The Impact of the Newly Established Priorities and Massive Proposed Reduction in Force (RIF) on CFPB Supervision

Our podcast show being released today features two former CFPB senior officers who were key employees in the Supervision Division under prior directors: Peggy Twohig and Paul Sanford. Peggywas a founding executive of the CFPB when the agency was created in 2010 and led the development of the first federal supervision program over nonbank consumer financial companies. Beginning in 2012, as head of CFPB’s Office of Supervision Policy, Peggy led the office responsible for developing supervision strategy for bank and nonbank markets and ensuring that federal consumer financial laws were applied consistently in supervisory matters across markets and regions.

Paul served as head of the Office of Supervision Examinations for the CFPB from 2012-2020 with responsibility for ensuring the credible conduct of consumer protection examinations.

The purpose of this podcast show was primarily to obtain the opinions of Peggy and Paul about the legal and practical impact of (i) a Memo to CFPB Staff from Mark Paoletta, Chief Legal Officer, dated April 16, 2025, entitled “2025 Supervision and Enforcement Priorities” which rescinded prior priority documents and established a whole new set of priorities which in most instances are vastly different than the Supervision Priority documents which guided former directors and (ii) drastic steps taken by CFPB Acting Director Russell Vought to minimize the functions and staffing at the agency. That included, among other things, an order calling a halt to all work at the agency, the cancellation of all supervisory exams and the creation of plans by Vought to reduce the agency’s staff (“RIF”) from about 1,750 employees to about 250 employees (including a reduction of Supervision’s staff to 50 employees) We also described the status of a lawsuit brought by the union representing CFPB employees and other parties against Vought seeking to enjoin him from implementing the RIF. The Court has granted a preliminary injunction which so far has largely prevented Vought from following through on the RIF. The matter is now on appeal before the DC Circuit Court of Appeals and a ruling is expected soon.

Peggy and Paul describe in detail the CFPB Supervision priorities under Director Chopra and compare and contrast those priorities with the new priorities established by Paoletta which are:

1.  “Shift back” CFPB Supervision to the proportions focused on depository institutions to nonbanks to where it was in 2012 -- to a 70% depository and 30% nonbank, compared to the more recent 60% on nonbanks to 40% depositories. 

2.  Focus CFPB Supervision on “conciliation, correction, and remediation of harms subject to consumer complaints” and “collaborative efforts with the supervised entities to resolve problems so that there are measurable benefits to consumers.”

3.  Focus CFPB Supervision on “actual fraud” where there are “identifiable victims with material and measurable consumer damages as opposed to matters where the consumers made “wrong” choices.

4. Focus CFPB Supervision on the following priorities:

·       Mortgages as the highest priority

·       FCRA/Reg V data furnishing violations

·       FDCPA/Reg F relating to consumer contracts/debts

·       Fraudulent overcharges, fees, etc.

·       Inadequate controls to protect consumer information resulting in actual loss to consumers.

5.  Focus CFPB Supervision on providing redress to service members and their families and veterans.

6. The areas that will be deprioritized by CFPB Supervision will be loans for “justice involved” individuals, medical debt, peer-to-peer platforms and lending, student loans, remittances, consumer data and digital payments. 

7. Respect Federalism” and not prioritize supervision where States “have and exercise” ample regulatory and supervisory authority and participating in multi-state exams (unless required by statute).

8.  Eliminate duplicative supervision where other federal agencies have supervisory jurisdiction

9.  Not pursue supervision under “novel legal theories.”

10.  For fair lending, ignore redlining or “bias assessment” based solely on statistical evidence, and only pursue matters with “proven actual intentional racial discrimination and actual identified victims.”

Peggy and Paul also discussed their skepticism as to whether CFPB Supervision will be able to comply with its statutory duties if the RIF is carried out and Supervision’s staff is reduced to 50 employees.

Alan Kaplinsky, former longtime Chair of the Consumer Financial Group and now Senior Counsel hosted the podcast.