Potential Impacts from a Zombie CFPB

We understand our members are concerned about the executive actions of our new administration. Most of these questions concern the regulatory obligations of credit unions now that the future state of the Consumer Financial Protection Bureau (CFPB) is up in the air. While we acknowledge the recent administrative actions can appear spooky (hence the title), this blog will attempt to demystify what is happening to the agency and how that will likely impact the financial institution industry, at large.

What Happened to the CFPB?

The Trump administration moved swiftly to curtail the CFPB in early February, 2025. On February 1, President Trump fired Director Rohit Chopra. Two days later, then Acting Director Scott Bessent (Treasury Secretary) ordered the agency to halt all operations-including investigations, rulemaking, and enforcement. By February 7, Russell Vought, Office of Management and Budget (OMB) Director and Project 2025 architect, assumed the acting role, directing staff to cease supervision, suspend new rules, and stop public communications. Additionally, Vought fired all probationary Bureau employees and most contract employees. Future firings have been paused pending litigation. On February 10, Trump nominated Jonathan McKernan, a former FDIC board member, as permanent director. These steps systematically and for the time being, dismantled the CFPB's regulatory and enforcement functions.

Where Does America's Credit Unions Stand on the Issue?

America's Credit Unions supports CFPB reform and a significant review of recent rulemaking to ensure that it appropriately weighs the goals of consumer protection and access to financial services. However, if the CFPB persists in its current state and were effectively shuttered, the immediate and long-term consequences would extend beyond regulatory uncertainty and have tangible impacts on financial institutions' day-to-day operations. While some credit unions may welcome reduced regulatory pressure, the lack of necessary regulatory updates, guidance, and oversight would create serious operational challenges.

The Impact?

Although the recent freeze on supervision, regulation, enforcement, and engagement is likely to be temporary, it is important to understand the impact if it is not. We have listed key functions that would be negatively impacted by the gutting of the CFPB's regulatory powers:

Annual Threshold Adjustments for Key Consumer Protection Laws

  • Credit unions rely on Reg Z, Home Mortgage Disclosure Act (HMDA), and Reg E threshold adjustments to determine compliance obligations.
  • If thresholds freeze:
    • More small institutions could be forced into HMDA reporting requirements because the volume threshold wouldn't adjust for inflation.
    • More loans could become high-cost loans under HOEPA, creating additional compliance burdens.
    • Reg Z credit card penalty fee safe harbor amounts would not adjust, creating potential cost recovery issues.
  • A lack of adjustments could impose unnecessary compliance obligations.

Typical Threshold Update Dates

  • Regulation Z (Truth in Lending Act - TILA) Adjustments
    • HOEPA (High-Cost Mortgage): Announced in late Q4 (November-December), effective January 1 of the following year.
    • Credit Card Penalty Fees (Safe Harbor Limits): Announced in Q4 (usually November), effective January 1 of the following year.
  • HMDA Loan-Volume Threshold
    • Announced in Q4 (typically December), effective January 1 of the following year.
  • Regulation E (Electronic Fund Transfers Act - EFTA) Remittance Transfer Threshold
    • Announced in Q4 (November-December), effective January 1 of the following year.
  • Ability-to-Repay/Qualified Mortgage (ATR/QM) Points & Fees Thresholds
    • Announced in late Q3 or early Q4 (typically August-September), effective January 1 of the following year.
  • Rural and Underserved Counties List
    • Typically published in or before May each year.

HMDA Filing and System Maintenance

  • Credit unions subject to HMDA rely on the CFPB's Loan/Application Register (LAR) system for submission.
  • If it goes offline, institutions may have no clear way to report HMDA data.
  • Without updates or a replacement system, credit unions could struggle with reporting requirements, leading to potential penalties from other regulators.

Interagency Coordination for Consumer Financial Protection

  • The CFPB plays a role in ensuring consumer protection rules are applied consistently across regulators (NCUA, OCC, FDIC, Fed).
  • If the CFPB shutters:
    • NCUA and other regulators might start issuing their own interpretations, creating a patchwork of inconsistent enforcement.
    • Credit unions could be left in regulatory limbo, unsure which interpretations apply.
  • The lack of clear, unified guidance could lead to fragmented compliance requirements.

Loss of Special Purpose Credit Program (SPCP) Guidance

  • The CFPB recently started providing more clarity on SPCPs under the Equal Credit Opportunity Act (ECOA).
  • Without continued guidance:
    • Credit unions could be hesitant to offer programs aimed at underserved borrowers due to fear of fair lending liability.
  • Institutions seeking to expand lending access could be deterred.

Mortgage Servicing Compliance

  • The CFPB regulates how mortgage servicers handle delinquencies, loss mitigation, and foreclosures.
  • If it ceases to update guidance:
    • Credit unions might struggle to comply with foreclosure-related rules in disaster relief scenarios.
    • State regulators and courts might start filling the gap with inconsistent standards.
  • Uncertainty in mortgage servicing could increase litigation risks.

Uncertainty Regarding Implementation Guidance for the Section 1033 Personal Financial Data Rights Rule

  • The CFPB has finalized the 1033 rule, requiring financial institutions to provide consumers with access to their financial data.
  • The effective date of the rule was Jan 17. 2025 with the first compliance dates beginning in 2026. The rule is the subject of litigation which could further delay compliance dates.
  • The Bureau promised to issue a Small Entity Compliance Guide.
  • Impact: With the CFPB shuttered, this guide may never be published, leaving credit unions uncertain about compliance expectations and technical implementation.
  • Acting Director Vought has ordered the Bureau to suspend the effective dates on any rules that were finalized but not yet effective, which would include this rule.

Uncertainty Regarding Implementation for the Section 1071 Small Business Lending Data Collection Rule

  • The CFPB has finalized the 1071 rule and set July 18, 2025 as the date for the first tier of financial institutions to begin collecting data, with a first filing deadline of June 1, 2026.
  • The final rule is subject to litigation, with a stay currently affecting credit unions, the ultimate disposition of which will likely impact compliance dates.
  • Acting Director Vought has ordered the Bureau to suspend the effective dates on any rules that were finalized but not yet effective, which would include this rule.

Uncertainty Regarding the Continued Applicability of the Bureau's P2P FAQs for Reg E/EFTA

  • The CFPB's FAQs on unauthorized peer-to-peer (P2P) transfers have significant compliance implications, particularly for fraud liability.
  • These are interpretative statements rather than codified regulations.
  • Impact: Without the CFPB, it is unclear whether these interpretations still apply, increasing legal uncertainty around fraud dispute obligations.

Uncertainty Regarding Whether Institutions Still Have an Obligation to Respond to Consumer Complaints

  • The CFPB's Consumer Complaint Database collects and publicly reports complaints and requires companies to respond within specific timeframes.
  • Impact: If the database remains active but the CFPB is not enforcing response deadlines, credit unions may face unclear obligations regarding complaint response requirements.

Uncertainty Regarding Credit Card Agreement Submissions

  • The CFPB requires quarterly submissions of credit card agreements.
  • Impact: If submission procedures are not clarified, credit unions may face compliance risk for missing submissions or unnecessary administrative burdens if the requirement is informally discontinued.

Uncertainty Regarding the Publication of Rural and Underserved Counties Lists

  • The CFPB publishes a list of rural and underserved counties annually, which is used for certain mortgage exemptions (e.g., ATR-QM rural portfolio exemptions).
  • Impact: If the CFPB stops publishing this list, credit unions may be unable to determine eligibility for these exemptions, affecting mortgage lending in rural areas.

Loss of Official Interpretations for Evolving Compliance Questions

  • The CFPB provides official interpretations of Reg Z, RESPA, ECOA, and other rules.
  • Impact: Without these updates, credit unions will need to rely more on legal counsel, increasing costs and compliance uncertainty.

Inability to Obtain No-Action Letters or Regulatory Sandbox Protections

  • The CFPB issues no-action letters (NALs) and sandbox approvals for innovative financial products.
  • Impact: Without these, credit unions may halt fintech partnerships or new product launches due to legal uncertainty.

Enforcement Actions

  • The administration has ordered the CFPB to pause all enforcement actions and reportedly cancelled contracts with all expert witnesses set to testify in existing enforcement litigations.
  • Impact: While this action may provide a reprieve from litigation for credit unions, it will also prevent the Bureau from taking enforcement actions against bad actors, which could hurt credit unions members and harm the reputation of financial services institutions in general.

If you have any questions concerning this blog, please contact the compliance team. To keep up with the policy changes, check out this America's Credit Unions' Executive Order Tracker.