CFPB And FHFA On List Of Agencies To See Course Change Under Trump

As we continue to analyze the strength of former President Trump’s red wave, one thing is clear: a number of federal agencies are poised for a major shift in their rulemaking agendas, priorities, staffing and approach to enforcement. Two agencies that may be particularly vulnerable to the political swing are the Consumer Financial Protection Bureau (CFPB) and the Federal Housing Finance Agency (FHFA). Their structure of having a single director, particularly after the decisions in Seila Law and Collins, which made the director serve at the pleasure of the president, means that the current directors will almost certainly be replaced and will likely take these agencies in a new direction.

RULEMAKING FREEZE AND CONGRESSIONAL REVIEW ACT

One of President Trump’s first actions upon taking office will likely include issuing a freeze on new regulations from executive departments and independent agencies. Other efforts to stall Biden administration rulemakings could include:

• Refraining from sending any proposed or final rules to the Office of the Federal Register (OFR) for publication in the Federal Register;
• Withdrawing from OFR any proposed or final rules that have not yet been published in the Federal Register; and
• Postponing or considering postponing for 60 days the effective dates of rules that have been published in the Federal Register but that have not yet taken effect.

As we await final word on whether there will be a Republican trifecta, it certainly appears that Congress could also play a role in halting final CFPB and FHFA rules by using the Congressional Review Act (CRA). The CRA enables Congress to issue a joint resolution of disapproval to invalidate a final rule in its entirety. The joint resolution of disapproval must be introduced within a 60-day legislative day lookback period, and the current time frame of the lookback period is approximately late-May to mid-June. For reference, in 2017, a Republican-controlled Congress helped kick off the Trump administration’s regulatory reform efforts by using the CRA to repeal 16 Obama-era regulations.

Congress can also use the annual appropriations process to limit the reach of rulemakings. Appropriations language might include prohibitions on the use of funds for certain rulemaking purposes, such as prohibiting the use of funds for finalizing proposed rules or carrying out enforcement of final rules. However, unlike a CRA joint resolution, appropriations provisions do not nullify existing regulations. As such, final rules that have taken effect will continue to be binding, even if appropriations language prohibits the use of funds to enforce the rule.

Beyond these tools, since both of these agencies are led by a single director, it is also much easier to reverse course on rulemaking simply through the administrative process by finding reasons to repropose or reconsider rulemakings that were finalized under a previous administration. We saw this at the CFPB under the last Trump administration when the small dollar lending rule was reopened by the agency with no directive from Congress or otherwise, after it had been finalized in the Trump administration.

The rulemakings and agency actions from the FHFA and CFPB listed in the sections below are likely to either be frozen, repealed or amended.

FHFA

In November 2023, FHFA published the culmination of its year-long review of the Federal Home Loan Bank (FHLB) system, the FHLBank System at 100: Focusing on the Future initiative. Over the last year, FHFA released numerous proposals stemming from the review on the FHLBanks mission, membership asset management tests and changes to the governance structure and responsibilities of the FHLBanks. While it is not clear who will lead FHFA, slowing down or eliminating current FHFA Director Sandra Thompson’s review of the FHLBanks could be near the top of the list.

FHFA is also expected to finalize rules relating to Fair Lending, Fair Housing, and Equitable Housing Finance Plans that many stakeholders in the proposed stage worried went beyond the agnecy’s authority. Brownstein has written about the proposed rule here.

In 2023, FHFA also issued a Request for Input (RFI) related to tenant protections and later announced in July 2024 that FHFA and Fannie Mae and Freddie Mac (the Enterprises) will continue to evaluate options for “codifying” additional tenant protections. Stakeholders pushed back on FHFA’s authority to do this at the federal level and the concepts laid out in the RFI could shift under a new director.

FHFA Director Thompson stated in an April 2024 Senate Banking Committee hearing that FHFA would attempt to set a minimum energy efficiency standard for new homes built using Enterprise loans. Stakeholders asked the FHFA to consider promoting voluntary efforts in this space, rather than create expansive and complex mandated requirements. Eight Democratic senators called for movement on this issue in September, but FHFA has yet to finalize rules in this area, and anything finalized between now and December could face pushback from a new director.

Supervisory Approach

Under the Biden administration, FHFA has issued Advisory Bulletins and Supervisory Letters that intend to “describe FHFA supervisory expectations for safe and sound operations in particular areas and are used in FHFA examinations of the regulated entities.” Recently, FHFA has ramped up its use of advisory bulletins to issue mandates on the FHLBanks. On Sept. 27, FHFA issued an advisory bulletinthat requires the Federal Home Loan Banks (FHLBanks) to institute member lending standards that focus on members’ financial condition, not solely the collateral securing the members’ obligations. FHFA found “weaknesses” in FHLBanks’ credit risk management along with “misconceptions” on the role of an FHLBank in lending to members under financial distress. FHFA also released an advisory bulletin on Sept. 30 that recommends FHLBanks “consider the range of climate-related risks that may affect them in the near and long term.”

Separately, in 2022, FHFA issued a six-page policy statement on “Supervisory and Regulatory Access to Regulated Entity Privileged and Confidential Information.” The policy statement details that “FHFA has general regulatory and supervisory authority over its regulated entities.” A new FHFA director under the Trump administration may wind down or eliminate the use of advisory bulletins and supervisory letters. New leadership at FHFA may also formally pull back the guidance issued under the Biden administration.

FHFA under the Biden administration focused on ways in which the Enterprises can reduce closing costs for homeowners and recently approved a limited-duration “Title Acceptance Pilot” that allows existing homeowners that meet certain criteria to refinance their homes without having to purchase title insurance.

CFPB

The CFPB, under a second Trump administration, will likely move to reverse or halt many of the rulemaking efforts undertaken by current CFPB Director Rohit Chopra, including the CFPB’s proposed rule on overdraft lending issued in February. The proposal would require insured financial institutions with over $10 billion in assets to comply with the Truth in Lending Act (TILA) when extending overdraft loans. The proposal has not been finalized, and a Trump-led CFPB will likely halt any effort. The CFPB will also likely undo the CFPB’s recent supervisory guidance for federal and state consumer protection enforcement officials to use to prevent banks and credit unions from charging overdraft fees in certain situations. Brownstein previously analyzed the guidance and proposed rule.

Credit Card Late Fees

On March 15, the CFPB finalized its highly anticipated credit card late fee rule; the main rule reduces the safe harbor from late fees from an average of $30 to $8. The final rule included some notable changes from the proposal as the CFPB attempted to lessen the chances of a successful legal challenge, as noted in a Brownstein analysis. However, the rule has faced a contentious legal challenge that is currently being heard in Texas, along with pushback from industry and Congress. The incoming Trump administration may seek to halt the defense of the rule in court.

Medical Debt

The CFPB proposed a rule in June that 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. Continuing the CFPB’s efforts on medical debt, it issued an advisory opinion on Oct. 10 that outlines standards for companies that service medical collections accounts. Brownstein challenged this action in the United States District Court for the District of Columbia on behalf of ACA International, arguing that it ultimately creates new rules for medical account servicers and debt collectors beyond the FDCPA and Regulation F requirements when conducting medical bill collections. The CFPB is also expected to potentially release its final rule related to medical debt credit reporting before the end of the year.

All Republican members of the committee signed on to a comment letter opposing the CFPB medical debt credit reporting proposed rule, stating that the proposal would “undermine underwriting processes and increase risk in the financial system.” The legal and policy challenges to this rule are expected to continue, making it ripe for repeal under a new administration.

Section 1033 Final Rule

Two weeks before the election, the CFPB finalized its long-awaited data-sharing rule as required under section 1033 of the Dodd-Frank Act. The rule, once effective, will require depository and nondepository entities to make available to consumers and authorized third parties certain data relating to consumers’ transactions and accounts; establish obligations for third parties accessing a consumer’s data, including privacy requirements; and provide standards for data access. Shortly after the final rule was released, a banking trade group filed a lawsuit, arguing that the CFPB “exceeded its statutory authority” by requiring banks to provide customers’ financial information to fintech companies and data aggregators. 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.

Mortgage Costs

As outlined by Brownstein, on May 30, the Consumer Financial Protection Bureau (CFPB) released a Request for Information (RFI) regarding mortgage closing costs. The seven-page RFI provided nine questions about the impact of closing costs and how they relate to borrowers and the mortgage market and targeted several areas of the process deemed “junk fees.” The CFPB was planning to issue a proposed rule on this topic in December, which could be reconsidered or halted as part of the transition to a Trump administration CFPB.

ENFORCEMENT ACTIVITY

Under a second Trump administration, it is likely that the CFPB and other regulatory agencies will take a less aggressive enforcement stance compared to the Biden administration. For comparison, the CFPB under President Obama took 161 public enforcement actions in his second term from 2013–2017, compared to 114 public enforcement actions from the Trump administration’s CFPB from 2017–2021. The Trump administration’s CFPB also ended the practice of using warning letters against a variety of financial institutions. The Biden administration has taken 88 public enforcement actions so far, slowed down as the bureau awaited the Supreme Court ruling in Consumer Financial Protection Bureau (CFPB) v. Community Financial Services Association of America (CFSA). In addition to an expected decrease in public enforcement actions, the CFPB will likely end its reliance on blog posts, guidance, circulars and other methods that sidestep the required Administrative Procedure Act (APA) process to target certain industries.

CURRENT LITIGATION AGAINST THE CFPB

The CFPB also continues to defend several of its rulemakings and enforcement actions in court. Challenges to final rules for Small Business Lending (1071), credit card late fees, the previously mentioned 1033 rule, Buy Now Pay Later, and guidance in the Unfair, Deceptive, or Abusive Acts or Practices (UDAAP) exam manual are at various stages in the litigation process. It is possible the CFPB will choose not to defend the Biden-era regulations in court, similar to what we saw for a number of Department of Labor regulations in the last Trump administration. This is unchartered territory at the CFPB since the young agency faced an unprecedented number of legal challenges under Director Chopra’s era.

EXPECTED STAFFING CHANGES

CFPB Director Chopra will likely be removed, as he serves at the pleasure of the president as determined by Seila Law, and FHFA Director Sandra Thompson will also likely be removed under similar reasoning in Collins. Again, as fairly young agencies, there is no clear precedent for how political appointments or semipolitical hiring decisions are made at both the CFPB and FHFA, and how that impacts staff changes. For example, Director Chopra had a fellows program that Republican lawmakers argued was used to select politically aligned staff at the agency but did not require the transparency associated with a formal political appointment. Both agencies would, at a minimum, likely have new leadership surrounding a new director in the offices of the directors, including a new chief of staff and deputy director roles.

It is expected that both directors will be removed immediately but it is not totally clear what the process will be for leading the agency during the process of confirming a new director, since Seila Lawand Collins created a new framework for removing the director. Under the Kraninger administration at the CFPB all of the Republican political appointees voluntarily resigned. However, there is no clear legal precedent for this leadership transition.

CFPB AND STATE ATTORNEY GENERAL COORDINATION

During the Biden administration, the CFPB has become increasingly reliant on state attorneys general to enforce federal consumer protection laws. Brownstein wrote about it here. With the change in administration coming in 2025, it is likely that such federal-state cooperation will be significantly curtailed, particularly when it comes to the new administration working with Democratic attorneys general. In the absence of the CFPB deputizing state attorneys general, we expect to see Democratic attorneys general coordinate their efforts and pick up where the Biden CFPB left off, with increased consumer protection investigations and litigation.

Brownstein’s Government Relations team is closely following and engaged in conversations about transition efforts and can continue to support clients through navigating any new opportunities or challenges.