The Consumer Financial Protection Bureau (CFPB), a federal agency that regulates lending activities by fintech and financial services companies, is on a forced hiatus amid an effort by President Trump and Elon Musk’s Department of Government Efficiency to shrink the size and role of government–and particularly of regulatory agencies. But the agency isn’t dead yet—a judge issued an injunction last week against the possibility of mass firings or a bureau shutdown. Now financial services policy experts are warning fintech companies against running wild while the cops are temporarily off-duty.
The CFPB’s work was first slashed in February, when Office of Management and Budget (OMB) head Russell Vought fired some of its 1,700 staffers, told those remaining to stop working and later put many employees on administrative leave. While Republicans have opposed the CFPB for years, policy experts say Trump’s White House has also targeted the CFPB because many viewed former CFPB director Rohit Chopra’s rulemaking and enforcement actions as too heavy-handed. Critics say he expanded the CFPB’s power beyond the remit it was given when it launched in 2011.
Today, behind the scenes at the CFPB, whose name was dramatically removed from the outside of its D.C. headquarters in February, hundreds of staffers are reportedly at work. Mark Calabria, who led the Federal Housing Finance Agency during Trump’s first term and was more recently a senior advisor at the libertarian think tank the Cato Institute, is overseeing a reset of the bureau, says one financial services policy expert. Calabria is looking through the CFPB’s rules and regulations to assess which (if any) policies will help advance President Trump’s agenda. Any CPFB activities or regulations that aren’t mandated by law will be the easiest to discontinue, rescind or not enforce.
The CFPB’s website remains live, and it’s still taking consumer complaints. (Last fall, we reported on a rise in CFPB complaints from consumers who were having difficulty canceling fintech app subscriptions.)
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Todd Baker, a financial services consultant and senior fellow at Columbia University’s business and law schools, says the CFPB’s activities will be “severely limited” to work that is statutorily required. That includes supervising financial services companies, enforcing regulations and issuing rules. He thinks enforcement activity, including fines to fintech and financial services companies, will drop to a minimum. In 2023, the CFPB ordered $3.1 billion in fines and refunds for consumer relief, the largest sum it had ordered since 2015.
Congress has already moved to overturn some of the rules finalized by the CFPB under Chopra by using the Congressional Review Act, which lets Congress repeal regulations published over the past 60 days. The Senate has already started this process for CFPB rules regarding medical debt being removed from consumers’ credit histories, a $5 cap on bank overdraft fees and non-bank payments companies falling under the regulatory purview of the CFPB. Both the Senate and House need to approve a rule’s repeal before it’s overturned.
The dramatic shift in policy in the wake of Trump’s election reflects a larger trend: the politicization of financial regulation. “There’s an increasing amount of variance between regulatory approaches during Democratic and Republican administrations,” Baker says. “And that ultimately hurts the regulatory system as a whole.” All the regulatory and policy experts we spoke with for this article agreed that the severe pendulum shifts are bad for businesses, since they makes it hard for companies to know which rules to follow.
Washington, D.C., insiders think Jonathan McKernan, a former board member at the Federal Deposit Insurance Corporation (FDIC) who was nominated by Trump in February to lead the CFPB, will be confirmed as the agency’s director in the coming weeks. It’s hard to predict how big the CFPB’s staff will be once it gets settled under McKernan. Baker thinks it could shrink by as much as 40% or 50% from where it was under Biden.
Many fintech companies are closely watching what will happen to the 1033 open banking rule, a yearslong initiative that the CFPB finalized in October 2024. It sets guidelines for consumers’ control over their banking data and how banks store, manage and make that data accessible. The rule has long been supported by upstart fintech companies like Plaid, whose core service relies on connections to bank data, and opposed by incumbent banks, who worry about losing customers and the costs of providing the data connections. “The fintechs would like the section 1033 rule to go into effect. However, the Republican party wants to disassociate itself from anything done under Rohit Chopra,” Baker says. He’s not sure what will happen.
“The rumor is that they’re going to crack 1033 open to see if they can refine some of the more controversial issues that are subject to litigation,” says one policy expert. Lobbying groups including the Bank Policy Institute sued the CFPB over the rule shortly after it was finalized last October, saying the bureau had overstepped its authority in creating it.
How will a dormant CFPB affect American consumers? Baker thinks the impact will be “net negative,” since some of the agency’s rules have aimed to regulate areas like high fees and hidden charges. “Consumers benefit from these things, but they don’t often understand why things have changed or why some of the more abusive practices go away,” he says.
Yet experts ranging from David Pommerehn, general counsel of bank lobbying group Consumer Bankers Association, to Michele Alt, a partner at financial services advisory firm Klaros and a former lawyer at the Office of the Comptroller of the Currency (OCC), don’t expect to see a rise in predatory activity by fintechs over the next few years. They note that the states’ attorneys general and the prudential regulators like the FDIC and the OCC actively regulate financial services and monitor for predatory activity.
Of course, companies should expect a more permissive regulatory environment during Trump’s second term. “The burden of proof has shifted from the companies having to prove that they’re doing something right to the government having to prove that they’re not,” says one policy expert. He adds that the new climate could help fintechs collaborate more with regulators instead of feeling afraid to approach them, and it could create more opportunities to engage in pilot programs or regulatory sandboxes, where companies can test new products under a regulator’s supervision. Already, the door to granting bank charters seems to be opening, Michele Alt notes–General Motors recently refiled its application for an Industrial Loan Company banking charter, which it had withdrawn in June 2024.
Sima Gandhi, a former early employee at Plaid who last year created the Coalition for Financial Ecosystem Standards (CFES), a membership organization that has devised voluntary compliance guidelines for fintechs, is optimistic about the change in the regulatory environment. She thinks the new administration is “much more open to competition and product choice and letting consumers–with the appropriate disclosures and transparency–make decisions about what products are and aren’t good for them.”
As of last September, eight fintechs, including Stripe and Block, had signed on to become paying members of CFES. Since then, seven more organizations have joined, including payments companies FIS and Airwallex. Gandhi says the changes in administration and Congress haven’t affected the guidelines she has written, since her standards are focused on complying with regulations from the prudential and state regulators.
No one we spoke with thinks fintech companies should aggressively take advantage of a more permissive regulatory climate. “The current regulatory environment may only last for two years,” Baker says. “It’s possible that the CFPB will be resurrected and look much like it did during the Biden administration.” At a virtual speaking event last week on how fintechs should manage risk under the new administration, Janet Hale, a senior managing director at financial advisory firm FTI Consulting, said, “You don’t want to be the first consent order of 2030.”