Experts fear unfair influence for Musk in CFPB stoppage

Within an hour of Treasury Secretary Scott Bessent being named acting director of the Consumer Financial Protection Bureau on Feb. 3, the agency’s staff received a memo ordering them to stop all rulemakings and enforcement activity. 

Noticeably absent from Bessent’s stop-work order was any mention of supervision, the bread-and-butter of regulatory work that involves on-site exams and date-gathering. Many banking lawyers said they breathed a sigh of relief thinking supervision would continue as normal.  

One day later, the memo was updated with the directive to staff “not to initiate supervisory designation proceedings or designate any nondepository institution for supervision.” The staff also was ordered to stop supervising all nonbanks, including digital payment apps such as Block’s CashApp, PayPal, Zelle and Amazon.

Many experts fear that the directive not to supervise new nonbanks reflects an effort by Elon Musk — the erstwhile head of the newly formed Department of Government Efficiency and owner of social media platform X — to forestall any attempt by the CFPB to investigate or supervise the new payments partnership between X and Visa. The partnership with Visa Direct empowers X’s “X Money” account with the infrastructure to become a global payments powerhouse. Visa will provide payments support for the X’s financial app, contributing to its ability to scale quickly to millions of users. The deal is part of Musk’s goal of turning X into an “everything app” that will allow users to store money and make payments on the platform.  

“The actions of Musk and his DOGE operation at CFPB in accessing confidential agency data, along with Vought’s efforts to gut the agency and prevent additional nonbank regulation,  raise huge conflict of interest issues, which in normal circumstances would cause a national uproar,” said Todd Baker, a senior fellow at the Richman Center for Business, Law & Public Policy at Columbia Business School and Columbia Law School.

“While X’s plans to enter financial services would obviously benefit from the end of CFPB oversight, no one has any idea what use Musk is making of confidential CFPB competitor data, which also could be of great value to his businesses,” Baker said.

While the first Bessent memo was relatively normal for an incoming administration, the second updated memo had one bullet point added that was narrow and technical. Bank lawyers at the time were parsing the language to determine what the new administration was trying to stop.

“That instruction was very specific on a very niche issue, but it only prevented new supervisory designations of tech companies and fintechs,” said James Kim, a partner at the law firm Troutman Pepper. 

Three days later, the newly formed Department of Government Efficiency — spearheaded by billionaire entrepreneur and Trump advisor Elon Musk — sent several employees to the CFPB’s Washington headquarters, while Office of Management and Budget Director Russell Vought was tapped to be the second acting CFPB director. Vought immediately told all CFPB employees to stop all work, including supervisory work, rulemaking and enforcement. All CFPB employees have been placed on administrative leave pending legal challenges. 

The Treasury Department did not respond to a request for comment. The Department of Government Efficiency, or DOGE, could not be reached for comment. The CFPB under the Trump administration no longer responds to media inquiries. 

Visa, the largest U.S. credit card network that processes $16 trillion of payments annually, is the first partner of the X Money Account. CEO Linda Yaccarino announced the partnership in an X post on Jan. 28. The X Money service is licensed in 41 states and registered with the Financial Crimes Enforcement Network, or FinCEN. Andy Gerlit, a Visa spokesman, said the app is expected to launch later in 2025 and will compete against other payment platforms like Venmo and Zelle. A spokesman for X did not respond to a request for comment. 

Under former CFPB Director Rohit Chopra, the bureau was moving quickly to subject Big Tech financial apps to nearly the same consumer protection requirements as banks. In November, Chopra finalized a larger participant rule that would treat Apple Pay or Google Pay like large banks with on-site inspections, reporting requirements and periodic monitoring. Tech firms deemed “larger participants” based on their transaction volume could get greater CFPB scrutiny, particularly if the bureau receives a large volume of consumer complaints to its consumer complaint database, according to the rule.

If X established a digital wallet and exceeded the CFPB’s threshold of 50 million payment transactions, it would be supervised by the bureau according to the larger participant rule, which is already being challenged in court by two tech trade groups.

“If Musk personally intervened to advantage payments on the X platform, that would be problematic. He has a huge personal interest and would have to recuse himself,” said Eric Grover, a principal at Intrepid Ventures, a financial services consulting firm. “But Scott Bessent and Russ Vought are doing the kind of things I expected they would do. I certainly hope he didn’t lobby for his advantage, but the idea of severely curbing the CFPB was all but inevitable.”

The CFPB “has been a battle cry for Republicans for a long time,” Grover said, noting that Chopra was in a frenzy to get as many rules finalized as possible — including the larger participant rule — before the end of the Biden administration. 

In December, the CFPB designated Google’s payments arm for federal supervision based on consumer complaints. Google sued the CFPB the same week, claiming that the company had retired the product in question. Many lawyers expect the Trump administration will likely no longer defend the CFPB’s position in court against Google.

Some experts suggested that a Treasury staffer who wrote Bessent’s first stop-work memo didn’t realize that it excluded supervision or know enough about the bureau’s functions to cover all work. Some experts thought that the first memo was intentionally scoped to keep supervisory examinations functioning, noting that supervision was a focus in the first Trump administration under former CFPB Director Kathy Kraninger. 

“If Musk got the government to not supervise his company, it’s an enormous conflict of interest and shows he’s using undue influence on the government,” said Joe Lynyak, a partner at Dorsey & Whitney.