Yuyun Lusiyani
In mid-July congressional testimony, Russell Vought, then acting head of the Consumer Financial Protection Bureau (CFPB), lauded a significant shift in the agency’s approach to financial oversight. He boasted of refashioning the CFPB’s strategy from an adversarial stance to a more "collaborative" model, particularly in its dealings with banks and financial companies accused of exploiting American consumers. This new direction, Vought claimed, represented a departure from what he termed the bureau’s past "thuggery," aligning with a vision of deregulation and "humility" in its interactions with the industry. However, this much-touted new philosophy has come under intense scrutiny following a series of critical service failures by a prominent financial technology (fintech) startup, Bilt, which Vought himself had cited as a success story of the new approach. The incidents have ignited a broader debate among consumer advocates and former CFPB officials about the efficacy of a "lighter touch" in safeguarding consumer interests.
The Architect of Change: Russell Vought’s Vision for the CFPB
Vought’s tenure at the CFPB, particularly under the Trump administration, was marked by an initial, aggressive push to dismantle the very agency he led. For the first 18 months of the administration, his efforts mirrored those he and other appointees undertook at the U.S. Agency for International Development, aiming to significantly curtail or eliminate the bureau’s power. These attempts included ordering mass layoffs, endeavoring to choke off the CFPB’s funding, and even terminating the lease on its headquarters, seemingly in pursuit of his stated vow to put civil servants "in trauma." These drastic measures, however, were largely blocked by federal courts, with one judge admonishing the administration for acting with "complete disregard" for congressional intent in establishing the agency.
Thwarted in his attempts at outright dissolution, Vought, a senior advisor to President Donald Trump, pivoted tactics. If the CFPB could not be eliminated, he reasoned, its operational mandate could be fundamentally reshaped. His vision transformed the traditional "watchdog" into what critics metaphorically described as a "golden retriever" – an entity friendlier to industry and significantly less aggressive in its enforcement. This strategic shift emphasized deregulation, a collaborative approach, and what Vought termed "humility" in dealing with companies that might harm consumers. The agency, originally conceived in the wake of the 2008 economic crash to protect consumers from predatory financial practices, was now poised to prioritize industry relations over stringent oversight.
A Case Study in Collaboration: The First Bilt Fiasco
As a prime example of this reformed approach, Vought highlighted Bilt, a fast-growing fintech startup that offers credit cards enabling users to earn rewards and build credit by paying rent or mortgages. Bilt had recently undergone a critical transition, dubbed "Bilt 2.0," which regrettably led to widespread confusion and financial distress among its customer base. The issues included late or double-charged rent payments, inexplicably frozen cards, and significant reductions in credit limits, leaving many customers in precarious financial situations. The company’s customer support infrastructure buckled under the deluge of complaints, with users reporting inability to bypass chatbots and receiving "completely wrong" or "demonstrably false" information from Bilt’s AI support system.
In the past, the CFPB would typically have deployed examiners to conduct thorough investigations, ensuring comprehensive relief for harmed consumers. This might involve scrutinizing Bilt’s technology platforms for flaws, questioning third-party contractors, or issuing subpoenas to unearth the root causes of the problems and prevent recurrence. However, the Trump-era CFPB under Vought took a markedly different course. "We reached out to the company," Vought informed Congress, "and before it got to the adversarial part of the process, they were able to fix their issues."
This "collaborative" engagement, led by political appointees rather than career executives and subject-matter experts, saw Victoria Dorfman and Elie Greenbaum, both Vought advisors, along with Deputy Enforcement Director Deborah Morris, meet with Bilt executives. Bilt provided assurances and data regarding their corrective actions. Following these interactions, the CFPB issued a "feel-good" statement on its website, celebrating its new approach and declaring that information provided by Bilt "appears to show" the firm was "back on track." Crucially, the statement explicitly noted that the bureau had not opened an investigation, nor had it crafted a consent decree or any other enforceable pledge to ensure compliance. The CFPB’s reliance solely on the company’s own findings and assurances, without independent verification or a root-cause analysis, marked a stark departure from its established supervisory protocols.
The Illusion Shattered: Bilt’s Second Failure
The effectiveness of this non-adversarial strategy was tragically undermined just two weeks after Vought’s congressional testimony. Bilt cardholders were again plunged into distress, this time receiving mistaken debt collection notices for phantom balances, which subsequently caused their credit scores to plummet. Nearly 1,900 customers, including Jordan Carey, a 30-year-old hospitality professional, reported significant credit score drops and the shock of receiving collection notices for debts they did not owe. Carey, who meticulously paid off his card, described being "sent into a panic" by a 50-point drop in his credit score. He, like many others, found Bilt’s customer service initially unaware or misinformed about the issue, blaming different banking partners. The incident sparked fresh waves of embarrassing news stories and angry complaints across social media platforms like Reddit, where users recounted receiving multiple false notices, some at critical junctures like closing on a new house.
In the wake of this second, significant breakdown, the CFPB was conspicuously absent. There was no public statement, no immediate intervention, leaving customers to grapple with the consequences largely on their own. This glaring oversight underscored the criticisms leveled against Vought’s approach: that an "ask-nicely" strategy is inherently insufficient to protect consumers when systemic issues arise. Former CFPB officials argued that the bureau’s traditional playbook, which included deploying examiners and conducting deep dives into operational flaws, could have prevented or at least more quickly identified the problems that led to Bilt’s second fiasco.
Historical Mandate and Evolution of the CFPB
To understand the gravity of these recent developments, it is essential to recall the CFPB’s origins. Established by the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010, the CFPB was a direct legislative response to the catastrophic 2008 financial crisis. The crisis exposed egregious gaps in consumer protection, with predatory lending, opaque financial products, and unchecked corporate practices contributing to widespread economic devastation. Congress created the CFPB with a clear mandate: to make markets for consumer financial products and services work for Americans by enforcing federal consumer financial laws and ensuring consumers are treated fairly.
The agency was designed with two primary operational tracks. The supervision track involved CFPB employees conducting regular, confidential visits to banks and other financial institutions. Their role was to monitor business practices, assess compliance with consumer protection laws, and proactively identify potential risks or violations. This process was intentionally confidential, allowing companies to correct issues without immediate public scrutiny, fostering a collaborative yet firm regulatory environment. A notable example involved the proactive monitoring of over 9 million student loan accounts during a servicer transition in 2021, where the bureau identified and rectified problems like inaccurate due dates before they escalated, later publishing findings to guide the industry.
The enforcement track, conversely, involved CFPB lawyers initiating public lawsuits or negotiating consent decrees – legally binding settlements – against companies found to have violated the law. These actions were public by design, serving as a deterrent and ensuring accountability. Both tracks were intended to be robust, independent, and centered on consumer protection. The shift under Vought, particularly the disengagement of career staff and the eschewing of these established oversight mechanisms, represented a fundamental reinterpretation of the bureau’s core mission.
Bilt’s Ascent and Stumbles in the Fintech Landscape
Bilt Rewards, founded in 2021, quickly ascended as one of the hottest startups in the personal finance sector. Its innovative premise – allowing consumers to build credit and earn rewards on rent and mortgage payments, typically their largest monthly expense – resonated deeply within the market. Bilt boasts 7 million customers and has raised nearly $1 billion in venture capital, achieving a staggering $10.75 billion valuation. Its impressive roster of investors includes private equity giant Blackstone, the Ontario Teachers’ Pension Plan, and a venture capital fund chaired by former American Express CEO Kenneth Chenault. The company’s co-founder, Ankur Jain, is estimated by Forbes to be worth $3.4 billion, and his high-profile 2024 wedding near the Great Pyramid of Giza, covered by People magazine, underscored the company’s meteoric rise.
Bilt’s initial success was significantly bolstered by a seven-year partnership with Wells Fargo, which issued Bilt-branded credit cards. Under this agreement, Wells Fargo absorbed processing fees for rent transactions and made payments to Bilt, viewing the partnership as a strategic avenue to attract new customers who might eventually seek mortgages. However, this lucrative arrangement proved unsustainable for Wells Fargo, with revenues falling short of projections and the bank reportedly losing as much as $10 million monthly. Consequently, Wells Fargo terminated the partnership four years early, a decision Bilt publicly disputed as an "inaccurate representation" of their collaboration.
This premature termination necessitated Bilt’s "2.0" relaunch in February, involving new financial partners. It was this transition that triggered the initial wave of customer complaints and service disruptions, drawing the attention of consumer groups and lawmakers. Protect Borrowers, a consumer advocacy group, sent a letter to the CFPB in March, demanding "immediate action." Senator Elizabeth Warren (D-Mass.) also wrote to Bilt, highlighting a 1,300% increase in CFPB complaints about the company in February and questioning whether Bilt’s immediate debiting of rent payments might violate disclosure requirements under the 2009 Credit Card Accountability Responsibility and Disclosure Act. While Bilt dismissed Warren’s assertions as "incorrect," the scrutiny underscored the serious nature of the service failures.
A Shift in Oversight: The Vought-Era CFPB’s Operational Changes
The handling of the Bilt incidents revealed a systemic shift within the CFPB under Vought. Beyond the specific case, the bureau’s overall operational tempo and internal directives reflected a clear move towards deregulation. ProPublica reported that since the Trump administration took office, the CFPB has brought only one enforcement action, which concluded with a consent decree and a symbolic civil penalty of $1. Concurrently, dozens of cases initiated by previous administrations were dismissed or resolved.
Internal reports and accounts from current and former CFPB staff painted a picture of an agency whose oversight capabilities were being deliberately eroded. A supervisor reportedly warned subordinates of "most unpleasant" consequences if they were too aggressive. The bureau also announced it would cease including narratives in consumer complaints published in its public database, effectively obscuring the human stories behind the statistics and reducing transparency.
Furthermore, internal resources critical for robust oversight were significantly curtailed. The number of policy attorneys, crucial for guiding supervision work and identifying legal violations, reportedly dwindled from 40-50 to a mere five. Examiners, once empowered to access primary source data, were allegedly restricted to "check the checker," meaning they had to rely on a company’s own findings rather than conducting independent audits. Compounding this, examiners faced immense pressure to complete their work swiftly, with allocated examination periods shrinking from eight weeks to just three. These changes collectively suggest a deliberate strategy to diminish the agency’s capacity for in-depth, proactive, and independent oversight, aligning with the "deregulatory" philosophy articulated by Vought.
Voices of Concern: Critics Weigh In
The Bilt controversy served as a stark demonstration of the consequences of this altered regulatory posture, drawing sharp criticism from those who champion consumer protection. Mike Pierce, a former CFPB official who now leads the consumer advocacy group Protect Borrowers, did not mince words. "What we saw Vought do with Bilt is innovative — and I don’t mean that as a compliment," Pierce stated, viewing the approach as indicative of a wholesale deregulatory mindset akin to that seen during the Reagan presidency. He argued that the bureau was actively retooling its supervisory and enforcement tools to serve a less interventionist, pro-industry agenda.
Austin Hinkle, a former supervision lawyer and section chief at the CFPB, echoed these concerns, emphasizing the critical difference between a company self-reporting fixes and the bureau conducting a thorough root-cause analysis. Hinkle explained that while a company can easily identify harmed customers and offer superficial relief, understanding what caused the problem – identifying faulty systems, scrutinizing third-party processors, analyzing communications – is paramount for preventing future incidents. "The press release just looks like they’re providing air cover for the company without directing real fixes or systematic changes," Hinkle observed regarding the CFPB’s public statement on Bilt’s first crisis. The recurrence of problems, he noted, strongly suggested that the normal supervisory process, designed to prevent such issues, had failed.
The Broader Implications for Consumer Protection
The Bilt episode raises profound questions about the future of consumer protection in the United States. If the CFPB, a federal agency specifically tasked with safeguarding consumers, adopts a "collaborative" and non-adversarial stance that shies away from rigorous investigation and enforcement, what becomes of its mission? The implications are far-reaching. A reduced emphasis on root-cause analysis means that systemic flaws in financial products and services may go unaddressed, leaving millions of consumers vulnerable to repeated harm. Without independent verification of company claims, there’s a heightened risk that firms might offer temporary fixes without truly resolving underlying issues, as arguably happened with Bilt.
Furthermore, the curtailment of policy attorneys, restricted examiner access, and pressure for rapid examinations could lead to a significant decline in the agency’s institutional knowledge and its ability to effectively monitor an increasingly complex and rapidly evolving financial landscape, particularly in the fintech sector. The decision to remove consumer complaint narratives from public view also erodes transparency, making it harder for the public, media, and advocacy groups to track emerging problems and hold companies accountable. This "lighter touch" could inadvertently foster an environment where financial institutions face fewer consequences for missteps, potentially emboldening risky practices and undermining the very purpose for which the CFPB was created.
Looking Ahead: The Future of the CFPB
Russell Vought’s term as acting director concluded in early August, though he remains a senior advisor to the Trump administration. The administration’s nominee for full-time director, Brian Johnson, a former CFPB appointee and executive at Capital One bank, has signaled a clear alignment with Vought’s philosophy. At his confirmation hearing, Johnson explicitly stated that he could not recall a single decision made by Vought at the CFPB with which he disagreed. This continuity suggests that the "collaborative" and deregulatory approach pioneered by Vought is likely to persist, further embedding these operational shifts within the agency’s framework.
The overarching question remains: If a presidential administration cannot legally eliminate the CFPB, what will become of its effectiveness when led by officials who fundamentally believe the agency is unnecessary? The Bilt incidents serve as a critical early test, suggesting that a strategy built on trust and self-correction, without robust independent oversight and enforcement teeth, may ultimately fail to deliver on the bureau’s core mandate to protect American consumers from financial exploitation.
Bilt’s Response and Ongoing Challenges
Following the second round of customer complaints involving mistaken debt collection notices, Bilt attributed the issue to an "earlier iteration" of its credit cards that had ceased accepting new customers. The company stated it alerted the collection agency and credit bureaus to the error and awarded affected customers an additional 2,500 points, valued at $25 to $50, for their trouble. A Bilt spokesperson asserted, "We held the agency accountable, made things right for every customer involved, ensured each was notified directly and provided direct customer support along with courtesy Bilt Points."
However, affected customers like Jordan Carey remained unimpressed, arguing that 10,000 points, equivalent to $100 to $200, would have been a more appropriate compensation from a "multibillion-dollar company." While Carey’s credit score was restored within days, the emotional distress and time spent rectifying the error highlighted the ongoing challenges faced by consumers when relying on the good faith of companies and a regulatory environment that appears to prioritize collaboration over stringent enforcement. The Bilt saga thus stands as a cautionary tale, illuminating the potential pitfalls of a deregulated approach to consumer financial protection.
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