The report states that these figures are higher than the CFPB’s reported figure of $21 billion returned to consumers through enforcement actions.
“Through a combination of regulation, oversight, and the continued threat of enforcement, the CFPB has increased the cost of credit for both lenders and borrowers,” the report said. “In addition, instances of overreaching regulation and actions that circumvent the Administrative Procedure Act create additional costs and uncertainty in credit markets, which may further induce lenders to withdraw or limit their offerings.
“As a result, the $21 billion total often cited by the CFPB seriously underestimates the broader burden placed on the financial system.”
Risk pricing versus regulatory disruption
The ability-to-repay (ATR) rule – implemented under the Dodd-Frank Wall Street Reform and Consumer Protection Act – requires lenders to verify a borrower’s ability to repay their mortgage.
Loans above a debt-to-income ratio (DTI) of 43% are objectively riskier and were associated with a higher probability of default during the housing crisis of the late 2000s. Crossing that threshold now means an interest rate that is about 16 basis points (bps) higher – a relative increase of 4.3% – according to the report.
The CEA projects a “wedge movement” between credit markets, estimating $116 billion to $183 billion in mortgage costs, $32 billion to $51 billion for auto loans and $74 billion to $116 billion for credit cards.
But the identified price effect comes from a limited subset of mortgages – mainly jumbo loans above the 43% DTI limit during a post-crisis regulatory transition.
“It appears that the CEA used the relative size difference of 4.3% for the extrapolation, rather than the absolute size difference of 16 basis points,” said Adam Levitin, a law professor at Georgetown University. wrote in a blog post about the report.
“That will have the effect of magnifying the impact if rates rise (as they did). I can’t be sure that CEA used relative, rather than absolute, size because they haven’t shown their work, but they will come back to that 4.3% figure later, which makes me think that’s the number they used.
“Second, and this is the big problem, the CEA assumes that all the price difference is due to CFPB regulations. But you would always expect higher rates for mortgages with a higher DTI – they are riskier, all else being equal, and there is no reason to think rates would increase linearly.”
Levitin’s identification of more accurate risk pricing rather than pure regulatory distortion is reinforced by widespread underwriting failures before 2008, which were documented by the Financial Crisis Inquiry Commission.
Research in summary by the Urban InstituteThe Housing Finance Policy Center shows improved delinquency outcomes following the implementation of the ATR rule, compared to pre-crisis outcomes.
“Furthermore, CEA ignores that there is no secondary market for non-QM mortgages,” Levitin added. “In 2014, the FHFA directed Fannie and Freddie to purchase only QM loans or loans exempt from repayment requirements. That explains the much smaller volume of loans with DTIs > 43%. Lenders don’t want to be stuck with an inventory of high-risk loans.
“But the CEA is either oblivious or purposefully ignoring the effect of the FHFA guidance, which of course would make it impossible to pin all the blame on the CFPB.”
Transfers versus real economic loss
Most of the cumulative cost estimate reflects transfers: borrowers pay more interest to lenders.
In economic terms, transfers are redistributions and not deadweight losses. The estimated deadweight loss – $1.5 billion to $5.7 billion – represents the perceived efficiency costs associated with fewer new loans.
Accompaniment of the White House Office of Management and Budget distinguishes between transfers and efficiency costs in the federal regulatory analysis. Economists note that labeling transfers as “costs” can confuse redistribution with net welfare losses.
Financing structure, benefits omitted
The report calculates $8.9 billion in transfers from the Federal Reserve to fund the CFPB and applies a 50% marginal tax rate, bringing the total budget cost to $13.3 billion.
Transfers of Federal Reserve revenues in lieu of annual congressional appropriations fund the CFPB, a structure that was retained in 2024 by the Supreme Court in CFPB v. Community Financial Services Association of America.
Furthermore, the CEA report does not quantify the potential benefits to consumers and the economy, such as fewer defaults, better underwriting standards or a lower likelihood of systemic crises.
“There is a glaring omission in this report,” said Graciela Aponte-Diaz, vice president of the Center for Responsible Lendingsaid a statement. “The Consumer Financial Protection Bureau has saved Americans trillions of dollars by protecting them from financial exploitation and providing guardrails that prevent predatory lenders from creating a repeat of the catastrophic 2008 financial crisis.
“The best US banks posted record profits in 2024 – they are doing great. Meanwhile, over its history, the CFPB has returned $21 billion directly to consumers, exactly what it was designed to do. That work must continue regardless of the government’s repeated attempts to dismantle the agency.”
The 2008 financial crisis caused trillions of dollars in lost output and household wealth, according to estimates summarized by the Government Accountability Office.
As Aponte-Diaz noted, the CFPB reports that $21 billion has been returned to consumers through enforcement actions targeting illegal credit card add-on products, mortgage default abuses and overdraft practices.
The returned transfers do not take into account ongoing rate reductions, deterrent effects, or changes in industry practices – benefits that are harder to quantify.
Although the CEA report provides a quantitative framework for assessing the CFPB’s economic impact and highlights its significant potential costs to borrowers, its findings remain subject to debate.
Critics argue that the analysis relies on specific methodological assumptions, conflates financial transfers with net economic loss and omits broader benefits such as greater market stability.
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