What Eliminating the Nation’s Top Consumer Watchdog Means for Home Buyers and Renters. ‘It’s Open Season.’

Halting the work of the nation’s top consumer watchdog could leave Americans without a key ally as they navigate their single biggest expense: housing.

The Trump administration’s move to shut down the Consumer Financial Protection Bureau comes as consumers face mounting challenges finding housing they can afford.

Home prices are at record highs, mortgage rates are still elevated at around 7%, rent prices remain high after skyrocketing during the pandemic, and the rising cost of home-insurance premiums is weighing on buyers, owners and renters.

Without a federal agency keeping tabs on the mortgage and rental-housing industries, consumers could see an increase in predatory business practices and even scams, experts told MarketWatch.

“The gravity of this attack on the CFPB cannot be overstated,” Richard Dubois, the executive director of the National Consumer Law Center, a left-of-center advocacy group, said in a statement.

“The CFPB saves homes, stops fraud that ruins lives, and enforces key laws, winning $21 billion in relief for over 200 million people harmed by credit bureaus, big banks, debt collectors and predatory lenders,” he added.

The CFPB monitors companies’ actions to ensure that they are following the law.

Office of Management and Budget Director Russell Vought, whom President Donald Trump has named as acting head of the CFPB, ordered the CFPB over the weekend to “cease all supervision and examination activity,” the Associated Press reported.

Jonathan McKernan, a former board member of the Federal Deposit Insurance Corp., has been tapped as the bureau’s next director, according to the AP.

The agency’s chief operating officer told employees that the agency headquarters in Washington, D.C., would be closed from Monday to Friday this week, the Washington Post reported on Sunday.

The actions appear to be in line with the Trump administration’s stated desire to shrink the federal government. Here’s what the end of the CFPB in its current form could mean for home buyers, homeowners and renters.

What is the CFPB and why did Trump shut it down?

The CFPB was created with vulnerable home buyers in mind.

The agency was established under the 2010 Dodd-Frank Wall Street Reform and Consumer Protection Act in the aftermath of the subprime-mortgage crisis, during which reckless lending by the mortgage industry led to millions of people losing their homes to foreclosure.

Sen. Elizabeth Warren, the Massachusetts Democrat who first proposed creating such an agency in 2007, envisioned the CFPB as a “cop on the beat” that would protect consumers from unscrupulous lenders. 

At the time, then-President Barack Obama stressed the need for an agency that would scrutinize the financial industry’s behavior.

“Part of what led to the financial crisis were practices that took advantage of consumers, particularly when too many homeowners were deceived into taking out mortgages on their homes that they couldn’t afford,” Obama said in a speech in September 2010.

While the Dodd-Frank Act strengthened protections for mortgage borrowers, there is still a need for a watchdog agency to monitor consumers’ interactions with financial institutions, advocates say.

“Without an active cop on the beat looking out for consumers in the financial marketplace, the administration is essentially saying consumers are on their own,” Delicia Hand, a senior director at Consumer Reports, said in a statement. 

Financial products that charge unreasonable fees or feature fine print that is intentionally difficult for the average consumer to understand could make a comeback, Dalié Jiménez, a professor of law at the University of California, Irvine, and a founding staff member at the CFPB, told MarketWatch.

The reduced level of oversight is “going to affect people’s bottom lines,” she said. For companies, she added, “it just feels like open season. Do what you will and figure out the consequences later.”

The CFPB and the White House did not respond to requests for comment.

Republicans and financial-industry players have long railed against the bureau, accusing it of overstepping its authority and seeking unsuccessfully to shut it down with lawsuits that went all the way to the Supreme Court.

The CFPB “has long functioned as another woke, weaponized arm of the bureaucracy that leverages its power against certain industries and individuals disfavored by so-called ‘elites,’” the White House said in a statement on Monday, adding that “under the administration of President Donald J. Trump, the weaponization ends right now.”

What an end to the CFPB could mean for home buyers

The entire process of applying for a mortgage is monitored by the CFPB. Not having a watchdog could lead to risky lending and an increase in scams, one advocate warned.

“There are a bunch of rules in place now, and without the CFPB to enforce them, wrongdoers will feel free to run rampant and it will be harder for people to trust the process,” Alys Cohen, a senior attorney at the National Consumer Law Center, told MarketWatch.

Over the last decade, the “CFPB has been essential in making sure that people can afford loans at the front end and are likely to get help at the back end when they face hardship,” Cohen said.

In 2024, for example, the CFPB went after a Berkshire Hathaway-owned mortgage lender for allegedly pushing borrowers into loans they couldn’t afford. The mortgage lender said the CFPB’s actions were “unfounded and untrue” and amounted to “regulatory overreach.”

The agency attempted to cut the fees borrowers pay when they take out a mortgage, which it described as “junk fees.” It also penalized a mortgage lender in Alabama for alleged redlining. The lender said it was in “strong disagreement” with the federal government’s approach in identifying potential discrimination but ended up settling with the CFPB and the Justice Department.

The CFPB also went after well-known real-estate industry players on behalf of home buyers.

In December, the agency sued Rocket Homes for allegedly using kickbacks to steer home buyers to Rocket Mortgage for their loans, depriving buyers of the ability to shop around for the best mortgage.

Rocket Homes told MarketWatch that the CFPB’s allegations are “false and a distortion of reality,” and that then-director Rohit Chopra directed a “flimsy lawsuit.” 

Now that the Trump administration appears to have stopped the CFPB from policing companies in the mortgage industry, it’s unclear what might happen next.

Before the CFPB was created, the mortgage market was regulated by seven federal agencies: the Federal Reserve, the FDIC, the Federal Trade Commission, the National Credit Union Administration, the Office of the Comptroller of the Currency, the former Office of Thrift Supervision and the U.S. Department of Housing and Urban Development.

In Cohen’s view, that system of oversight “brought us the housing crisis and the Great Recession. That’s not where we want to return.”

What it could mean for homeowners

Until Trump’s recent moves, the CFPB also monitored the process of paying a mortgage or of modifying one, which is a step homeowners can take when they’re in financial distress.

In 2022, for example, the bureau ordered Wells Fargo to pay $3.7 billion after the bank allegedly mismanaged customers’ loans over several years. In some cases, the bank improperly denied homeowners’ requests for mortgage modifications, resulting in thousands of people losing their homes to “wrongful” foreclosures, the CFPB said.

“The bank was aware of the problem for years before it ultimately addressed the issue,” the CFPB said. 

The CFPB’s consent order against Wells Fargo was terminated on Feb. 4, the bank said in a press release. It still has one pending order with the agency.

What it could mean for renters

Even renters have been protected under the watchful eye of the CFPB.

The agency is charged with monitoring the rental process, including application fees, tenant screenings and debt-collection activities.

Diminishing that role would be a “huge loss for consumers,” Marie Claire Tran-Leung, director of the evictions initiative at the National Housing Law Project, told MarketWatch. The NHLP is a left-of-center advocacy group that supports renters. 

Among other actions focused on renters, the agency has raised alarms about inaccurate background checks that result in people being unable to rent apartments. In November 2022, the agency issued reports describing how tenant background checks were sometimes “filled with largely unvalidated information.” 

The CFPB also highlighted how some tenant-screening companies were using an algorithm to assess a prospective renter’s risk level. In one study, the agency cast doubt on the efficacy of such background reports in predicting how renters would behave.

Balancing the rise of technological advancements in artificial intelligence and machine learning with the age-old practice of renting out a home requires walking a very fine line, Tran-Leung said. 

It’s not like “you feed things into a computer, and it takes away all the bias,” she said. In fact, algorithms can actually “amplify bias that humans put into the process.” Existing biases become more magnified, with machines sometimes making racist decisions, she said.

The CFPB also tried to address so-called junk fees in rental housing, something the Biden administration focused on more broadly.

In August 2023, the agency began accepting complaints about rental debt collection. Renters left complaints about junk fees, such as fees from rental-payment-processing servicers that were added to their rent as a required fee. The agency said it was going to look into whether debt collectors were following consumer-protection laws. 

Ending the CFPB wouldn’t mean consumers are completely abandoned by regulators

If the CFPB’s role shrinks, some state consumer-protection agencies and attorneys general help could fill the gap. But a state-by-state approach to consumer protection could leave many people vulnerable.

Some states aren’t as forceful in cracking down on companies’ predatory behavior, Tran-Leung said. “We are going to leave people behind if we only leave this to the states,” she added. 

And even if big companies don’t engage in harmful behavior toward consumers, that won’t stop the scammers, Tran-Leung said.

Why the mortgage industry is wary about lost consumer protections

The mortgage industry may be searching for a single set of rules, instead of 50 different approaches.

When the Supreme Court examined the CFPB’s constitutionality several years ago, mortgage and real-estate trade groups asked the court to be careful in its ruling. 

The groups didn’t take sides with the agency or its payday-lender opponents in the litigation, but they warned of “potentially catastrophic consequences” if the court ruled in a way that suddenly questioned the CFPB’s rules on mortgage lending. 

“Today, virtually all financial transactions for residential real estate in the United States depend upon compliance with the CFPB’s rules, and consumers rely on the rights and protections provided by those rules,” the 2023 filing said. The court ultimately sided with the agency.

One of the organizations signing on to the friend-of-the-court brief, the Mortgage Bankers Association, declined to comment. 

Andrew Keshner contributed.