FTC Sees Dismantling of Consumer Watchdog as Growth Opportunity

The Federal Trade Commission, charged with enforcing consumer protections, is seizing on an opening as the Trump administration dismantles the Consumer Financial Protection Bureau.

That means fintechs, payday lenders, and debt collectors may face greater FTC scrutiny over privacy and accuracy issues even as the bulk of the CFPB’s consumer mandate shrivels.

Taking on some financial oversight helps get the FTC back to its “historically important role,” said Chris Mufarrige, director of the agency’s Bureau of Consumer Protection.

“The Fair Credit Reporting Act, that was the nation’s first privacy law, and we’re also reinvigorating that,” said Mufarrige, who was also a former senior adviser at the CFPB.

Consumer advocates and former officials, however, are skeptical that the FTC can do enough to fill the gaps.

“We were very active in this area, but we were a partner to the CFPB when it came to protecting consumers in the financial services space, and the CFPB is a much larger agency,” said Sam Levine, former director of the FTC Bureau of Consumer Protection. He said that the agency’s dozens of staff dedicated to financial services can’t replace a CFPB with hundreds of enforcement attorneys and examiners prior to this year.

Congress created the CFPB because other regulators, including the FTC, failed to pick up on harmful lending and practices that culminated in the 2008 financial crisis, said Patrick Woodall, the managing director for policy at Americans for Financial Reform.

“The FTC does not have additional authority to address those issues that it didn’t have prior to the financial crisis,” he said.

Back to Basics

Before the CFPB was founded in 2011, the FTC was the top watchdog of nonbank financial institutions. But the CFPB has since taken the lead in areas such as mortgage servicing, credit reporting, and finance.

The Trump administration has repeatedly tried to fire up to 90% of the CFPB’s staff. Now that Congress has gutted the CFPB’s funding, widespread layoffs at the agency are a near certainty.

The CFPB’s Trump-appointed leaders are also moving to slash the number of debt collectors, credit reporting companies, nonbank auto lenders, and international remittance providers it supervises.

All of that will boost the FTC’s role in those markets even as questions persist about its ability to police them.

“Without the CFPB, you’re removing the only enforcer that has done anything to protect consumers” from financial predators and discriminatory lending practices, Woodall said.

But the FTC does have some experience and authority in areas the CFPB is pulling back from.

The Fair Credit Reporting Act, also enforced by the CFPB, protects the accuracy and privacy of information collected by consumer credit reporting companies, medical information companies, and tenant screening services. Focusing on the law is a natural step for the FTC, which has touted its work enforcing clear congressional mandates.

In 2023, the FTC and CFPB reached a settlement with TransUnion for $15 million over allegedly failing to ensure the accuracy of tenant screening reports.

“It’s a time-tested and litigation-tested statute, the OG of privacy statutes,” said Ian Barlow, a lawyer at Wiley Rein and former deputy director of the FTC’s Office of Policy Planning. “The FTC is the historic first interpreter, first enforcer.”

Another cornerstone of the FTC’s mandate stems from the Gramm-Leach-Bliley Act, which requires financial institutions to safeguard sensitive data.

Key Differences

Unlike the FTC, the CFPB can directly supervise and examine large financial institutions, create comprehensive rules for consumer financial products, and handle individual consumer complaints against financial service providers. The CFPB—which has returned around $20 billion to consumers since opening its doors nearly 15 years ago—also has broader authority in specific areas such as mortgage lending, payday loans, student loan servicing, and debt collection.

The FTC, on the other hand, must often rely on civil investigative demands to compel businesses to share documents or answer specific questions.

Having direct access to companies allows the CFPB to get compliance changes and customer restitution without formal enforcement actions.

Supervision is “important to enforcement,” Woodall said. “It’s important as a sentinel to see what’s happening to people.”

“That’s a huge distinction between the FTC and the CFPB,” he said.

While Mufarrige’s ambitions open the door for the agency to return to its pre-CFPB roots, the agency will still have to be “selected and targeted” in enforcing the law, said Lucy Morris, partner at Hudson Cook LLP, a former assistant to the director of the FTC’s Bureau of Consumer Protection, and a former deputy enforcement director at the CFPB.

“The FTC has always been a little engine that could,” she said. “They do a lot with limited staff.”

Mufarrige wrote in a follow-up email that “new cases take time to build.”

“We work with many state and federal partners when appropriate and expect we will continue doing so,” he wrote with regard to the agency’s relationship with the CFPB.

The CFPB didn’t respond to a request for comment.

Looking Forward

In its first eight months, the Trump FTC under Chairman Andrew Ferguson has taken aim at deceptive debt collections and fintechs.

In March, the agency levied a $17 million fine against fintech cash advance firm Cleo AI. In July, the FTC won a court order halting practices by seven companies and three individuals that allegedly violated several statutes, including the Fair Credit Reporting Act and the Gramm-Leach-Bliley Act, to swindle older consumers and veterans into a scam claiming to reduce consumer debt.

However, the FTC under Ferguson has yet to take new action against data brokers or credit reporting companies. Trump’s CFPB, meanwhile, withdrew a Biden-era proposal that would’ve tightened rules for data brokers after industry groups objected.

Despite the uneven enforcement landscape, a wide range of companies handling consumer data—including people search companies and data brokers—should be assessing their compliance under the FCRA, Barlow said.

“Any company that sells consumer data that includes financial details should check to see if they’re covered,” he said.