, putting more money in consumer pockets than the expenses it incurs to do so.

PCAOB to be Dissolved Into the SEC

Under the proposed legislation, the PCAOB, known to oversee the audits of public companies, will merge into the SEC. This results from Republican criticism of the agency that it lacks accountability and transparency. The SEC would essentially assume the duties and responsibilities of the PCAOB.

While many are in support of such a significant move, many believe that such a move is not practical. Congresswoman Janelle Bynum cautioned against merging the PCAOB into the SEC, describing the proposal as a significant and potentially risky shift that demands closer examination. She urged Republicans to “pump the brakes” and introduced an amendment that would delay the transfer of oversight authority until the SEC can confirm that the change would not heighten investor risk.

In contrast, many believe that that such a move is crucial towards President Trump’s government spending agenda. “I appreciate my colleague’s newfound passion for fiscal discipline,” Congresswoman Ann Wagner said. “However, the committee print before us today is a result of extensive member input to deliver on the promise to rein in out-of-control spending.  

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The panel’s decision comes almost a month after an appeals court modified a trial court’s order which effectively allowed the CFPB to engage in mass firing after conducting a “particularized assessment” of each fired employee. Under this order, the CFPB was required to show that any dismissed employees were in fact “unnecessary expenses” to the agency.

The D.C. panel specifically defined “particularized assessment” as involving “a determination, conducted by the decisionmaker responsible for the reduction in force, that each division or office within the Consumer Financial Protection Bureau will be able to perform any statutorily required duties of that division or office without the employees subject to the reduction in force.”

The complete ban of mass firings issued by the panel comes as a result of a dispute on whether the CFPB Director, Russell Vought, can execute the mass firings while in compliance with the panel’s definition of “particularized assessment.” Many top officials within the CFPB believe that the agency only requires around 200 employees to satisfy its duties and responsibilities such as supervising banks and enforcing consumer financial law. However, many agency employees believe that mass firings would essentially render it impossible for the CFPB to function properly.

The panel’s decision, although not permanent, effectively prohibits the CFPB from pursuing “reductions-in-force”.  According to the panel, it is best to restore the block of mass firings while the parties battle it out in court. By doing so, CFPB employees would still be protected in the case that President Trump loses.

The decision will ultimately be in effect until the panel rules on the original trial court’s injunction issued by Judge Amy Berman Jackson. Judge Jackson initially imposed the injunction that prohibited the CFPB from conducting mass employee firings but also deleting agency data, permanently shredding service contracts, idling employees with stop-work orders or taking the agency’s complaint-handling functions offline. Judge Jackson based her ruling on evidence that showed Director Vought’s “a hurried effort to dismantle and disable the agency entirely.

According to the panel, this order “ensures that plaintiffs can receive meaningful final relief should the defendants not prevail in this appeal, rather than continue collateral litigation over the meaning and reviewability of the ‘particularized assessment’ requirement imposed by this court’s stay order.”

“Reinforcing this conclusion, we have already accommodated the government’s interests by substantially expediting the [injunction] appeal, with oral argument scheduled less than three weeks from today,” the order added. “At that time, we will carefully consider the separation of powers and other arguments raised by the parties.”

One of the panel judges, Judge Rao, dissented from the decision to restore the injunction. He said that the panel’s order raises many separation of power issues and that the CFPB should be permitted to follow President Trump’s orders. Specifically, Judge Rao said that “because the preliminary injunction entered by the district court raises serious separation of powers concerns and has paved the way for ongoing judicial supervision of an executive branch agency, I would continue the stay pending appeal.”

The CFPB has come under fire recently for its series of voluntary lawsuit dismissals against banks and other financial institutions. The agency recently dropped its $2.25 million student loan debt collection against the National Collegiate Student Loan Trusts. The lawsuit aimed at defending college students after they allegedly became victims of deceptive and unfair debt collection litigation strategies.  

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This rule—commonly referred to as Small Business Lending Under the Equal Opportunity Act or Section 1071 of the Consumer Financial Protection Act—was originally issued during the Biden administration and requires banks, small business lenders, and other financial institutions to report data on their small-business loans, including applicant demographics, pricing, and approval rates.

In a court filing responding to a challenge brought by a merchant cash advance group, the CFPB indicated its intent to reissue the rule, citing the agency’s new leadership as a basis for its decision.

“New leadership has been assessing the Final Rule and the issues that this case presents to determine the CFPB’s position. CFPB’s new leadership has directed staff to initiate a new Section 1071 rulemaking,” according to the agency’s filing. “The CFPB anticipates issuing a Notice of Proposed Rulemaking as expeditiously as reasonably possible.”

The start of the Trump administration brought a change in the CFPB’s leadership. New leadership arrived at the CFPB on January 31, 2025, when Scott Bessent was named Acting Director of the CFPB, and again on February 7, when Russell Vought replaced Scott Bessent as Acting Director.

Under the Biden administration, the rule faced many legal challenges claiming that it was too burdensome and invasive. While many were against the rule, many supported it on the basis that it reinforced fair lending enforcement.

Although the CFPB previously prioritized defending the rule against legal challenges during the Biden administration, its recent filing indicates a shift in approach, suggesting it will no longer defend the original rule and instead modify and reissue it.

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In its dropped lawsuit, the CFPB claimed that hundreds of thousands of consumers filed fraud complaints to Wells Fargo, JP Morgan, and Bank of America and were denied help, with many being told to contact the fraudsters directly to recover their money. The major banks were alleged of failing to properly investigate the customer complaints and failing to reimburse such their customers for valid fraud claims.

The lawsuit originated from a investigation in 2021. The investigation found that three of the nation’s largest banks allegedly “rushed to launch a payment system without implementing basic protections for their customers.” As a result, “Defendants failed to take steps to ensure consumers were protected from fraud, while nevertheless marketing Zelle as safe and secure.”

This lawsuit was originally brought under the leadership of former CFPB Director Rohit Chopra. Chopra, who was appointed during the Biden administration, was fired in February, weeks after the commencement of the Trump administration. “This is about financial institutions fulfilling their basic obligations to protect customers’ money and help fraud victims recover their losses,” according to former CFPB Director Rohit Chopra said at the time. “These banks broke the law by running a payment system that made fraud easy, and then refusing to help the victims.”

Although the CFPB sought to hold those who failed to protect consumers from fraud accountable, its dismissal of the case has gathered much support. “Banks have and consistently do follow the law in offering services through Zelle,” Consumer Banks Association President and CEO Lindsey Johnson said. “In a time when fraud and scam activity is surging across industries and government alike, we look forward to moving past finger-pointing and political grandstanding and, instead, working constructively with policymakers to counter the root causes of these threats.”

This dropped lawsuit is the latest in a series of voluntary dismissals by the CFPB, which recently withdrew several cases against companies like Capital One and Rocket Homes. All of these lawsuits were initially filed during Chopra’s tenure as CFPB Director.

The CFPB has been rapidly dismantled in a matter of weeks, with employees ordered to halt nearly all work, approximately 150 staff members dismissed, and the bureau’s D.C. headquarters closed. This comes at a time in which President Trump has explicitly expressed his goal in shrinking the agency.  

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McKernan was not the only nominee advanced by the panel. The other three consisted of Bill Pulte, a private equity CEO who is up for the top job at the Federal Housing Finance Agency, Jeffrey Kessler, a trade lawyer who is up for a Department of Commerce role and Stephen Miran, an economist and investment strategist nominated for chair the Council of Economic Advisers.

While President Trump has dedicated much effort in dismantling the CFPB, as he aims to reduce administrative spending and reduce regulation, many perceive the CFPB as a necessary agency purposed for defending American citizens against fraud and scams. “I have deep, substantive reservations about these nominees,” Elizabeth Warren said. “Jonathan McKernan … is clearly being sent in by co-presidents Trump and Elon Musk to unleash the scammers, the fraudsters, and cheats on the American people.”

Others, including Senate Banking Chair Tim Scott, see McKernan’s nominations as well as the other three nominees as a step in the right direction and believe that they will guide the CFPB towards much needed change.

“As the Director of the Bureau of Consumer Financial Protection, Jonathan McKernan will ensure accountability and much needed reforms to curtail the weaponization of this rogue agency,” according to Scott. “These nominees represent a path forward — a path toward economic resurgence, job creation, and renewed prosperity for every American family. Their confirmation is not just a formality; it’s a commitment to putting our nation back on track after years of uncertainty and stagnation.”

This nomination comes at a time in which the CFPB has essentially shut down. In just the past month, it dismissed numerous lawsuits against top companies and will seemingly continue to do so.  

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The lawsuit specifically alleged that giant real estate company offered referrals to those who directed clients toward the mortgage lender, Rocket mortgage. One of those who took advantage of Rocket Homes’ incentive was Jason Mitchell, founder of the Jason Mitchell Group. The CFPB claimed that Mitchell provided gift cards to his agents who made a significant number of referrals to Rocket Mortgage. The agency explicitly claimed that Mitchell’s agents were trained to manipulate clients into thinking that Rocket Mortgage’s mortgage options were the only available and viable options.

After becoming aware of the dropped charges, Rocket Homes released a statement expressing its gratitude that the charges were dismissed. “It was good to see the truth come to light,” the company said. “This case was a misrepresentation of the facts, as we have said from the day the suit was filed. It was an empty claim brought forth by former CFPB director [Rohit] Chopra for the sole purpose of seeing his name in headlines during the final days in public office.”

CFPB Dismisses Multiple Cases After Litigation Funds Freeze

On the same day that it dropped the Rocket Homes lawsuit, the CFPB also announced that it voluntarily dismissed lawsuits against Capital one, Berkshire Hathaway, and the Pennsylvania Higher Education Assistance Agency, a student loan servicer. These dismissals come shortly after having its litigation and enforcement investigation funds frozen by its newly acting director, Scott Bessent.

President Trump has made it known that his administration aims to eliminate the CFPB as a result of the agency’s alleged politicization. His administration explicitly stated that it intends to create and more “streamlined and efficient CFPB” as a result of this “politicization.” While many view this as a positive step, many others perceive it as providing an outlet to corporations who are engaging in illegal activities.

“We’re getting a very strong message here that if you’re a bank, if you’re a student loan servicer, and you’re violating the law, the CFPB is not only not going to pursue you, they’re going to let you out of your case scot-free, ” according to the director of consumer protection at the Consumer Federation of America, Erin Witte. Public Citizen, a consumer advocacy group, echoed Director Witte’s statement, cautioning that unchecked misconduct could drive the U.S. “hurtling down the path that led to financial crises in the past.”

The CFPB isn’t the only federal agency scaling back enforcement under the new administration. The Securities and Exchange Commission announced that it has closed or paused regulatory enforcement against several cryptocurrency platforms, signaling a shift toward a more crypto-friendly stance under Trump.  

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The leaders of the proposed legislation argue that the original rule, which aimed to protect consumers from high fees, had negative impacts on consumers and diminished their financial protections. “The CFPB’s actions on overdraft is another form of government price controls that hurt consumers who deserve financial protections and greater choice,” said House Financial Service Committee Chairman French Hill. “Our [rule] will help overturn this harmful rule and is a next step toward ensuring the CFPB halts all ongoing rules until it answers to Congress, just like any other non-independent federal agency.”

The effort to repeal the overdraft fees cap has received much support from various Bankers Associations. “Millions of hardworking Americans, including the one in five without access to credit, rely on overdraft services as a valuable financial lifeline, yet the Biden-Chopra CFPB’s overdraft rule threatens to cut off their access to this essential bank product,” Consumer Bankers Association President Lindsey Johnson said in a statement.

The overdraft rule was finalized in December under former CFPB Director Rohit Chopra. According to Chopra, this rule was purposed to ensure that junk fees were not the source of a billion-dollar revenue stream. The CFPB perceives the rule as an effort to balance the power between those charging the junks fees and those being charged.

Although the bill is aimed at protecting consumers, the House and Senate’s efforts to nullify the rule has received some criticism. Many consumer advocates hope that the bill does not get passed. They view the overdraft cap as means to protect lower-income families from “junk fees.”

“For too long, banks have gouged economically vulnerable consumers with costly overdraft fees that make it harder for them to stay on track financially,” said Chuck Bell, advocacy program director at Consumer Reports. “The CFPB’s new rule imposes reasonable limits on overdraft fees so they are in line with a bank’s actual costs instead of a way for banks to pad their profits at the expense of those least able to afford it.”

Various banking industry groups have challenged the rule in court on the basis that the CFPB did not have proper authority to impose such a rule. The case remains open but is expected to be thrown out now that the House and Senate intend to invalidate it.

Although the rule seeks to invalidate the overdraft fees rule, it has not effectively done so yet. This bill was enabled by the Congressional Review act, which permits Congress to either nullify or approve new agency rules. The Act authorizes Congress to pass a joint resolution of disapproval if it seeks to invalidate the rule. If the joint resolution of disapproval approved by both houses of Congress and signed by the President, or if Congress successfully overrides a presidential veto, the rule at issue cannot go into effect or continue in effect.  

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Chopra was appointed as director during the Biden administration in 2021, committing himself to making the financial system more reasonable for consumers and opposing any regulations or practices that undermined this goal.

The CFPB was created in the aftermath of the 2008 global financial crisis, which was caused in part by banks’ irresponsible lending and securitization practices. The agency’s mandate is to protect consumers from financial frauds and scams, to fight unfair banking and financial practices, and to offer a recourse for consumers who have been scammed or defrauded.

Although Chopra was initially given a five-year term for his position, the Supreme Court ruled in the case of Seila Law v. CFPB that such a director should be treated as an at-will employee for the purposes of presidential removal. As a result, it was within the President’s constitutional authority to fire Chopra and designate a new director for the Bureau.

During his tenure as CFPB Director, Chopra removed medical debt from credit reports, limited overdraft penalties, and limited credit card late fees. The former director also led an initiative which would ultimately provide consumers with more easy access to and privacy of their financial data.

Under the leadership of Chopra, the CFPB also brought numerous actions against some of the nation’s biggest banks such as Wells Fargo, JPMorgan, and Bank of America, for failing to protect consumers from widespread fraud. The case remains ongoing but seeks to impose a heavy penalty on the banks and implement measures to prevent similar violations in the future.

Although Chopra’s termination fell within President Trump’s executive authority, his administration has faced some criticism over the move. Many critics have pointed to Chopra’s success as support for the argument that President Trump was in the wrong.

President Trump’s Move Faces Praise and Criticism

“One of the most effective consumer champions in government in American history, Rohit Chopra worked tirelessly to protect vulnerable citizens from financial predators. The CFPB under Chopra eliminated many junk fees, capped credit card late charges, reformed reporting of medical debt, sued giant corporations, and elevated the total relief to consumers beyond $21 billion,” according to Co-President of Public Citizen, Lisa Gilbert. “An administration that retreats from the many advances the agency made while under his leadership will betray working Americans. That Trump’s oligarchs want this agency ‘deleted’ attests powerfully to Chopra’s effectiveness and the need for the CFPB – and Trump’s firing of Chopra is as clear a sign as there could be of whose side Trump is on.”

However, many groups praised the President’s move as they saw it as a step in the right direction for the Bureau. “The longer Director Chopra stays, the harder it will be for this pro-growth administration to undo the politically-driven, government-price setting agenda that former President Biden’s appointee has engaged in over the last several years at the Bureau,” according to Consumer Bankers Association press secretary, Weston Loyd.

The CFPB has faced a large number of challenges in the previous years. Many brought challenges seeking to undermine the agency. The challenges were brought on a constitutional basis in which it was argued that the agency is funded illegally.

While most agencies are funded by an annual budget process in Congress, the CFPB is funded directly by the Federal reserve. Although it may be argued that such funding violated the Appropriations Clause of the Constitution—a law of Congress that provides an agency with budget authority—the Supreme Court rejected ultimately such the argument and held that it was not in fact a violation.  

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The CFPB’s lawsuit describes how hundreds of thousands of consumers filed fraud complaints and were largely denied help, with some being told to contact the fraudsters directly to recover their money. Bank of America, JPMorgan Chase, and Wells Fargo also allegedly failed to properly investigate complaints or reimburse consumers for fraud and errors as is required by law.

Jane Khodos, a spokesperson for Zelle, said that the CFPB’s arguments are “legally and factually flawed, and the timing of this lawsuit appears to be driven by political factors unrelated to Zelle.”

“Zelle leads the fight against scams and fraud and has industry-leading reimbursement policies that go above and beyond the law,” Khodos said. “The CFPB’s misguided attacks will embolden criminals, cost consumers more in fees, stifle small businesses and make it harder for thousands of community banks and credit unions to compete. Zelle is relied upon by 143 million enrolled American consumers and small businesses, and we are fully prepared to defend this meritless lawsuit to ensure their service does not suffer.”

The Alleged Failures and Neglect

According to statement made by CFPB Director Rohit Chopra, this lawsuit results from an investigation that launched in 2021. The investigation found that three of the nation’s largest banks allegedly “rushed to launch a payment system without implementing basic protections for their customers.”

The CFPB alleges widespread consumer losses since Zelle’s 2017 launch due to the platform’s and the banks’ failure to implement appropriate fraud prevention and detection safeguards. The CFPB alleges that Bank of America, JPMorgan Chase, Wells Fargo, and Early Warning Services violated federal law through critical failures including:

• Leaving the door open to scammers: Zelle’s limited identity verification methods have allowed scammers to quickly create accounts and target Zelle users. For example, criminals often exploited Zelle’s design and features to link a victim’s token to the fraudster’s deposit account, which caused payments intended for the consumer’s account to instead flow to the fraudster account.
• Allowing repeat offenders to hop between banks: Early Warning Services and the banks were too slow to restrict and track criminals as they exploited multiple accounts across the network. The banks did not share information about known fraudulent transactions with other banks on the network. As a result, the fraudsters could carry out repeated fraud schemes across multiple institutions before being detected, if they were detected at all.
• Ignoring red flags that could prevent fraud: Despite receiving hundreds of thousands of fraud complaints, the banks failed to use this information to prevent further fraud. They also allegedly violated the Zelle Network’s own rules by not reporting fraud incidents consistently or on time.
• Abandoning consumers after fraud occurred: Despite obligations under the Electronic Fund Transfer Act and Regulation E, the banks failed to properly investigate Zelle customer complaints and take appropriate action for certain types of fraud and errors.

The lawsuit aims reimburse those who suffered financial losses due to the alleged neglect of fraud. It also seeks to impose penalties on the banks and implement measures to prevent similar violations in the future.  

Jacob Horowitz is a contributing editor at Compliance Chief 360°

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