Few federal agencies have experienced as much turmoil in recent weeks as the Consumer Financial Protection Bureau, which finds itself in the crosshairs of a Trump administration effort to “delete” it.

In early February, Office of Management and Budget Director Russ Vought was appointed the CFPB’s acting chief, and within a day, ordered employees to halt their work. The agency’s home page also displayed a “404 error” for several weeks, until Thursday.

The agency has begun telling workers to resume work that’s required by law, but even that has spotlighted miscommunication among CFPB leaders and confusion for staff.

David Silberman, a visiting lecturer at Yale Law School, was a senior CFPB administrator for a decade, helping to stand up the agency that was created in 2011. 

Last month, in an opinion piece directed toward financial institutions, Silberman warned of potential negative outcomes they might encounter if the Trump administration – which has called the CFPB “another woke, weaponized arm of the bureaucracy” – were to abolish the agency.

The conservative Project 2025 blueprint, for which Vought has been credited as an architect, calls for Congress to shutter the bureau and return its consumer-protection functions to banking regulators and the Federal Trade Commission.

Payments Dive spoke with Silberman this week. 

Editor’s note: This interview has been edited for clarity and brevity.

PAYMENTS DIVE: Explain what you expect would happen if the administration were to effectively shutter the CFPB, or “delete” it, to use Elon Musk’s term.

DAVID SILBERMAN: One effect is you have now created essentially a regulatory vacuum when it comes to any kind of (CFPB) rulemaking, adjusting of rules, adapting rules, because all rulemaking authority that previously existed in the Federal Reserve Board and most of the rulemaking authority that previously existed at the Federal Trade Commission and at Housing and Urban Development have all had been transferred to the CFPB. So if somehow the CFPB disappears, there is nobody to adjust the rules, modify the rules, even update inflation adjustments and things like that. So that’s one big piece. 

And then the other piece is that you tilt the playing field. Ironically, the community banks wind up the biggest (regulatory) losers because they’re subject to full supervisory and enforcement authority. The large banks come in second place, because there’s some supervisory authority in the credentials around certain statutes, but not around a lot of others. And there’s “backup enforcement authority” in the (Securities Industry and Financial Markets Association) prudential regulation, so they have some enforcement authority. And probably non-depositories wind up in the best shape, because there’s no supervisory authority at all, and there’s some FTC enforcement authority, but FTC has limited resources.

Are the large banks thinking about this potential regulatory vacuum you cite and perhaps unintended consequences of neutralizing the CFPB?

There’s certainly trade associations who, in their heart of hearts, know that this would not be an advantageous world for the banks if this were to happen. There are folks who want greater clarity as to what the law does and doesn’t allow. If so-called rulemaking by enforcement is the bane of banks’ existence, this would be an invitation toward that, because the enforcement authority would exist, to some extent; the rulemaking authority, not at all.

Could a dramatically smaller CFPB carry out its mandated responsibilities under the law that created it?

That depends in part on how you understand, what are the statutory responsibilities? The first sentence of the statute is, “there is established the CFPB, which shall regulate the offering and pro-rules vision of consumer financial products and services.” So you can treat that as a command to do regulation as needed. That’s not saying you have to write this rule or that rule. When you get one level deeper, it says the bureau shall seek to implement and, where applicable, enforce federal consumer financial law. That would suggest that you need to have a rulemaking capability, supervisory capability, and enforcement capability.

If you take a much narrower view and say that you only have to do those things where there's a specific “shall” next to a specific function, even then you have a lot of “shalls.” There's a “shall” with do research. There's a “shall” for monitoring markets. There’s a “shall” for consumer response. There’s a “shall” for supervision of non-depository institutions. It has various reports which are statutorily required reports. Even on that narrowest view, you couldn’t do it with five people, right? How many people you need depends in part on what you view as the mandatory responsibilities, and in part on what level of service you’re going to provide in doing those things.

Where do you see Americans being left unprotected in the payments realm most immediately if the CFPB is no longer enforcing rules that pertain to payments?

I don’t have a good sense as to where the impact would be felt first in the world of payments. I may be naive, but I don’t believe there are folks who are champing at the bit to say, “Look, we’ve been told not to do this, but if there’s nobody watching, we’re gonna see what we can get away with.” CFPB is a backstop that prevents standards from degrading over time, and surfaces practices that may be questionable, and you lose that.

What’s an example of potential consumer risk?

We had the litigation against Zelle and Early Warning Services. (The CFPB dropped the case Tuesday.) I don’t know who would have won, but it raised the question of, before you launch an app like this, what do you need to do to make sure that you’re going to minimize the chance of people being taken advantage of by fraudsters and all that? That’s an important conversation to have, and the CFPB being there would mean in the future, the next time somebody went to launch one of these things, some compliance people would have be able to say, “Hey, I understand speed is one value, but we need to think about A, B, C and D.” If there’s no CFPB there, one part of the dialogue is missing within the financial institution, and I think that’s a net loss to consumers.