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The role of the US Consumer Financial Protection Bureau (CFPB) as a hands-off regulator under the second Trump administration is becoming clearer, following a significant withdrawal of agency guidance.
As covered by Vixio, in May, acting CFPB director Russell Vought announced that the bureau had withdrawn 67 guidance documents, including interpretive rules, policy statements and advisory opinions.
The withdrawal is consistent with the current focus on deregulation in the US, and with the CFPB’s approach in recent months, which has seen the agency back away from active rulemaking and enforcement activity, as well as withdrawing lawsuits and penalties initiated under the previous administration.
The oldest of the documents date back to 2011, the CFPB’s founding year, but the vast majority were issued under President Biden (between 2020 and 2024).
The withdrawn guidance is wide-ranging, covering almost every product and service area that has come under CFPB supervision, including: remittances; credit cards; overdrafts; mortgages; and buy now, pay later (BNPL) loans.
A number of key associations, including the American Bankers Association (ABA) and America’s Credit Unions, have welcomed the mass withdrawal of CFPB guidance.
They have also welcomed the CFPB’s new commitment to notice-and-comment rulemaking over future interpretative guidance as part of its changed approach.
The bigger picture
By withdrawing much of its previous guidance en masse, the CFPB is aiming to reduce the compliance burdens of consumer financial companies.
In Vought’s words, the CFPB’s new policy is to issue guidance “only where necessary” and only where it serves to “reduce compliance burdens rather than increase them”.
In a supplementary notice to the Federal Register, Vought said the CFPB had previously issued guidance “without adequate regard” to its impact on compliance burdens and costs.
He also said that in “many instances” the CFPB had issued interpretative guidance that is “inconsistent” with statute or regulation.
But even where consistent, Vought said that CFPB guidance that imposes additional compliance burdens outside the notice-and-comment rulemaking process is “unnecessary” and “illegal”.
Whether the withdrawal of the guidance and the agency’s more hands-off approach will achieve the stated goal of reducing compliance burdens remains to be seen.
As Vought acknowledges, the guidance issued by the CFPB over the years has served as “reliance” material for a wide range of firms and activities.
In legal terms, this means that firms may have designed and structured their operations around this guidance — a process that is often costly and time-consuming for compliance departments.
Although firms’ reliance on the guidance might be said to create a strong incentive for the CFPB not to abruptly rescind it, the agency’s new management has prioritised its deregulation agenda.
It should be noted, however, that the withdrawal of the 67 documents is not necessarily final — adding another risk for compliance staff to keep in mind.
Why should you care?
The mass withdrawal of guidance is one of the clearest signals that the CFPB under the second Trump administration will take a hands-off approach to supervision and a last-resort approach to enforcement.
However, the repeal of the guidance does not mean that organisations will be freed up entirely from regulatory scrutiny or obligations.
Although the CFPB will no longer rely on the withdrawn guidance as a part of its enforcement, the laws and regulations for which many of these pieces of guidance provided clarification are still in place.
The repercussions of the CFPB’s mass withdrawal of guidance will vary — the wide range of the guidance withdrawn makes it difficult to generalise about its impact, so payments firms will have to assess for themselves what it means.
In seeking to determine how they will be affected, organisations should consider reviewing the withdrawn documents to determine the level of compliance risk they face. Although a review on this scale will be challenging, it will help firms ensure they have a clear view of the improvements and efficiencies that the CFPB’s change in approach may provide.
Firms must also review their processes and procedures to ensure that they continue to comply with the statutory requirements of the withdrawn guidance, such as relevant provisions of the Truth in Lending Act (Reg Z), the Electronic Fund Transfer Act (Reg E), and the Fair Credit Reporting Act.
And they will have to identify which of the rescinded documents they previously relied on for compliance, operational practices or legal interpretation.
Without the regulator’s guidance on interpreting the rules, compliance departments will need to return to the original text and determine whether they are in scope and, if so, exactly what they need to do to ensure they meet their obligations.
This will likely mean that they will have to rely on the advice of external counsel. It may also mean a rise in litigation as challenges in the courts become a key way to determine the precise requirements of specific regulations.
In addition, firms with a presence in states with strong consumer protection laws may still need to comply with areas of the laws and regulations covered in the now-withdrawn guidance.
For example, several states have BNPL legislation, which may address the withdrawn guidance in this area, and states’ unfair trade practice laws could be relevant to the way organisations operate.
We may also see blue-leaning states seek to fill in the gaps left by the CFPB.
In February, a coalition of 23 attorneys general came together to warn against efforts by the Trump administration to defund and disband the CFPB.
And in March, as covered by Vixio, New York Attorney General Letitia James introduced the Fostering Affordability and Integrity through Reasonable (FAIR) Business Practices Act, which seeks to offer new safeguards for consumers and small businesses.
If states do start to impose consumer protection rules and guidance at a local level, it could lead to significant fragmentation in the regulatory framework, adding a layer of complexity for firms that operate nationwide.
Time will tell whether the CFPB continues on its path of deregulation, or if a few years from now the pendulum will swing the other way and we will see the agency ramp up its enforcement and rulemaking.
For now, the bureau’s increasingly hands-off approach means at least a short-term increase in workload for payments firms that need to determine which rules they need to follow, and how.
