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CFPB lawsuits against major banks face uncertainty after

leadership change

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Critics argue CFPB's power and accountability issues since

2010

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Senator Warren protests recent CFPB actions

By Mike Spector and Douglas Gillison

NEW YORK/WASHINGTON, Feb 10 (Reuters) - The Trump

administration's idling of the Consumer Financial Protection

Bureau (CFPB) left in limbo significant cases the agency brought

against companies and large financial firms in the waning days

of President Joe Biden's time in office.

The CFPB in January sued Capital One, accusing the bank of

illegally cheating consumers holding its flagship "high

interest" savings account out of more than $2 billion by

freezing their rate.

In December, the agency sued the likes of Walmart ( WMT ) and big

banks including JPMorgan Chase ( JPM ), Bank of America ( BAC )

and Wells Fargo ( WFC ). The agency accused Walmart ( WMT ) and

a workforce payments company of forcing delivery drivers into

using accounts that cost them more than $10 million in "junk

fees."

The lawsuit against the banks, meanwhile, said they failed

to safeguard consumers from widespread fraud on payments

platform Zelle. The agency also sued the company operating

Zelle.

But the fate of those lawsuits, which have been filed in

recent months, has been put into significant doubt following the

abrupt and dramatic upheaval at the watchdog.

Russell Vought, President Donald Trump's recently confirmed

Office of Management and Budget director who is now the CFPB's

acting head, told its nearly 2,000 employees to stay away from

the office and do no work, according to an email seen by

Reuters.

"The enforcement actions, all of them, are going to be shut

down," said Chris Peterson, a University of Utah law professor

specializing in consumer finance.

The agency could potentially withdraw the lawsuits, though

federal judges overseeing them normally would have to approve

any actions parties in the cases take.

Capital One did not immediately respond to a request for

comment. The financial firm previously said it disagreed with

the claims and would defend itself in court while expressing

disappointment in what it described as a pattern of lawsuits

coming from the agency before a change in U.S. presidential

administrations.

Walmart ( WMT ), JPMorgan ( JPM ) and Wells Fargo ( WFC ) declined to comment. Bank

of America ( BAC ) did not immediately respond to a request for comment.

Walmart ( WMT ) previously rejected the CFPB's allegations and accused

the agency of failing to allow time for it to offer explanations

and rushing to sue.

JPMorgan ( JPM ) CEO Jamie Dimon has been critical of the CFPB and

vowed to oppose measures he contends would not make banks safer.

Bank of America ( BAC ) said it opposed the CFPB lawsuit when it was

filed, describing it as imposing huge new costs on banks and

credit unions offering free Zelle service to clients. Early

Warning Services, the company that operates Zelle, pointed to an

earlier statement in which it called the case legally and

factually flawed, and driven by political factors.

Billionaire Elon Musk, tapped by Trump to downsize the

federal bureaucracy as part of the Department of Government

Efficiency (DOGE), has been openly critical of the CFPB.

He is also making a push to offer consumer direct payment

options on his social-media platform X. Visa agreed to partner

with X on the XMoney Account the platform intends to debut later

this year, X's chief executive said in a social-media post in

January.

"There is a direct, deep conflict of interest of overseeing

the dismantling of the consumer protection financial regulator

and starting up a large complex consumer financial business,"

Peterson said.

DOGE and Musk did not immediately respond to requests for

comment.

"The most recent communications from interim director Vought

to the CFPB staff instruct them to halt work on all rulemaking,

enforcement, investigation, settlement, guidance, and

supervisory activities," Mallory Sorelle, a Duke University

public policy professor, said. "That pretty much encompasses all

of the agency's work to protect consumers."

The CFPB has drawn criticism from Republican lawmakers and

the financial sector that it is too powerful and lacks

accountability since its inception in 2010.

The complaints escalated under Rohit Chopra, the agency's

most recent director during the Biden administration. Critics

argued he tested the boundaries of legal activity at the agency

with his aggressive policing of the financial sectors.

The agency's supporters contend it has been a critical

safeguard for consumers, reaping billions in repaid funds to

wronged parties.

Senator Elizabeth Warren of Massachusetts, the top Democrat

on the Senate Banking Committee who helped set up the agency, on

Monday joined a crowd of protesters in front of the CFPB's

building. The CFPB is the one that "caught the crooks and made

them give back so far $21 billion," she said.