With the government seemingly stepping back from regulatory duties, consumers may have to act as their own financial watchdogs.
The Consumer Financial Protection Bureau, the independent federal agency created after the 2008 financial crisis to shield people from fraud and abuse by lenders and financial firms, has been muzzled, at least temporarily.
“Everything is on pause right now,” said Delicia Hand, senior director of digital marketplace with Consumer Reports. “So it’s back on consumers to be extra diligent.” Ms. Hand previously spent nearly a decade in a variety of roles at the Consumer Financial Protection Bureau, including overseeing complaints and consumer education, before departing in 2022.
In early February, the Trump administration ordered the consumer bureau to mostly cease operations. It closed its Washington headquarters, fired some employees and put most of the rest of the staff on administrative leave, and opted not to seek funding for its activities. Several lawsuits are challenging the administration’s actions. On Feb. 14, a federal judge in Washington ordered the bureau to halt firing workers and not to delete data, pending a hearing scheduled for Monday.
The administration, however, has already dialed back enforcement — dropping, for instance, a suit accusing an online lender of promoting free loans that actually carried high interest rates. On Thursday, the bureau dismissed a lawsuit that it had brought in January accusing Capital One of cheating customers out of some $2 billion in interest.
It’s a stark change for an agency that had been energetic in adopting rules and filing lawsuits aimed at aiding consumers. Under the Biden administration, the bureau moved to reduce or eliminate various fees charged by banks and other financial firms and to remove unpaid medical debt from credit reports, and it fined a major credit reporting bureau for misleading consumers about credit freezes.
Where does this leave consumers?
Jennifer Tescher, chief executive of the Financial Health Network, a nonprofit that helps people make sound financial decisions, said laws protecting consumers remained in place, so people shouldn’t fear that financial firms would immediately start behaving badly. The financial firms, she noted, rely on consumers for their business.
Even so, consumers need to be “asking questions and verifying the fine print before opening a new account or taking out a loan,” she said, and they should carefully check their financial statements.
Here are some areas to pay attention to, according to consumer experts. (The consumer bureau didn’t respond to emails sent to its press office seeking comment.)
Will I have to pay higher bank and credit card fees?
In December, the consumer bureau finished a rule that generally limited overdraft fees charged by big banks and credit unions to $5. But banking groups have challenged the rule in court, and Republicans in Congress have proposed legislation to overturn it.
Banks charge overdraft fees when customers overspend their accounts. The bank covers the shortfall, but charges a fee. The average overdraft fee last year was about $27, but ranged as high as $38, according to Bankrate.
Some big banks have already reduced or eliminated overdraft fees, in part because of competition from digital payment start-ups. If you occasionally need the service to cover cash shortages, consider if it may be worth changing to a bank with lower or no fees. Review bank customer satisfaction rankings, like those published by J.D. Power, to see if you can find better treatment elsewhere, Ms. Tescher said.
Lauren Saunders, associate director of the National Consumer Law Center, said consumers should double-check to see if they had authorized their bank to cover payments when they overspend. If you don’t want to run the risk of incurring a fee, you should opt out. That way, if you make a purchase with your debit card that would overdraw your balance, the bank will simply decline the purchase. (Banks, however, can still charge a fee if you overspend using a check or recurring electronic payments. You can’t opt out of those fees.)
The consumer bureau also moved last year to limit late fees on credit cards to $8. The average late fee is around $30, but can be as high as $41, according to Wallet Hub. That rule is on hold, after banking and business groups sued. You could consider switching to a card with low or no late fees. The Citi Simplicity credit card charges no late fees, and the Discover It Cash Back card allows one fee-free late payment. (It charges up to $41 thereafter.)
What about payment apps and other digital tools?
Pay particularly close attention when using financial technology, or “fintech,” products, said Adam Rust, director of financial services at the Consumer Federation of America, including peer-to-peer payment apps.
Such “nonbank” firms are generally less closely regulated at the federal level than traditional banks, he said. The consumer bureau completed a rule in November allowing it to supervise large payment firms. That rule is being contested in court and is now under review by the bureau.
Ms. Hand at Consumer Reports said that while some payment apps had significantly improved their fraud protections, some types of scams remained a concern, particularly a variety where criminals trick someone into transferring money to them. Because the user “authorized” the transaction, she said, it can be difficult to recover the stolen funds.
If you’re paying someone new with an app and something doesn’t feel right, hold off and pay with another method, like a credit card, which carries robust fraud protections, she said.
Consumer Reports also suggests promptly moving cash balances out of payment apps to a federally insured bank account. Many people accumulate funds in the apps and treat the apps as if they were checking accounts. But it may not always be clear if the money is as protected as in a standard bank account.
Penny Lee, chief executive of the Financial Technology Association, which represents fintech companies including payment apps, said in an emailed statement that the industry was regulated “by a variety of consumer protection laws and agencies at the federal and state levels, including but not limited to the C.F.P.B.” Regardless of the change in administrations, she said, “those facts do not change.”
Do I have to worry about medical debt hurting my credit score?
In January, the consumer bureau completed a rule to remove unpaid medical debts from credit reports, saying such debt doesn’t accurately reflect a person’s creditworthiness and, because of the complexities of medical billing, is often reported incorrectly. (Hospitals and doctors typically don’t report unpaid bills to credit bureaus, but they may send them to collection agencies, which then report to the credit bureaus.) The rule was scheduled to take effect on March 17, but industry groups sued to stop it, and the bureau effectively agreed this month to delay the rule.
Some improvements, however, have already occurred. The major credit bureaus — Equifax, Experian and TransUnion — in 2022 voluntarily agreed to exclude medical debts that had been paid, as well as those that were less than a year old. That allowed consumers more time to clarify what was owed. And as of April 2023, the credit bureaus stopped including any medical debts for amounts under $500.
About 5 percent of Americans had unpaid medical debt as of June 2023, down from 14 percent in March 2022, the consumer bureau said.
If you are having trouble paying a medical bill, consumer experts recommend first confirming that the amount is accurate and, if it’s not, contesting it with your provider or insurer. If it is valid, see if your doctor or hospital will allow you to negotiate a lower amount by paying in full up front. If not, ask about payment plans or special assistance programs that can help cover the cost.
Where can I complain if I have a problem?
People “need to speak up about losing money in an unfair way,” said Nadine Chabrier, senior policy and litigation counsel with the nonprofit Center for Responsible Lending, a consumer advocacy group. Start by complaining directly to the company you are having a problem with, whether online or by phone.
You can also still submit a complaint to the consumer bureau. Although the bureau’s homepage displayed an “error” message this week, the online portal for accepting complaints was still available. Ms. Tescher noted, however, that “it’s not exactly clear” if someone is reviewing complaints. You can also complain to the bureau by phone, at 855-411-2372.
You can also contact the attorney general’s office in your state, Ms. Tescher said. Most have consumer protection arms.