January 3, 2025

By Trace Dodge, Capstone Financial Services Analyst

Capstone expects the Consumer Financial Protection Bureau (CFPB) to scale back its aggressive rulemaking agenda under the Trump administration in 2025. While the CFPB will continue to enforce the law, the Trump administration is likely to pause pending rules and rescind or initiate rulemakings to roll back ambitious Biden-era rules. Constitutional challenges and efforts to impose direct congressional appropriations face dim prospects.

Outlook at a Glance:

• Second Trump Administration Will Limit CFPB’s Reach and Power; Expect Narrower Rulemaking but Continued Enforcement and Supervision of Existing Law
• CFPB Likely To Walk Several Back Biden Era Rules and Become a Less Aggressive, Innovation-Friendly Watchdog
• Legislative Action to Curtail CFPB To Face Uphill Battle Despite Unified Republican Control as Filibuster and Other Priorities Limit Oxygen; States Stand as Bulwark

Second Trump Administration Will Limit CFPB’s Reach and Power; Expect Narrower Rulemaking but Continued Enforcement and Supervision of Existing Law

Winners	Covered financial institutions subject to CFPB supervision, enforcement, and rulemaking authority
Losers	N/A

Expect Emphasis on Supervision and Enforcement against Bad Actors; Personnel is Critical

Capstone expects a significant recalibration of the CFPB’s aggressive posture that it maintained under Director Rohit Chopra (D) toward a friendlier regulatory approach, but not a total abdication of its responsibility to supervise and enforce federal consumer financial protection laws.

As seen under Acting Director Mick Mulvaney and Trump’s first confirmed CFPB Director Kathy Kraninger, personnel will have a meaningful impact on the CFPB’s character and approach over the next four years. As acting director, Mulvaney appeared determined to handcuff the CFPB from the inside (most notably by requesting a zero-dollar budget from the Federal Reserve in 2018). Kraninger, on the other hand, positioned herself as a champion of fair and transparent markets, focused on leveraging the screwdriver of supervision but certainly not shying away from swinging the hammer of enforcement when needed. For example, in the third and fourth quarters of 2020, Kraninger oversaw the second and third most enforcement actions (by quarter) in the CFPB’s history.

The radically different approaches of Trump’s prior CFPB directors inform Capstone’s belief that the CFPB’s approach will depend on who is nominated and confirmed to lead the agency. Initial reporting suggests that Brian Johnson (a former Kraninger deputy) and Todd Zywicki (a law professor at George Mason and former advisor to Kraninger) are being considered for the role. Both have been active in the consumer finance regulatory domain, testifying before Congress on the bureau’s activities under Director Chopra and a path forward, “junk fees,” the CFPB’s budget, and a wide range of other topics. It is clear that both would seek to strategically orient the CFPB away from innovation-constraining regulation and toward promoting fair, transparent, innovative, and competitive consumer financial markets.

Capstone will continue to monitor potential Trump appointees and the nomination process to better ascertain the specific priorities of the watchdog agency’s next director. Nonetheless, the direction of travel is clear. The CFPB is poised to pivot from an aggressive regulator that sought to maximize its authority under existing statutes to a strategic and tactical overseer of innovative industry.

Informal Guidance Subject to Hasty Revision and Rescission; Final Rules Will Take Longer

Chopra will leave his role (via resignation or firing) when President-elect Trump assumes office in January 2025. As such, Director Chopra is counting days, not just for himself but for his policy priorities, which were often effectuated through informal guidance, including bulletins, advisory opinions, and policy statements.

These forms of informal guidance are most at risk for hasty reversal once President-elect Trump assumes office and his yet-to-be-named nominee is confirmed. Capstone expects the incoming Trump appointee to pause ongoing efforts across the consumer finance landscape and quickly revise or rescind informal guidance with which they disagree, including potentially narrowing recent guidance that sought to informally broaden the definition of “unfair, deceptive, and/or abusive acts or practices” (UDAAPs) under Section 1031 of the Dodd-Frank Act.

Proposed rules are also likely to be paused immediately. On the other hand, final rules not subject to Congressional Review Act (CRA) look-back periods will require lengthier rulemaking processes to revise and/or rescind, as they are subject to traditional notice and comment procedures, including cost-benefit analysis, comment periods, and timing requirements for publication in the Federal Register prior to their effective date. Final rules facing legal challenges are also likely to be creatively managed, with the CFPB agreeing to pause the litigation with counterparties while it revisits the rules or refusing to defend them entirely.

Capstone thus anticipates the CFPB to be highly active throughout 2025 and beyond as it seeks to unwind some of the rulemaking activities of the Biden-era CFPB. We expect the CFPB to revisit (with differential prioritization) credit card late fees, overdraft lending and non-sufficient funds fees, open banking, digital payments, small business lending data collection, medical debt, and data brokers final and/or proposed rules.

Likely Review of Pending Enforcement Actions Incentivizes Brisk Pace Through End of Biden Term

In addition to efforts to unwind Biden-era rules, the Trump administration is likely to review pending investigations and enforcement actions currently underway at the CFPB. This creates a dramatic incentive for Director Chopra to accelerate the pace of enforcement efforts, particularly in more aggressive cases, before President Biden’s term ends. It might also incentivize companies to stall, slow the extent of their cooperation, or refuse to negotiate consent orders or settlements with the agency.

For instance, in January 2023, the CFPB and New York Attorney General Letitia James brought an action in the United States District Court for the Southern District of New York against Credit Acceptance Corp. (CACC), a subprime auto lender. The complaint alleges, among other things, that CACC and its dealers have engaged in deceptive acts or practices in violation of Section 1031 of the Dodd-Frank Act, including by misrepresenting and hiding costs, furtively selling expensive add-on products, leveraging algorithms to set interest rates in violation of state usury laws, failing to appropriately assess borrowers’ ability to repay, and taking unreasonable advantage of consumers. The matter remains pending in court.

The CFPB’s investigation into CACC began with a civil investigative demand (CID) during the first Trump administration, so we do not anticipate new leadership will abandon the ongoing case. However, a Trump CFPB may seek to revisit the pending litigation (assuming it is not settled before Trump takes office) and could take a narrower approach to the allegations against the company, including walking away from more novel charges such as ability-to-repay failures. NY Attorney General James may also continue to press the case forward if the CFPB steps back.

The CACC case signals how the presidential transition could impact ongoing CFPB enforcement actions, and we will continue to monitor noteworthy actions for investors.

CFPB Likely To Walk Several Back Biden Era Rules and Become a Less Aggressive, Innovation-Friendly Watchdog

Winners	Covered financial institutions subject to CFPB supervision, enforcement, and rulemaking authority; nonbanks active in the consumer financial marketplace; fintech companies
Losers	TBD

Capstone believes the Republican-led CFPB will pause, refuse to defend, rescind, or initiate rulemakings to roll back certain pending and recently finalized rules. Notably, rules related to the CFPB’s “junk fee” initiative face an uncertain future. We also expect the CFPB to revisit rules relating to open banking, digital payments, and small business lending. The CFPB is likely to pause more prescriptive and jurisdiction-expanding Fair Credit Reporting Act rulemakings too.

We expect the CFPB to reign in its expansive rulemaking agenda and revisit some of the more controversial rules proposed and finalized under Director Chopra. This is especially true if Zywicki, Johnson, or a like-minded appointee becomes director.

Credit Card Late Fee Rule Likely Abandoned, Maintaining Late Fee Limits of $32 or More

The Republican CFPB will likely abandon its credit card late fee rule, which lowers the maximum late fee a credit card issuer can charge to $8—as long the issuer has one million or more open consumer credit card accounts. The rule would also give the CFPB more power by transitioning the fee limit’s automatic annual inflation adjustment to an adjustment based on a CFPB-determined market condition analysis.  We expect the CFPB to elect to rescind the rule through notice and comment rulemaking in 2025, maintaining the current limit of $32 ($41 for subsequent late payments).

The rule was finalized in 2024 under the Democratic CFPB, but it has not gone into effect amid a legal challenge. On December 6th, the judge presiding over the case upheld a nationwide injunction on the rule and denied the CFPB’s request to transfer the case to DC, ensuring the rule will remain stayed until Trump takes office and easing the path for his administration to vacate the rule

Republicans have pushed back on the safe harbor rule, arguing that it shifts costs from consumers that incur them through their own fault to all cardholders through higher interest rates and fees. On the campaign trail, Trump floated the idea of temporarily capping credit card interest rates at 10%, drawing praise from Senator Bernie Sanders (I-VT) and facing strong push back from credit card issuers. We believe Trump’s CFPB could signal that the rescission of the rule is a means of constraining credit card interest rates, which have increased in anticipation of the rule going into effect. Such a move would limit the need to advocate for an interest rate limit that Congress is highly unlikely to pass.

Overdraft and Non-sufficient Fund Fee Proposed Rules on Chopping Block

Capstone does not expect the Republican CFPB to finalize the Democratic CFPB’s proposed rules and requests for comments that seek to curtail overdraft and non-sufficient fund (NSF) fees incurred by a consumer.

The proposed NSF Rule would effectively prohibit overdraft fees by allowing banks and other financial institutions with more than $10 billion in assets to charge only a breakeven fee to cover losses associated with overdraft and NSF transactions. If covered institutions continue to generate profit from the transactions, the proposed Overdraft Lending Rule would require the institutions to disclose their interest rates, terms, conditions, and other measures to inform and protect consumers—in compliance with the Truth in Lending Act (TILA) and Regulation Z.

The CFPB also issued Circular 2024-05, clarifying that consumers must affirmatively opt into overdraft protection services before the institution charges overdraft fees. Outlining that Regulation E “establish[es] an opt-in, not an opt-out regime,” the CFPB declared that charging such fees without consent may constitute a violation of the Electronic Fund Transfer Act (EFTA).

Widely condemned by financial institutions and industry trade groups, the rules are also unpopular among Republicans. Potential nominees Johnson and Zywicki have also indicated disagreement with the rules.

CFPB’s Open Banking Rule Faces an Uncertain Path Forward

The final rule moving the US toward an open banking system has an unclear future, as it has garnered support from some Republican lawmakers. However, the rule has faced tougher opposition from industry. On the same day the rule was finalized, the Bank Policy Institute and Kentucky Bankers Association filed a lawsuit seeking declaratory and injunctive relief from the rule, creating an immediate decision point for Trump’s incoming CFPB director regarding how to approach the litigation.

Mandated by Section 1033 of the Dodd-Frank Act, the CFPB issued the Personal Financial Data Rights final rule in an effort to “move the United States closer to having a competitive, safe, secure, and reliable ‘open banking’ system.” The rule aims to heighten competition and give consumers more choices. Consumers would have greater control over their personal financial data (including revocation and deletion rights and banning certain types of data harvesting) and more opportunities to shop for better rates, make secure payments, and transfer their financial information between financial institutions.

Unlike many CFPB rules issued under Democratic leadership, this final rule received applause from certain influential congressional Republicans. For example, Representative Patrick McHenry (R-NC), the current but retiring Chair of the House Financial Services Committee, called the rule “a promising step forward to protect Americans’ financial data privacy,” while noting that Director Chopra heeded Republican “concerns regarding unreasonable restrictions on the secondary use of consumer data.” Capstone believes Republican support for the rule in Congress signals its potential political durability, though shifts in Congress and leadership of the House Financial Services Committee raise risks to its longevity.

Capstone will continue to monitor this litigation throughout 2025 given its uncertain path forward.

Digital Payments Larger Participant Rule a Lower Priority for Republican Targets, but Not Safe

Unlike many current CFPB priorities, Capstone believes the digital payments rule could have greater durability under a Trump administration that has been increasingly critical of Big Tech, though both Zywicki and Johnson have expressed skepticism about the rule.

The CFPB issued the final rule to supervise large covered nonbanks (e.g., Apple, Google, Venmo, Cash App, and Samsung) that offer digital payment services, including digital wallets, fund transfer, and other peer-to-peer payment applications. The rule gives the CFPB supervisory jurisdiction over, and the ability to proactively examine, these providers if they process more than 50 million transactions annually. The rule aims to enhance CFPB oversight of digital payments companies amid growing concerns over privacy and surveillance, errors and fraud, and debanking.

Focused on enhancing supervision for the largest participants in the digital payments industry, the rule dovetails with a more traditional Republican approach to regulatory compliance favoring supervision to more aggressive tools like enforcement (which the CFPB already has over these providers). It also strategically carves out crypto, potentially diminishing the energy behind prior congressional Republican critiques. The incoming director could de-prioritize the examination of digital payments service providers rather than rescind and revise the rule amid more pressing priorities in 2025.

While the rule remains subject to the Congressional Review Act, Capstone believes congressional Republicans are likely to focus their efforts on other, more pressing priorities in early 2025. Litigation challenging the rule has yet to be filed, despite financial technology trade groups signaling a potential legal challenge and condemning the rule. This inaction signals that the groups may be awaiting clarity on the incoming administration’s perspective. Capstone believes that if Zywicki or Johnson are confirmed as CFPB director, we may see an energized effort to rescind it, despite unlikely congressional action.

Small Business Lending Rule Likely to Be Modified, but Statutory Mandate Forces CFPB Action

The CFPB finalized its Small Business Lending Rule in March 2023 and extended compliance dates in June 2024 following the resolution of litigation challenging the CFPB’s funding mechanism. The rule, mandated by Section 1071 of the Dodd-Frank Act, requires covered small business lenders to collect demographic, geographic, credit pricing and decisioning, and other loan-level data associated with small business financing transactions. The data is to be filed with the CFPB to facilitate fair lending enforcement, credit access, transparency, and economic development among women and minority communities. Tied up in a litigation saga surrounding the constitutionality of the CFPB’s appropriations and the breadth of the data collection, the rule survived legal challenge on the merits (subject to appeal), and compliance dates (differentiated across tiers 1, 2, 3) are scheduled for 2025 and 2026 with first filings due in 2026 and 2027.

While we believe the Trump administration will generally not engage in rulemaking that broadens the remit and reach of the CFPB, the agency has previously been ordered to finalize a 1071 rule as statutorily required by the Dodd-Frank Act. As a result, Capstone anticipates that the Trump administration may seek to pause implementation of the existing final rule and initiate notice and comment on a more modest proposal in 2025 or 2026, especially in light of the somewhat bipartisan effort to nullify the rule in late 2023 (staved off only by President Biden’s veto). Litigation regarding the rule remains ongoing, though the US Circuit Court of Appeals for the Fifth Circuit is expected to rule on the matter prior to the compliance deadlines and potentially before a new director is confirmed.

Proposed Rules to Ban Medical Debt and Cover Data Brokers under FCRA Unlikely to Survive

Capstone believes outspoken Republican criticism in Congress suggests that the prospects of survival are dim for the proposed rule to prohibit most credit reports from reporting medical bills. Given this dynamic, we believe the CFPB is unlikely to finalize the rule in the ongoing lame duck session as recission of the rule through the CRA would prevent the bureau from issuing a substantially similar rule in the future, which would restrain future Democratic administrations.

In the proposed rule, the Democratic-led CFPB cited concerns about accuracy, a desire to boost credit scores, and an effort to “end the senseless practice of weaponizing the credit reporting system to coerce patients into paying medical bills that they do not owe.” The rule would seek to close a regulatory exception that allows creditors to use certain medical debts in credit decisioning. While the comment period closed on August 12^th, the CFPB has yet to release a final rule. With days dwindling before President-elect Trump takes office, any final rule would be subject to CRA review and recission.

The outlook is similarly dim for a notice of proposed rulemaking (NPRM) to broaden the definition of a “consumer report” and “consumer reporting agency” under Regulation V, the implementing regulation of the Fair Credit Reporting Act (FCRA), to include data brokers that buy and sell consumer credit and financial information. The rule proposes to treat such brokers “just like credit bureaus and background check companies” that must comply with the FCRA, protect consumers’ personally identifiable information, and receive consumer consent for data-sharing. While the comment period for the data brokers NPRM does not close until March 2025, Capstone expects the rule to be withdrawn shortly thereafter and/or subject to serious legal challenge in the unlikely instance the Trump administration does seek to finalize it.

While the proposed rules dovetail with broader government efforts (cheered by some Republicans) to “protect Americans’ sensitive personal data” and promote credit access, Capstone believes the Trump administration’s deregulatory impetus, desire to reduce the CFPB’s authority, and overarching goal to foster innovation in the consumer financial marketplace make survival of these efforts unlikely in 2025.

Legislative Action to Curtail CFPB To Face Uphill Battle Despite Unified Republican Control as Filibuster and Other Priorities Limit Oxygen; States Stand as Bulwark

Winners	Incumbent consumer financial service providers with sophisticated governance and compliance processes
Losers	N/A

Frontrunners for Chair on Key Financial Services Committees Raise Specter of Legislative Action

Capstone believes that unified Republican control, and the potential ascendance of Representative Andy Barr (R-KY) and Senator Tim Scott (R-SC) to the top seats on the House Financial Services and Senate Banking Committees, respectively, raise the specter of significant legislative action in the 119^th Congress aimed at limiting the power, funding, independence, and structure of the CFPB.

Rep. Barr appears to be the frontrunner to replace retiring Rep. McHenry as chair of the House Financial Services Committee. He has announced his interest in the position, championing a four-prong platform to “roll back burdensome financial regulations,” “foster innovation in fintech and digital assets,” “reform the [CFPB],” and “implement market-based solutions for housing finance and affordability.”

In December 2023, Rep. Barr introduced legislation aimed at transforming the CFPB’s structure, funding, and rulemaking processes. The CFPB Transparency and Accountability Reform Act would require annual congressional appropriation of CFPB funding, remove the agency from the Federal Reserve System, transform its leadership structure from a single director to a five-person commission, and create an Office of Economic Analysis in the CFPB to “review all proposed and existing guidance, orders, rules, and regulations” with a mandate to publish reports on costs and benefits of proposed regulations. As recently as October 2024, Rep. Barr introduced a bill aimed at curtailing the CFPB’s CID authority to “ensure… industry participants are given due process” and protect such participants from “extortionary CID request[s]… that amount to fishing expedition[s].”

Meanwhile, Sen. Scott has also been an outspoken critic, regularly attacking proposed and final rules during Director Chopra’s tenure. As the current ranking member on the Senate Banking Committee, Sen. Scott is poised to become chair. As recently as April, he introduced a measure to overturn the CFPB’s credit card late fee rule. 

Thin Majorities, Filibuster, and Competing Priorities Beat Back Momentum

Despite unified Republican control and alignment of interests for key congressional Republicans, Capstone believes thin majorities, the legislative filibuster, and competing priorities dampen momentum for robust legislative intervention aimed at reining in the CFPB.

With only a 220-215 majority in the House of Representatives and a 53-47 majority in the Senate, Republicans will have to manage tight margins in order to pass most legislation. This is particularly challenging in the Senate where most legislation still requires a 60-vote majority in order to pass due to the filibuster (with notable exceptions, including tax bills and other measures achieved through reconciliation).

Amid priorities related to trade, tax, immigration, and defense, Capstone believes the prospects of a concerted effort to pass legislation to seriously curtail the CFPB are dim. While we anticipate Rep. Barr will propose such legislation, which the House could realistically pass, the filibuster provides a robust stopgap against such an action without the support of at least some Democratic senators. We do not believe any Democrats would support Rep. Barr’s CFPB Transparency and Accountability Reform Act or broader efforts to limit the bureau’s authority. We believe political capital and oxygen is, therefore, both limited and better spent on other priorities, as outlined by incoming Senate Majority Leader John Thune (R-SD) in early December.

Capstone will remain attuned to developments in the 119^th Congress and potential legislation with impacts on the independence, funding, and authorities of the CFPB.

States Poised to Fill Vacuum Left by a Trump CFPB

Investors should be mindful that states retain the power to enforce both their own consumer financial protection laws, and any real or perceived step back that emerges at the federal level is likely to be filled by active state attorneys’ general and other state financial regulatory bodies. States have the authority to enforce federal prohibitions on UDAAPs under Section 1042 of the Consumer Financial Protection Act. In addition, the CFPB finalized an interpretive rule in May 2022 that clarified (and arguably expanded) state authority to enforce such laws. While such a rule is theoretically able to be revisited by incoming CFPB leadership, states have enforced federal consumer protection standards since Dodd-Frank was passed, and pre-emption is a nuanced legal question making determinative conclusions unclear at this stage.

At the least, investors should not expect consumer financial markets to become the wild west of non-compliance. Similar to California passing legislation to create the Department of Financial Protection and Innovation (DFPI) in response to Trump’s first presidential term and a shift in federal oversight of consumer finance, Capstone expects states to heighten their activity in the domain if and when the Trump-era CFPB steps back from the limelight. In fact, the DFPI recently released a request for comment seeking input on additional products and services that should be regulated under the California Consumer Financial Protection Law. The regulator has already extended its authority to offerings seemingly exempt from the CFPB’s oversight, such as lease-to-own, highlighting the potential for other states to follow suit.

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