CEA Report Exposes True Cost of CFPB’s Regulatory Burden 

It’s no secret that regulation drives up costs and hinders businesses from offering affordable services to customers. This fact has been more strongly underscored in the wake of a new report by the White House Council of Economic Advisers (CEA). The report estimates the total cost inflicted by the Consumer Financial Protection Bureau (CFPB) since its inception in 2011. The CEA found the CFPB passed an estimated $237-$369 billion in additional costs to consumers in the form of increased borrowing costs and reduced originations. 

The CEA’s study looked at increases in borrowing costs across different loan types ranging from mortgages to credit cards. Overall, the council found that the average borrower paid an additional $160-$253 in borrowing costs created by CFPB regulations. With respect to mortgages, mortgage origination costs increased by $1,100-$1,700 since the CFPB’s inception. Borrowers subject to CFPB regulations on mortgages “paid on average 4.3% more in interest” compared to borrowers not subject to CFPB regulations. Other findings revealed the time burden of CFPB paperwork amounted to around 29 million hours, costing businesses $21 billion.  

Another interesting finding from the report demonstrated the CFPB’s harmful fiscal costs. CFPB funding is a component of the Federal Reserve’s operating expenses, but the net income generated by the Fed’s portfolio is remitted to the Treasury General Account. This means that CFPB funding detracts from the amount the Fed remits to the treasury every year, resulting in less revenue which increases the fiscal burden through additional borrowing or increased taxation. Altogether, the CFPB’s cumulative fiscal cost to date amounts to over $13 billion.  

The CFPB, created by Dodd-Frank in the wake of the financial crisis, was meant to serve as a consumer protection agency for financial services. While other countries have one primary financial regulator, the US is the only country that has several, and oftentimes agencies have overlapping duties and responsibilities, such as bank examinations. Creating another industry certainly did not help the regulatory landscape in the financial sector.  It was granted rulemaking powers and expanded those powers to increase administrative burdens and compliance wherever it could. The report states “a combination of regulation, supervision, and the persistent threat of enforcement… has increased the cost of credit for lenders and borrowers.”  

Under the Biden Administration, the CFPB attempted to cap late fees, non-sufficient fund fees, and usher in open banking under section 1033. Many of these rules did not include cost estimates. 18 of the 46 final rules promulgated by the CFPB provided cost estimates or only 40% of the CFPB’s rulemakings.  

Under the new provision in the Big, Beautiful Bill, the CFPB’s budget was cut in half as the amount the agency could request was limited to 6.5% of the Federal Reserve’s operating expenses, rather than 12%. Under Interim Director Vought, the CFPB plans to cut down the agency’s headcount by 80%. The bureaucratic trimming not only helped save taxpayer dollars, but it also put an end to the CFPB’s arbitrary rulemakings. Even issues such as section 1033 which would have forced banks to hand over data for free to fintechs, the CFPB has committed to rewriting the original proposed rule to be more aligned with statute and re-emerge with a smaller scope than initially proposed.  

The CEA’s report vindicates common conservative concerns with the regulatory state. The CFPB inflicted monetary harm to lenders and borrowers, and consumers wound up footing the bill.  

Recent discourse about affordability should be centered around dismantling the structural costs priced into goods and services through agency mandates and supervision. Businesses can cut costs and still earn greater profits, benefiting both sides of the market with less government entrenchment. Whereas price controls have been proven to fail universally, deregulation provides an alternative path to lowering prices.  

The largest drivers of cost concerns include industries such as healthcare and education – industries where government presence in the marketplace does not go unnoticed. As rates on mortgages, auto loans, and other types of borrowing have increased, reducing structural costs associated with lending can help decrease borrowing costs and make lending more affordable to borrowers without requiring rate cuts from the Fed.  

The Trump administration is poised to make a big impact by continuing to remove government interference in the economy and allow markets to naturally lower prices. This holds true for the financial sector, which is one of the most regulated industries and would benefit from a systemic drawdown in the regulatory straitjackets previously imposed by the Obama and Biden administrations.  

ATR supports the Trump administration’s efforts to cut wasteful regulation across the government and return agencies to their original statutory duties.