The Cure May Be Worse Than the Disease: DOGE, the Trump Administration, and the Dismantling of the CFPB

In its relentless pursuit of dismantling the administrative state, DOGE has killed the Consumer Financial Protection Bureau. But in their zeal to eliminate what they see as bureaucratic overreach, they may have unknowingly unleashed a more formidable regulatory force: State AGs.

But they won’t be coming in an orderly, uniform way. Instead, state-driven enforcement may prove far more unpredictable, aggressive, and costly for the financial firms that once sought clarity from a single federal regulator. At the heart of this shift lies Section 1042 of the CFPA, which empowers state AGs to enforce federal consumer protection laws. And with the CFPB out of the way, state AGs have the authority and motivation to fill the void.

A more sophisticated approach—one that acknowledged political realities—would have been to keep the CFPB intact and shape its enforcement priorities and rulemaking to align with a deregulatory vision. Then the administration could control the narrative, ensuring that consumer protection remained under federal guidance while minimizing what it saw as regulatory overreach.

Instead, we'll have balkanized enforcement, where financial firms, fintechs, and crypto companies face disparate, conflicting state-level interpretations of federal law. This patchwork approach will stymie innovation as companies struggle to comply with 50 different sets of priorities and legal interpretations. Firms may end up spending more time navigating legal uncertainty than delivering new products and services.

Another unintended consequence is the disappearance of the billions of dollars historically returned to consumers through enforcement actions. Ironically, it is Red states—where consumer protection laws are often weaker and AGs less inclined to take aggressive action—that will feel this loss most acutely. Consumers in those states will no longer benefit from centralized enforcement efforts against predatory lenders, abusive debt collectors, or deceptive banking practices. Legal recourse will become a privilege enjoyed mainly by residents of Blue states, where AGs are likely to take a more active role in CFPB-style enforcement.

For all the populist rhetoric about making America great again, this move is not about empowering the average American. It is about removing obstacles for billionaires and corporations to operate without oversight. It is a feature, not a bug, of the administration’s broader goal: to eviscerate regulatory agencies without considering the downstream consequences. In doing so, the administration has created an unpredictable future where fintechs and crypto firms face greater uncertainty, increased compliance costs, and an inconsistent legal landscape.

In the end, the Trump administration may find that the cure was far worse than the disease.