New consumer protections could end soon. Here’s what you need to know. - The Washington Post

New consumer protections could end soon. Here’s what you need to know. – The Washington Post

2025-04-29T00:32:24Z

With the shuttering of the Consumer Financial Protection Bureau, rules are changing on bank overdraft fees, medical debt’s credit impact, and more.

As President Donald Trump’s cost-cutting crusade targets the government agency tasked with financial oversight for consumers, dozens of regulations have been caught in the crosshairs. The Consumer Financial Protection Bureau first suspended many of its services in February after an order from the Trump administration’s U.S. DOGE Service. Since then, its workers have been tangled in a court battle over whether the president can effectively shutter a federal agency without congressional approval, while state regulators, lawmakers and advocacy groups fight over its legacy.

In the most recent twist, the Trump administration attempted to fire more than 1,400 of the CFPB’s remaining workers earlier this month, despite a court order that largely barred it from terminating employees. A federal judge then temporarily blocked the layoffs, and on Monday, the U.S. Court of Appeals for the D.C. Circuit partially lifted a previous order that CFPB officials had used to justify the cuts. In short, the administration’s attempt at mass firings is halted for now, but the outcome remains uncertain.

As the legal battle unfolds, some CFPB rules — many of which already faced challenges in court — might remain on hold for several years. Others might be overturned outright or wither away because of weak enforcement. Mark Paoletta, the consumer watchdog’s chief legal officer, said in a memo that all CFPB enforcement and supervision priorities have been rescinded as part of an effort to slash the agency’s oversight efforts.

Here’s what you need to know about the state of some of the CFPB’s best-known consumer protections.

Bank overdraft fees could go up

In December, the CFPB approved a rule requiring large financial institutions to limit overdraft fees to $5; offer overdraft protection as a courtesy; or treat these fees as loans. This cap was crafted on grounds that overdraft fees disproportionately harm low-income communities and create a cycle of debt, and it took aim in particular at big banks, which had often imposed fees of up to $35. In 2023, those institutions earned $5.8 billion in revenue from overdraft charges.

The CFPB had estimated its rule — part of a broader Biden administration initiative to crack down on “junk fees” — would save 23 million consumers about $5 billion annually. But the rule prompted immediate pushback from financial industry groups, which sued the agency in December on grounds it exceeded its regulatory authority. They also claimed the fees are clearly disclosed to consumers and offer flexibility to people who can’t access traditional credit.

The Republican majority in Congress is now close to scrapping the cap. Last month, lawmakers passed a resolution to overturn the overdraft rule using the Congressional Review Act (CRA), which allows them to examine and rescind rules enacted by federal agencies. If Trump signs the resolution into law, as expected, it will bar federal agencies from crafting regulations that are “substantially the same” as the disapproved rule unless specifically authorized — diminishing national efforts to curb overdraft charges.

That said, the agency also reported that annual revenue from overdraft fees had fallen by $6.1 billion between 2019 and 2023 without government intervention — with some large banks, such as Capital One and Citibank, curbing fees soon after the CFPB began investigating. And dozens of financial institutions have taken related steps, such as limiting the number of daily overdraft charges.

Mike Litt, who leads the left-leaning U.S. Public Interest Research Group’s Consumer Campaign, said financial institutions could step away from offering overdraft protections — but he thinks they probably won’t because it would be “bad business.” Some states may also do more to regulate state-chartered banks and credit unions, most of which were too small to fall under the CFPB’s oversight.

Oversight on digital payment apps could diminish

The CFPB in November approved a digital payment app rule requiring nonbank financial companies handling more than 50 million transactions annually — such as Venmo parent PayPal and CashApp parent Block — to follow the same rules as traditional banks and credit unions, such as capital requirements and investment restrictions.

That regulation might also get scrapped: Republican majorities in both chambers passed a CRA resolution this month to overturn the rule and now are just waiting for Trump’s signature. Lawmakers took the side of companies such as Amazon and Google, which had argued that heavier regulations would be onerous and that payment apps are already well-regulated at the state level.

Consumer advocates have countered that tighter rules are more important than ever.

The lack of federal oversight creates a “significant gap” in the country’s financial ecosystem, especially as these technologies boom in popularity, said Adam Rust, the director of financial services at the Consumer Federation of America. “Clearly, these companies want to do more than just transfer money … but they’re trying to do it without the kind of supervision we need for banks.”

Consumers could face significant hurdles solving disputes with payment apps now that federal regulation has stumbled, he added.

But some apps might still court regulation if they want to offer services typically reserved for traditional financial institutions, such as issuing debit cards and loans. They could also run into state-level money-transmitter laws that govern payment apps, even though their impact is limited, Rust said.

Credit reports might still leave off medical debt

Just before Trump took office, the CFPB finalized a rule that would prevent credit reporting agencies from including unpaid medical bills in credit reports and prohibit lenders from considering medical debt when making credit decisions.

The regulation was crafted after multiple studies, including from the CFPB, found that medical debt doesn’t predict creditworthiness as well as other forms of debt and disproportionately affects people of color. The CFPB estimated its rule would remove about $49 billion in medical bills from the credit reports of 15 million Americans.

Republican lawmakers introduced a CRA resolution to repeal the rule in March. In contrast to some of the other CFPB regulations, however, they didn’t rush to act on medical debt — leaving some advocates of the rule optimistic.

Meanwhile, multiple trade associations have filed suit to declare the regulation unlawful and set it aside. In February, a federal judge in Texas paused consideration of that case until June, which the new Trump-appointed CFPB leadership agreed to. If the plaintiffs succeed, their win will overturn the regulation.

More broadly, the idea behind the rule has garnered bipartisan support because medical debt is so pervasive in the U.S., said Elisabeth Benjamin, the vice president of health initiatives at the Community Service Society of New York.

There has also been state-level momentum. In 2023, the three major credit reporting agencies, Experian, Equifax and TransUnion, stopped reporting medical debt under $500 on credit reports. Soon after, Colorado became the first state to prohibit medical debt from these reports, and New York, Illinois, New Jersey, California and others followed suit.

It could get harder for consumers to seek damages

In February, the CFPB dismissed “with prejudice” — meaning the cases can’t be refiled later — separate legal actions against Capital One, Vanderbilt Mortgage & Finance, Rocket Homes Real Estate and the Pennsylvania Higher Education Assistance Agency.

Last month, it also dropped its lawsuit against Zelle parent Early Warning Services, as well as Bank of America, JPMorgan Chase and Wells Fargo, for failing to protect consumers from fraud on the payment platform.

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