• Key insight: The CFPB's draft plan eliminates all supervision of nonbanks, which bankers oppose. 
• What's at stake: The plan mandates a radical reduction in supervision and oversight with the agency banning reputational risk and eliminating compliance.
• Forward look: The CFPB is cutting all nonessential roles at the agency, taking an axe to the bureau's staff. 

Banks are big supporters of the Consumer Financial Protection Bureau's deregulatory agenda with one glaring exception: the pullback from supervising nonbanks.

In comment letters responding to the CFPB's five-year strategic plan, bankers heaped praise on acting CFPB Director Russell Vought. But they also told him outright that nonbank supervision, which he scrapped early last year, is congressionally mandated by law. Bankers want the bureau to refocus on nonbanks and the epidemic of fraud and scams. 

The complaints echo comments from bankers last fall when the idea was first unveiled.

"Fraud and scams are a significant and growing concern; indeed, we believe that helping consumers recognize and avoid fraud is the consumer protection issue at this time," said Hallee Morgan, vice president and senior counsel for regulatory compliance and policy at the American Bankers Association. Friday was the deadline for comment letters on the CFPB's draft five-year plan. 

Lindsey Johnson, president and CEO of the Consumer Bankers Association, suggested that the CFPB use its civil-penalty fund, which currently holds $3.8 billion, to target the epidemic of financial scams. She suggested that the bureau's consumer complaint portal introduce scam-related tags so the bureau can track consumer harm from unauthorized money transfers. And Johnson also tied widespread fraud to the pullback in nonbank supervision. Congress unequivocally mandated nonbank oversight, she said, which the CFPB is not performing despite the law. 

"This retreat from the CFPB's statutory mandates would ultimately increase the risk of fraud and data breaches in markets where sensitive consumer financial data is already insufficiently protected," Johnson wrote. 

With no oversight, nonbanks have a competitive advantage over banks, which are required to comply with 18 consumer protection laws.

"Congress put a further thumb on the scale when it came to nonbank supervision," Johnson wrote, citing a section of the Dodd-Frank Act that says the bureau "shall require reports and conduct examinations of nonbanks on a periodic basis."

Johnson said the bureau's supervisory authority over large banks is framed in "permissive terms — that the bureau has the authority to examine them. 

"That asymmetry was not accidental," she said. "Congress understood that nonbanks, unlike banks, would not otherwise be subject to federal consumer financial supervision, and it made that supervision mandatory accordingly. A Strategic Plan that treats nonbank supervision as discretionary inverts a congressional choice that was deliberate and textually expressed."  

The ABA's Morgan agreed.

"State supervision of nonbanks, alone, is uneven and likely to leave 'gaps' where certain nondepositories are not subject to any supervision," Morgan wrote in a comment letter. "This is particularly important in a time of rapid fintech growth and expansion into credit and other products, and is best achieved through robust federal supervision of nonbanks."

A coalition of Democratic attorneys general called out Vought when claiming the CFPB's actions in the past year have run counter to its mission and the interests of American consumers. 

If finalized as written, the plan "would continue this abdication of statutory duty by severely reducing staff, undermining the agency's statutory obligation to supervise financial institutions, placing a greater burden on states to supervise entities and enforce consumer protection laws, and would result in less relief and protection for consumers."

Vought is also the director of the Office of Management and Budget, and a key architect of Project 2025, the Trump administration's blueprint for cutting the federal workforce. He was stopped by a court injunction from firing up to 90% of the CFPB's staff last February. A federal appeals court is expected to weigh in soon on whether he can move forward with a new reduction-in-force plan. 

Vought was sued last year by the National Treasury Employees Union for trying to dismantle an agency created by Congress. Under his latest plan, the CFPB would retain just 556 employees, a 53% drop from current staffing levels. When Trump took office a year ago, the bureau had 1,723 employees. Supervision staff would be cut to just 77 employees, from 523 a year ago, while enforcement faces an 80% cut to 50 attorneys and staff, from 254 a year earlier, according to court filings. Last April, Vought rescinded the bureau's supervisory and enforcement priorities and said the agency would cede those areas to state regulators. 

Tom Feltner, associate director of consumer policy at Americans for Financial Reform and a  former policy fellow in consumer engagement at the CFPB, said the five-year plan is more akin to "a statement of values," from the Trump administration. He called the plan "performative," and suggested that the real strategic plan for the CFPB came from Vought's Project 2025. 

"The plan is to shut down the agency and if that is halted or delayed then they are prioritizing the rollback of the small business data disclosure rule, and scaling back the ability to enforce consumer protection," Feltner said. "I think that the values expressed here are pretty clear that the current CFPB is executing a dangerous retreat from economic and civil rights for the very people it's charged to protect. This is a huge step back, a huge retreat, from the very mandate that Congress gave the CFPB 16 years ago."