Personal Finance

How Trump’s second term could mean the downfall of the FDIC, CFPB

Published

7 hours ago

January 18, 2025

Here's what to expect from the Department of Government Efficiency, or DOGE

Sweeping changes may be in store once President-elect Donald Trump takes office. Among them could be the closure of numerous federal agencies and regulators.

Trump will be sworn in for a second nonconsecutive term in the White House on Jan. 20. Already, he has suggested major cuts to federal spending.

To that end, Trump named Elon Musk and Vivek Ramaswamy co-chairs of a new outside advisory board dubbed the Department of Government Efficiency, or DOGE.

As part of its agenda, advisors to the government-efficiency group reportedly inquired about the possibility of shrinking or dismantling the Federal Deposit Insurance Corporation, or FDIC, according to a December report in The Wall Street Journal. In a Nov. 27 post on X, Musk also suggested the White House should “delete” the Consumer Financial Protection Bureau, another independent agency. “There are too many duplicative regulatory agencies,” he wrote in the post.

Trump’s transition team did not respond to a request for comment.

The future of the FDIC

Most bank account holders take for granted the fact that their deposits are insured.

Since its creation during the Great Depression, the FDIC has secured up to $250,000 per depositor, per bank, in each account ownership category. And over nearly a century, no depositor has lost FDIC-insured funds due to a bank failure.

“That’s one of its legacies,” said William Isaac, who was named chairman of the FDIC by former President Ronald Reagan and headed the agency during the banking crisis of the 1980s.

Former FDIC chair Sheila Bair: Eliminating the FDIC would be a mistake

In place of the independent agency, the Trump administration could task the Treasury Department with overseeing deposit insurance, according to reports.

“There may be great value in downsizing or eliminating overlapping agencies while still keeping key underlying functions they serve,” said Tomas Philipson, a professor of public policy studies at the University of Chicago and former acting chair of the White House Council of Economic Advisers. “For example, one proposal is to have Treasury insure bank-deposits rather than an additional agency such as FDIC.”

“It’s important to separate what government activities are being performed from who or how many agencies are in charge,” Philipson said. “Holding constant the activities being regulated, the fewer agencies the better.”

“I think it’s a terrible idea,” Isaac said of abolishing the agency. “The FDIC has brought about stability like we’ve never seen before.”

Others also argue that eliminating the FDIC would undermine the consumer lending system and leave some savers vulnerable.

“Getting rid of the FDIC would be a disaster for the U.S. economy and its preeminent status as a financial center,” said Brett House, economics professor at Columbia Business School. “Deposits are an abundant, cheap source of capital for American financial institutions.”

“Large banks may do fine without FDIC protections on their clients. But an end to federal insurance on them would be a serious drag on regional financial institutions that provide a major source of consumer lending and small-business financing,” House said.

Ultimately, because Congress controls the appropriation of federal funds, any proposal to eliminate the FDIC or any other agency would require congressional action.

The future of the CFPB

The Consumer Financial Protection Bureau has a much shorter track record than the FDIC. The watchdog group was created by Congress on the heels of the 2008 financial crisis to enforce consumer protection laws.

Since then, the CFPB has issued roughly 35 regulatory reports, including a 2024 effort to insulate Americans from credit card late fees.

“The CFPB is a recent creation and U.S. markets clearly functioned well for decades without it,” said Columbia’s House. “But recent increases in market concentration and power for a handful of firms in several major economic sectors makes the CFPB a critical force in balancing business and consumer interests.”

Unlike the FDIC, the CFPB draws its funding from the Federal Reserve system. Because it does not rely on an annual appropriation from Congress, it is somewhat insulated from political pressure.

However, the Consumer Bankers Association says the agency has increasingly “advanced ideologically-driven policies,” particularly over the last four years.

“The incoming administration and Congress have a unique and important opportunity to institute meaningful reforms to the CFPB, in both the immediate and long-term, that can help transform the agency into the credible and durable regulator Americans deserve,” CBA President and CEO Lindsey Johnson said in an email.

The CBA also released a white paper Tuesday outlining recommended changes to the CFPB, which include repealing or rescinding recent rules and guidance.

Consumers, however, are largely in favor of the CFPB’s actions, according to advocates. The agency protects “hard-working people from predatory practices and discrimination in financial services,” Richard Dubois, executive director of the National Consumer Law Center, said in a statement.

If the CFPB is dismantled, that could mean consumers would see some of those protections overturned — and it’s unclear what government entity, if any, might pick up the agency’s efforts for new or emerging issues. The CFPB has been investigating digital payment apps and buy now, pay later services, for example.

But there may still be room for streamlining, Isaac said.

“Surely we are wasting a lot of money. Anything we can cut out that’s not necessary — that’s fat — needs to be cut,” he said.

Subscribe to CNBC on YouTube.

Personal Finance

What to expect from travel prices in 2025

Published

7 hours ago

January 18, 2025

Business Finance News

Osaka, Japan.

Jiale Tan | Moment | Getty Images

The new year has many travelers thinking ahead to 2025 vacation plans — and how much those trips may cost.

About half — 51% — of Americans say flight cost will determine their destination choices this year, according to Skyscanner. And 50% said hotel costs are a factor.

The average person has paid more for travel of late: Airline fares were up 8% in December, on an annual basis, and hotel costs had increased 2%, according to the consumer price index.

But travelers can still find deals, experts said.

They may find the best bargains by going abroad in 2025 — especially by visiting the Asia-Pacific region, experts said.

Travel demand has come back very strongly, says Star Alliance CEO

Airfare for international trips is down 4% this year compared with 2024, according to a recent Kayak analysis. About two-thirds of all flight searches for travel in 2025 are for international flights, it found.

Conversely, airfare for U.S. flights in 2025 is up 3% from last year, Kayak said.

Kayak’s analysis examined its internal search data between May 1 and Oct. 31, 2024, for travel in 2025.

Domestic fares in January are about 12% higher relative to the same month last year, according to Hopper, a travel site. They’re expected to stay above 2023 and 2024 levels until at least halfway through the year.

“Overall, it’s going to be a more expensive year than last year” for domestic travel, said Hayley Berg, lead economist at Hopper.

Largely, that’s because flying domestically in 2024 was cheap, as airlines “flooded the market” with seat inventory, Berg said.

“Prices this year are very similar to prices in 2023,” she said. “And 2024 really threw us for a loop in how low they got.”

Meanwhile, long-haul fares to Europe, South America, Oceania and Asia are flat or lower to start the year, Berg said.

Of course, a trip abroad is likely to be more costly on a dollar basis than one closer to home: The average round-trip U.S. flight cost about $300 in January, versus $685 to South America, $750 to Europe and about $1,100 to Asia, according to Hopper.

Average hotel rates abroad and in the U.S. are similar to 2024, according to Kayak.

Rental cars are 8% and 4% more expensive for international and domestic rates, respectively, it said.

Why Asia is ‘the best bargain’

Sapporo, Japan.

Sergio Formoso | Moment | Getty Images

Price largely depends on when people book and plan to travel.

For example, travel to Asia is the cheapest it’s been in three years, Kayak found. Average airfare to the continent is down 7% year over year, it said.

“Asia continues year over year to look like the best bargain,” Berg said.

Even some places that are red-hot with interest from travelers — including Sapporo and Osaka, Japan — are shaping up to be cheaper.

Search interest in Sapporo, for example, is up 31% year over year, but average airfare is down 19%, to $1,230, according to Kayak. Fares to Osaka, Japan’s “gastronomic capital,” are down 14% to $1,233, it said.

Tokyo is the most-searched international destination of 2025, it said.

Hotel room rates advertised in Asia-Pacific are expected to be 11% lower in the first half of 2025 relative to the same period of 2024, according to Lighthouse, a hospitality market research firm.

A ‘new market equilibrium’ for airfare

Daniel Garrido | Moment | Getty Images

Airfare to Asia-Pacific destinations is pulling back from high levels following the Covid-19 pandemic, Berg said.

Asian nations were generally slower to reopen their borders and drop Covid restrictions relative to other countries. Now, airlines are adding flight routes, boosting supply and lowering seat prices, Berg said.

“We have to see what the new market equilibrium will be,” Berg said.

Jet fuel prices — a major input cost for airlines — were down 11% in January from last year, Hopper said.

Like Asia, travel to the Caribbean is also the cheapest in three years, with airfare down 17% compared with 2024, according to Kayak.

Hotel deals more likely for off-season travel

Globally, hotel prices will vary widely, and established locales such as Paris, London, and parts of Asia such as Tokyo and Bangkok, Thailand, are “expected to reflect strong demand,” Melanie Fish, vice president of global public relations for Expedia Group, wrote in an e-mail.

“Meanwhile, emerging destinations or less-crowded spots may offer lower rates,” she said.

Hotel deals are “more likely” in off-peak seasons than peak periods such as spring break, summer or the holidays, particularly in areas with consistently high demand, Fish said.

Another factor helping travelers’ wallets abroad: the strength of the U.S. dollar versus many international currencies, she said.

Argentina, Japan, Mexico, Brazil and Hungary are among the top destinations where the dollar can stretch furthest, “making activities, dining and accommodations more budget-friendly,” Fish said.

Tips for saving money on travel in 2025

Colton Stiffler | Moment | Getty Images

There are some ways consumers can reliably save money on travel expenses.

1. Flexibility is ‘key’

“Flexibility is really the key to saving on travel,” Berg said.

This applies to many aspects of travel, including destination, the time of year you visit that locale and the days of the week you travel, experts said.

For example, it’s generally cheaper to fly midweek. Hotel stays have a similar dynamic. The bottom line: Weekends are probably pricier.

“Adjusting your [hotel] stay to midweek instead of weekends or traveling during the off-season can lead to substantial savings,” Sally French, a travel expert at NerdWallet, wrote in an e-mail.

Seasonality has a “huge effect” on flight costs, Fish said.

A bucket-list trip to Europe in August will be expensive and crowded, but traveling in September or October can save you 30%, Berg said. Visit a city instead of taking a beach trip during spring break, or wait until fall to head to Europe, Fish recommended.

Experts also recommend travel “dupes,” a less-trodden but similar alternative to a popular destination.

Also be open to alternative airports, French said.

“Many cities are served by multiple airports,” she said. “Rather than fly into, say San Francisco International Airport, consider flying into Oakland International Airport, which is a similar distance to most parts of the city for a trip to San Francisco.”

2. Book at the right time

Domestic flights are often cheaper when bought about one to three months ahead, French said. International travelers should book two to eight months in advance.

Last-minute airfare deals are rare, so book in advance for maximum availability and generally lower prices, she said.

The logic isn’t always the same for hotels: Travelers can sometimes find last-minute deals on room rates in certain markets, Fish said.

3. Book directly with your hotel

Many hotels offer price-match guarantees or loyalty member discounts that aren’t available on third-party booking sites, French said.

“Third-party booking sites can be great to browse and compare hotels against each other on that site, but once you’ve narrowed down the hotel you want to book, check its price elsewhere (including the direct hotel website, or even bank travel portals),” she wrote in an e-mail.

4. Set flight alerts

Use tools such as Google Flights or Hopper to monitor prices and snag deals when fares drop, French said.

Personal Finance

CFPB fines Equifax $15 million for errors on credit reports

Published

1 day ago

January 17, 2025

Business Finance News

Elijah Nouvelage/Bloomberg via Getty Images

The Consumer Financial Protection Bureau fined Equifax $15 million over errors tied to consumer credit reports, alleging the company failed to conduct proper investigations of disputed information, the federal watchdog announced Friday.

Equifax is one of three major credit reporting agencies in the U.S., a group that also includes Experian and TransUnion.

“Equifax ignored consumer documents and evidence submitted with disputes, allowed previously deleted inaccuracies to be reinserted into credit reports, provided confusing and conflicting letters to consumers about the results of its investigations, and used flawed software code which led to inaccurate consumer credit scores,” according to the CFPB’s order.

Why credit reports are important

Credit reports are a ledger of consumers’ borrowing records, such as loan payment history and bankruptcy filings.

The financial consequences of inaccurate information on those reports can be “severe,” said Adam Rust, director of financial services at the Consumer Federation of America, a consumer advocacy group.

“It can change your ability to qualify for a loan, to get a job, to rent an apartment, all kinds of things that are very fundamental to navigating your personal life,” Rust said.

Equifax had ‘flawed’ process, CFPB says

Equifax processes about 765,000 consumer disputes a month, CFPB said.

Its “flawed” dispute policies and technology failures occurred since at least October 2017, “to the detriment of millions of consumers,” according to the CFPB, which alleged Equifax violated the Fair Credit Reporting Act.

Equifax settled the allegations to “[turn] the page on the CFPB’s long-running investigation,” a company spokesperson wrote in an e-mail.

The company has invested more than $1.5 billion into technology and infrastructure improvements over the last few years, including “significant changes” to its dispute process and consumer support, the spokesperson said.

“Our Purpose is to help people live their financial best and we know consumers and our customers depend on our data for important financial decisions,” they wrote. “Even one error affecting a consumer is one error too many,” they added.

'Phantom debt' is flying under the radar — and it could be a problem for the U.S. economy

The $15 million civil penalty follows a lawsuit CFPB filed against another credit bureau, Experian, on Jan. 7, alleging the company conducted “sham” investigations of credit report errors. In a statement on its site, Experian said the lawsuit was “completely without merit” and an “example of irresponsible overreach.”

“Credit bureaus have been sued repeatedly for this kind of conduct,” said Chi Chi Wu, senior attorney at the National Consumer Law Center. “They’re decades-old problems,” she said.

An Equifax data breach in 2017 also compromised the personal information of 147 million consumers, for which the company ultimately agreed to settle for $700 million.

How to have good ‘hygiene’ with credit reports

Consumers should check their credit reports at least once a year, Rust said. The Federal Trade Commission also recommends doing a check before applying for credit, a loan, insurance or a job.

Consumers should ensure they recognize identity information on their credit report like addresses and Social Security numbers, and verify that account information such as debt balances and delinquency status are correct.

“That’s just a good practice of financial hygiene,” Rust said.

Importantly, a credit report differs from a credit score. The latter is a numerical output compiled with information on a consumer’s credit report.

“If you see a sudden change in credit score, that’s a signal,” Rust said.

The three major credit bureaus allow consumers to request a free copy of their credit report once a week. Consumers can request a copy at AnnualCreditReport.com and by calling 1-877-322-8228. (Other sites may charge consumers or be fraudulent, according to the Federal Trade Commission.)

What to do about a credit report error

Smith Collection/gado | Archive Photos | Getty Images

Consumers who see an error on their credit report should lodge a dispute in writing, along with documentation. Send that by postal mail to the credit bureau and request a return receipt, Wu said. Consumers have better odds of resolution by mail than online, she said.

Consumers should also file a complaint with the CFPB and their state attorney general’s office, Wu said.

Consumers can ask that a statement of their dispute be included in their file and in future credit reports, and also ask the credit bureau to provide their statement to anyone who received a copy of their report in the recent past, Wu said.

AI is not used in calculating credit scores, says FICO CEO William Lansing

Consumers who can’t get an error fixed after repeated attempts may wish to consult an attorney, she said.

“Not every error will be worth bringing a lawsuit,” she said. “But if your loan ends up being more expensive because of a credit reporting error, that’s the kind of real harm [for which] you may want to consider litigation.”

They may be able to find an attorney through organizations like the National Association of Consumer Advocates, Wu said.

Personal Finance

IRS free Direct File expands to 25 states — but still faces scrutiny

Published

1 day ago

January 17, 2025

Business Finance News

Hirurg | E+ | Getty Images

With the start of tax season approaching, Democratic and Republican lawmakers are split on the future of Direct File, the IRS’ free tax filing program.

Direct File, which recently expanded to limited taxpayers in 25 states, processed roughly 140,000 returns in 2024 during the pilot that launched mid-season. The pilot covered simple returns in 12 states.

The program has been controversial among Republicans, who have pushed to end the free filing service. The critique has raised questions about Direct File’s future, particularly under GOP control of the White House, Senate and the House of Representatives.

During his Senate confirmation hearing on Thursday, Scott Bessent, President-elect Donald Trump‘s pick for Treasury secretary, was asked about the future of Direct File.

If confirmed, “I will commit that for this tax season that Direct File will be operative,” said Bessent, without commenting on future years.

Bessent’s comments come one day after more than 130 Democrats, led by Sens. Elizabeth Warren, D-Mass., and Chris Coons, D-Del., voiced support for Direct File.

“Direct File is making the process of interacting with the government more efficient, a goal we all can agree on,” the Democratic lawmakers wrote in a letter to Bessent and Billy Long, Trump’s pick for IRS commissioner.

The pilot program saved consumers an estimated $5.6 million in federal tax preparation fees and could save billions in the future, the Democratic lawmakers wrote. “We disagree with our colleagues who are calling on the President to pull the plug.”

Rep. Adrian Smith, R-Ne., along with 27 House Republicans in December wrote a letter to Trump, urging the president-elect to end Direct File via a day-one executive order.

“The program’s creation and ongoing expansion pose a threat to taxpayers’ freedom from government overreach, and its rollout and structural flaws have already come at a steep price,” the Republican lawmakers wrote.

While the program launched mid-season in 12 states last year for only simple returns, Republicans have continually pointed to the roughly 140,000 returns filed compared to total eligible filers.

The cost for Direct File through the pilot was $24.6 million, the IRS reported in May 2024. Direct File operational costs were an extra $2.4 million, according to the agency.

Over the past year, Republican lawmakers from both chambers have introduced legislation to halt the IRS’ free filing program. In January 2024, attorneys general from 13 states described Direct File as “unnecessary and unconstitutional” in a letter to the Treasury Department.