After weeks of former CFPB Director Rohit Chopra emptying the shelves with dozens of new regulations, proposals and enforcement activity, the financial services industry now faces whiplash as the Trump administration takes extreme actions reversing course.
On Feb. 7, Office of Management and Budget (OMB) Director Russ Vought was appointed by President Trump as the acting director of the Consumer Financial Protection Bureau (CFPB), replacing Treasury Secretary Scott Bessent. In an email to bureau staff on Feb. 7, Acting Director Vought stated that CFPB should cease all supervision, examination activity and stakeholder engagement, which expands on a freeze issued by former Acting Director Bessent. He also ordered staff to pause all pending investigations, not issue any public communications and halt enforcement actions. Despite these actions, industry is urging the CFPB to take more definitive action to rescind or remove existing regulations through the Administrative Procedure Act (APA) process or publish orders in the Federal Register to delay effective dates.
Without more clarity from more formal actions, many industries and businesses remain in limbo about what their expectations are, and it is expected that the trial bar will continue to pursue actions. Beyond this, as Brownstein recently outlined, state attorneys general can still enforce many consumer finance laws, and many laws have civil liability provisions allowing for a private right of action.
These developments occurred after the Department of Government Efficiency (DOGE) gained access to CFPB internal systems on Feb. 7. Additionally, Acting Director Vought said on X that the CFPB would not request any funding from the Federal Reserve for the upcoming fiscal period; rather, it would work using its $711 million existing balance. In the first Trump administration, former CFPB Acting Director Mick Mulvaney requested $0 for the second quarter of the 2018 fiscal year, although the CFPB ended up receiving funding throughout the first Trump administration.
Lawmakers quickly reacted to the changes at CFPB, including Rep. Andy Barr (R-KY), who stated on X that he supported halting CFPB activity to reassess the bureau’s future. Rep. Barr is the sponsor of the TABs Act (H.R. 654), CFPB reform legislation that would place the bureau under congressional appropriations. Similarly, House Financial Services Committee Chairman French Hill (R-AR) said that he looks forward to working with Acting Director Vought to place CFPB under congressional appropriations and turn it into a bipartisan commission. Many Democratic lawmakers have vowed in recent weeks to protect the bureau. Before Vought was appointed, House Financial Services Committee Ranking Member Maxine Waters (D-CA) and 80 House Democrats sent a letter to the CFPB, urging a reversal of the enforcement freeze and delay of final rules from taking effect.
President Trump nominated former Federal Deposit Insurance Commission (FDIC) Board Member Jonathan McKernan to serve as CFPB Director on Feb. 11. However, it will take weeks for McKernan to clear the Senate confirmation process, and Vought will remain acting director in the interim. Stay tuned for more from Brownstein on what to expect from McKernan’s term as director.
As the CFPB leadership discussions linger on in Washington, litigation continues around the country. Below are details about recent developments.
Rules Under Litigation
Section 1071
On Feb. 7, the Fifth Circuit Court of Appeals granted plaintiffs’ motion in Texas Bankers Association et al. v. Consumer Financial Protection Bureau to stay the effective date of the Consumer Financial Protection Bureau’s (CFPB) small business lending final rule. The Fifth Circuit’s stay applies only to the plaintiffs and parties represented by the trade groups in the lawsuit, such as America’s Credit Unions, which Brownstein represented. Other trade groups include the American Bankers Association, Independent Community Bankers of America and the Farm Credit Council. For all other covered entities, the compliance deadlines for the Section 1071 final rule remain in effect.
Medical Debt
On Feb. 6, the District Court of the Eastern District of Texas issued an order that stays the CFPB’s medical debt final rule effective date for 90 days, until June 15. The final rule would introduce sweeping changes to the process of medical debt credit reporting and the use of information related to the nonpayment of medical debt for underwriting purposes. Former Director Chopra finalized the rule on Jan. 7, less than two weeks before the change in administration. Litigation in the Southern District of Texas is ongoing, as plaintiff ACA International seeks longer-term relief beyond the 90-day stay.
In October the CFPB issued an Advisory Opinion related to medical debt. This was challenged in the D.C. District Court by ACA International. On Feb. 12, the CFPB asked the court for a 60-day extension of time to file the index of the administrative record. The litigation is ongoing.
Credit Card Late Fees
Before President Trump took office, District Judge Mark Pittman denied both the CFPB’s (1) motion to dismiss and (2) motion to remove the preliminary injunction on the credit card late fee final rule. While the preliminary injunction is still in place, the CFPB can wait until litigation concludes, or it could promulgate a rulemaking to rescind the rule. The rule was finalized in May 2024 and does not fall under the Congressional Review Act (CRA) lookback period for Congress to revoke the rule.
Section 1033
In October 2024, under its section 1033 final rule, which is facing a legal challenge from industry groups, the effective date for the final rule was Jan. 17, though the CFPB could halt the defense of the rule in court. In addition to legal challenges, the rulemaking could face a CRA challenge under a Republican trifecta, as the rulemaking falls under the 60-legislative-day lookback period.
Next Steps
With the CFPB at a standstill, regulations issued by the bureau and various consumer protection laws still remain on the books. Under Acting Director Vought’s order, the CFPB is now prohibited from finalizing or promulgating new rules, as well as using the rulemaking process to rescind Biden-era rules that are not subject to the CRA or are caught in the CFPB’s regulatory freeze. However, as previously noted, the CFPB has not taken the needed steps to publish changes in the Federal Register or provide details about changes in timelines.
While in some ways this is standard when a new administration takes the helm of an agency, there is a tremendous amount of confusion about the implications of Acting Director Vought’s email order. For example, it raises the question of whether an internal staff email can delay the effective date of a rule that has not yet been finalized. Likely, no, until formal action is taken in the Federal Register.
Similarly, even though there was a directive to pause litigation, can parties skip court deadlines and just stop? Again, no, actions will need to be taken to address required briefing in cases.
All of this will take some time and effort to sort out at the federal level. However, companies should not assume that they can simply stop their compliance programs and ignore consumer financial laws for the reasons outlined above. Furthermore, examinations can also include lookback periods of several years.
Congressional Republicans continue to urge the CFPB to address the midnight rulemaking efforts of the previous administration, but they also highlight the need for clarity for regulated industries. Congressman Andy Barr (R-KY) also recently reintroduced the TABS Act, which would subject the Consumer Financial Protection Bureau (CFPB) to the traditional congressional appropriations process.
Beyond this, in the coming weeks, congressional Republicans have indicated they may also attempt to include provisions to reform the CFPB during the budget reconciliation process. However, the feasibility and scope of the changes will be set by the Senate parliamentarian and how they rule on Byrd Rule compliance. Congress also continues to work to rescind certain CFPB rules using the CRA process.
With the many moving pieces and the sweeping actions of the CFPB acting director, it will be critical for businesses and industry to remain engaged.
