McKernan’s CFPB Nomination Hearing: What It Means For Consumer Financial Services Regulation

The Senate Banking Committee’s hearing on Jonathan McKernan’s nomination to lead the Consumer Financial Protection Bureau (CFPB) signals a potential shift in the agency’s direction: McKernan, a Trump nominee, pledged to enforce consumer protection laws while advocating for reforms to increase accountability. Democratic senators, however, raised concerns that his leadership could further weaken an agency they argued has already been functionally shuttered under the new administration.

A CFPB in Transition

Since the transition to the new administration, the CFPB has been largely inactive, with its headquarters reportedly closed and most staff on administrative leave. McKernan vowed that “under my watch, the CFPB will take all steps necessary to implement and enforce the federal consumer financial laws and perform each of its other statutorily assigned functions. But the CFPB will do this by centering its regulation on real risks to consumers and by focusing its enforcement on bad actors.”

Republicans pointed to past CFPB actions they view as exceeding statutory authority. McKernan echoed these concerns, stating the Bureau has gone beyond its mandate, but assured lawmakers throughout the hearing he would fully and faithfully follow the law, the specifics of which he would need to be advised on. McKernan stated, “The north star here is you got to follow the law, fully and faithfully execute the statute … I take that very seriously … I’m going to make sure the CFPB performs each of its statutorily performed functions.”

Regulatory Uncertainty and Industry Impact

Democratic senators, led by Elizabeth Warren, challenged McKernan on whether his leadership would restore or further diminish the CFPB. Warren questioned how he could lead an agency that has been functionally shuttered. For financial services firms, McKernan’s nomination raises key questions about regulatory priorities. His testimony suggests an expected shift toward statutory fidelity, which could impact all of the CFPB’s future activities. However, political and legal challenges surrounding the future of the CFPB are ongoing, and McKernan did not share specific details of his plans or the new administration’s plans for the agency as a functional regulator. While the hearing was under way, it was reported that CFPB Acting Director Russell Vought had dropped several enforcement actions brought by the Biden/Chopra-era CFPB against financial services companies.

Looking Ahead

McKernan’s confirmation process—and the CFPB’s future—will shape consumer financial regulation. While his nomination suggests a recalibration of priorities, it remains unclear how enforcement and supervision will evolve. At the same time, federal consumer financial services law remains unchanged, and with a few exceptions and limitations, generally allows enforcement by other federal agencies, state attorneys general, and state regulators. Financial institutions should stay engaged and monitor potential regulatory shifts in the coming months.