Americas
US consumer protection regulator will be a bellwether for Trump deregulation agenda
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February 5, 2025

Legal and regulatory experts seeking early intel on US regulatory reform should keep watch on the Consumer Financial Protection Bureau (CFPB), the first financial regulator targeted for change: President Donald Trump wants to “demolish” it, while deregulation czar Elon Musk wants to “delete” it.
As a regulator keen to tackle emerging fintech and artificial intelligence rules, the CFPB was the first agency to have its wings clipped. On Monday, Treasury secretary Scott Bessent was installed as its acting director. He announced an immediate halt to all CFPB activity, including communications, pending a review.
Senator Elizabeth Warren (D-MA) has vowed to fight Trumpʼs efforts to shutter the CFPB. Her office did not respond to an email requesting comment on Bessentʼs freezing order.
Uncertainty ahead
The president has wasted no time remodelling the US government into a sharper tool with which to execute his agenda, having installed allies in key departments. The moves promise the finance industry eased regulation — but also the challenge of managing risk when the government is ‘moving fast and breaking thingsʼ. The months ahead will bring more uncertainty as the administration enacts sweeping plans to reduce regulation and spending.
Whether or not efforts to slash government costs and red tape gain traction, the CFPBʼs fate may indicate how far regulatory boundaries are likely to be redrawn.
In the week Trump took office, Alan Kaplinsky at law firm Ballard Spahr said the problem was that changes at the CFPB were “very dramatic” from one administration to another, including “Obama to Trump and then Trump to Biden”. Compliance and risk teams will be busy not only with CFPB changes, but across the whole expanse of financial regulation, he added.
“We expect increased uncertainty under the new administration,” Alan Wynne, global strategist at JP Morgan Wealth Management, also said in an investment advisory note.
Initial signs show Trump pushing for fast-track deregulation, along with Republican lawmakers, who have already introduced legislation to defund the CFPB. The CFPB cannot be eliminated completely without legislation, however.
De facto fintech regulator
Nevertheless, the CFPB has moved ahead with rulemaking in recent months, especially in fintech areas such as financial data privacy, payment system rules, data brokerage, and curbs on discriminatory mortgage services — a market in which they have overtaken traditional lenders.
Musk, an early investor in PayPal, entered the picture just as the CFPB emerged as lead regulator for fintech, setting up a challenger vs traditional finance battle. Banks have publicly supported CFPB moves into fintech regulation — which covers competitors whose use of new technology has enabled them to devour large segments of traditional consumer lending.
However, Musk will need to satisfy his fintech cohort, as well as traditional finance, in issuing rules. He will also have to tread cautiously regarding digital currencies, a hot button concern of regulators and the finance industry.
“Everybody wants some common rules in the road that they can follow, whatever administration you have in power,” stressed Inclusive-Partners founder and veteran regulator Bradley Blower, in a Ballard Spahr briefing.
Roadmap for change
Compliance and risk teams should monitor what happens to the CFPB. Tactics for change, which have been used before and will probably be used elsewhere, include:
Defunding: Republicans have already introduced legislation using so-called “budget reconciliation” to cut the CFPB budget to $0, and need a simple majority for passage. But the CFPB and its financial backer, the Federal Reserve Bank, are independently financed, and not reliant on Congress. Moreover, the Supreme Court last year voted 7-2 for the CFPB’s constitutionality and funding, so even with Congressional approval, defunding would face legal challenges.
Acts of Congress: Congress could sponsor legislation to cancel the regulations already passed, or even eliminate the CFPB or other agencies such as the Federal Deposit Insurance Corporation, but needs 60 votes to overcome a filibuster. More likely would be laws to curb the CFPB, most notably a measure supported by the American Bankers Association and other industry groups to trim the Unfair, Deceptive, and Abusive Acts and Practices (UDAAP) rules that protect consumers. There is bipartisan support for clearly defining the catch-all law, which would raise the enforcement bar for violations to show intent to cheat customers and to ban its use in discrimination cases.
Rule recissions: Newly passed rules could be voided by a simple majority under the Congressional Review Act: the first Trump administration used it to void the Department of Labor fiduciary rule, for example. Major rules issued by the CFPB cover overdraft lending, open banking, buy now/pay later for internet finance and data broker rules.
Rule replacements: The Administrative Procedures Act allows presidents to rewrite rules, but there are strict limits and court challenges are virtually automatic. Some rules’ effective dates can be extended to allow time for rewrites, or for preparing for legal action.
Withdrawing “supervisory highlights”: The CFPB has often used supervisory guidelines, and other alternatives, to make rules without going through the whole process, which bank lobbyists have opposed as not legally binding. Many of the agency’s interpretive unofficial rules could potentially be reissued or withdrawn by a new director.
Reviewing cost-benefit factors: The deregulation effort will include digging through existing rules to determine whether they were drafted only after a cost-benefit analysis. Some rules passed without proper due diligence have been voided by courts.
Personnel changes: The newly established Department of Government Efficiency (DOGE) wants to slash $2 trillion from the US budget. With the president’s authority it has already fired inspectors general (internal compliance officials) at more than a dozen agencies. CFPB director Rohit Chopra was fired last week and swiftly replaced with Bessent.