For Immediate Release:
September 15, 2025
Contact:
Robert Mayo | hello@woodstockinst.org
**Media Interviews Available Upon Request**
CHICAGO – In response to the Consumer Financial Protection Bureau’s proposed rule that would exempt many nonbank financial companies from federal oversight, Horacio F. Méndez, President & CEO of Woodstock Institute, a consumer protection nonprofit, submitted scathing comments warning that the proposal would create dangerous regulatory gaps that predatory lenders will exploit.
“The most predatory and unscrupulous actors in a given industry will gravitate towards the least regulated space in that industry,” Méndez wrote in his September 8 letter to the CFPB. “This proposal points the most predatory and unscrupulous firms in the financial industry to exactly where the Bureau won’t be looking and where firms can profit the most from that lack of oversight. This supposed ‘regulatory clarity’ for the industry is putting consumers directly in harm’s way.”
The CFPB’s proposed rule would create a standard definition of “risks to consumers” that critics argue is too narrow and would effectively exempt many nonbank companies—including payday lenders, debt collectors, and fintech companies—from federal supervision. The Bureau attempted to justify the proposal by stating that some firms, “may be more likely to engage in conduct that could be said to present some probability of harm to consumers, but does not rise to the level of a high likelihood of significant harm.”
Méndez compared this rationale to a hypothetical proposal from the Nuclear Regulatory Commission saying “People may glow in the dark and suffer from cancer as part of an initiative to foster innovation and growth in the nuclear energy space, but not a whole lot of people … just some.”
“This is a financial version of that scenario coming from the agency created for the express purpose of protecting consumers from financial predators—most of which are among the nonbank entities it proposes to exempt from supervision,” Méndez stated.
Mendez’s letter also warns that the Bureau’s refusal to properly police the financial industry could help create the conditions for another financial crisis that would leave taxpayers on the hook for yet another bailout. A well-supported regulatory infrastructure would cost significantly less than trying to save the industry an average of $27,000 in compliance costs while risking a financial crisis. The irony in all of this is the fact that Congress created the CFPB as a direct consequence of the 2008 Great Recession specifically to prevent another crash.
Not only does the CFPB’s proposed rule openly acknowledge harm to the most vulnerable consumers, but it sets up all taxpayers to be on the hook to bail out an industry that wants to squirm out of proper regulatory oversight.
Instead of narrowing oversight, the CFPB should create a comprehensive framework for assessing financial products that considers accessibility, consumer understanding, and whether products facilitate financial stability, resilience and wealth. The CFPB’s priorities should be with the consumer, not with an industry that has a history of predatory lending.
In the absence of sound oversight, Woodstock Institute urges states to take up the mantle and legislate their own financial consumer protections. In Illinois, legislation filed by State Senator Mark Walker (D-Arlington Heights) would create a state-level CFPB. California enacted a similar law in 2020. Consumers need financial regulation now more than ever, no matter what level of government provides the oversight.
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About the CFPB Proposal: The Consumer Financial Protection Bureau’s proposed rule (Docket No. CFPB-2025-0018) would establish a standard definition for assessing “risks to consumers” in financial services. Critics argue the definition is too narrow and would effectively exempt many nonbank financial companies from federal oversight, creating regulatory gaps that could be exploited by predatory lenders.
Woodstock Institute is a leading policy and research nonprofit that advocates for consumer financial protection and community economic development. Our work seeks to combat structural inequities and to improve the quality of life in lower-income neighborhoods and communities of color. Among our areas of focus are predatory lending, access to banking, debt collection, and municipal fines and fees.
