Banks want US consumer regulator back to undo rules they loathe

Financial companies were rarely shy about their issues with the Consumer Financial Protection Bureau. But a largely shuttered consumer watchdog is creating its own problems for the industry.

While the agency’s headquarters stands dormant amid a halt-work order, its rules — ranging from major new edicts to dozens of small points of guidance which companies are loath to go against — are still in place. Financial firms can face penalties from state authorities for running afoul of them. And they remain at risk of being punished by regulators for breaking rules after President Donald Trump’s term ends.

Lobbyists for banks and mortgage companies have contacted Trump administration officials with a request for acting director Russ Vought: Turn the lights back on and get to work rewriting some regulations.

“The CFPB has work to do, like undoing rules and withdrawing proposals and guidance,” said Ian Katz, a managing director at Capital Alpha Partners in Washington. “I don’t know that initially the White House totally appreciated that. I just don’t know if Russ Vought was thinking in those terms or not, but clearly if you want to rescind rules you need people.”

Vought didn’t immediately respond to a request for comment.

Those efforts, described by lobbyists and executives who asked not to be identified commenting on the regulators, were on display at a Feb. 19 luncheon hosted by the Exchequer Club.

Mark Calabria, the lunch’s featured guest who is helping to oversee the agency’s operations, was pressed for details on the CFPB’s future. He tried to reassure lobbyists that the agency hadn’t fired all the rulemaking staff, and there would still be officials with the expertise to reshape regulations.

Calabria said he would look at the way the bureau was enforcing the prohibition against “unfair, deceptive or abusive acts or practices” by financial institutions, according to people who attended the event.

A spokesperson for Calabria, when asked about his comments, didn’t respond.

Some lawmakers have blasted the Trump administration for essentially shutting down the CFPB. Senator Elizabeth Warren said in February there was a “patchwork of law enforcement” for consumers before the 2008 financial crisis, which led to millions of people losing their homes and savings.

McKernan’s Nomination

The agency is currently without a Senate-confirmed director. Trump has nominated Jonathan McKernan, a former Republican member of the Federal Deposit Insurance Corp. board, to lead the consumer watchdog and his nomination was advanced by the Senate Banking Committee last week.

McKernan has given some in the industry hope that things would return to a more normal routine by pledging to uphold the laws of the agency. In contrast, Trump ally Elon Musk has called to “delete” the agency outright.

“We look forward to working with Mr. McKernan to undo many of the most recent actions by the Chopra CFPB that stand to harm millions of consumers, ensure the Bureau operates within its statutory authority, and to require it to fulfill its regulatory mission based on data and facts,” said Lindsey Johnson, the president of the Consumer Bankers Association, which represents banks and financial-technology companies.

Some banks, like Regions Financial Corp., are hoping McKernan can roll back regulations sharply curtailing banks’ ability to charge overdraft fees. The Birmingham, Alabama-based lender has relied on these fees in the past as a revenue stream and have tangled with the agency about their overdraft programs.

Regions Financial declined to comment.

As the requests to roll back Biden-era regulation come in, one former senior CFPB official said there is already a bottleneck at the agency of issues that companies want resolved with no one to handle the complaints.

Congressional Review Act

Republicans are working to roll back the overdraft fee rule using the Congressional Review Act, which lets certain government regulations that were recently finalized be stricken by simple majorities in the House and Senate with the president’s signature. But it’s not the only rule finalized during the Biden administration that has drawn the ire of financial industry.

Smaller banks are desperate for new CFPB leaders to undo a regulation that requires them to share large amounts of data with the public on their small-business lending. A spokesperson for the Independent Community Bankers of America, which represents small financial institutions, characterized this rule as an existential threat to small-business lending. That rule was finalized in March 2023, so it can’t be touched by the CRA.

There’s another issue with this method: If it is used to undo a rule, a similar regulation can’t be put in place unless it is specifically authorized by Congress. That means the rules some parts of the financial industry see as protecting their reputations or helping them compete could vanish unless the CFPB undoes them and replaces them with something better.

This might be fine with some financial industry participants when they consider many of the agency’s recent rules. But a few recent ones may be too well liked to be easily canceled using the CRA.

Katz pointed to the agency’s recent rule requiring banks to let their customers share their personal information, including data maintained by the banks, with other financial technology firms if that is what a customer wants.

“I’m guessing they won’t do CRA on that is because there is a pretty good amount of support for it even among some Republicans,” he said.