Senate Democrats warn CFPB shutdown could disrupt prime interest rates

U.S. Senate Democrats sent a letter to Consumer Financial Protection Bureau (CFPB) acting director Russell Vought raising concerns that any “efforts to shutter the agency” could disrupt the publication of average prime offer rates (APOR), a key benchmark in the mortgage market.

The CFPB manually calculates and publishes detailed APOR tables on a weekly basis. These rates are used to determine whether a loan becomes a qualified mortgage (QM), which offers lenders legal protections. Lenders rely on APOR data to reduce litigation risk by ensuring they offer rates within a defined range.

In November, the Trump administration declared in a court filing that the CFPB’s funding is unlawful and that the agency cannot legally request funds from the Federal Reserve under the Dodd-Frank Act. Under Vought, the CFPB has suspended much of its work and is now engaged in a legal effort to fire 90% of its staff.

“If the CFPB stops publishing standardized APOR tables, lenders might not make loans to lower income borrowers, given the risk of coming in too far above the APOR and potentially getting sued,” the senators wrote. “Or, they might raise interest rates on loans to compensate for the increased risk the market will price in without the liability shield that comes with making a QM loan—skewing the cost of homeownership and cutting off credit access for borrowers.”

The letter was signed by Sens. Elizabeth Warren (D-Mass.), Raphael Warnock (D-Ga.), Ruben Gallego (D-Ariz.) and Andy Kim (D-N.J.).

A CFPB spokesperson told the trade publication Capitol Account that the bureau “intends to publicly spell out a different way to calculate APOR” so lenders can determine it themselves. “The bureau also plans to underscore that using the alternative method won’t expose firms to enforcement actions,” the spokesperson added. 

The senators criticized the CFPB’s proposal to publish a framework and allow lenders to calculate APOR independently, arguing that such a method may lack clear legal standing.

They also cited earlier warnings from the Mortgage Bankers Association, National Association of Home Builders and National Association of Realtors in a 2023 amicus brief, which said there would be “potentially catastrophic consequences” to shuttering the CFPB.

“Virtually all financial transactions for residential real estate in the United States depend upon compliance with the CFPB’s rules, and consumers rely on the rights and protections provided by those rules,” the letter states. 

The lawmakers asked Vought to respond to their concerns by Dec. 16.