Breaking Down a New Day at the CFPB
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Breaking Down a New Day at the CFPB

Brownstein Client Alert, Feb. 3, 2025

After weeks of emptying the shelves at the Consumer Financial Protection Bureau (CFPB) with dozens of enforcement actions, new rules, proposed regulations and guidance, President Donald Trump fired CFPB Director Rohit Chopra on Feb. 1. While the new administration continues to determine who will be nominated for the full-time role, Treasury Secretary Scott Bessent will serve as the temporary acting director.

On his first day in office, President Trump issued a wide-ranging regulatory freeze that requires all executive departments and agencies to:

  • Refrain from sending any proposed or final rules to the Office of the Federal Register (OFR) for publication in the Federal Register;
  • Withdraw from the OFR any proposed or final rules that have not yet been published in the Federal Register; and
  • Postpone or consider postponing for 60 days the effective dates of rules published in the Federal Register but that have not yet taken effect. Agency heads may also consider further delaying or publishing for notice and comment beyond the 60-day period.

The regulatory freeze will, at a minimum, delay the effective dates of numerous rulemakings issued in the lame duck. This is relevant, as CFPB Director Rohit Chopra continued the CFPB’s rapid rate of rulemaking in the lame duck, in contrast with other Biden administration financial regulators that suspended major rulemaking efforts following President Trump’s victory in November.

In recent weeks, the CFPB issued a variety of proposed rules, final rules and other agency actions that could clash against a new CFPB director’s rulemaking agenda and vision for the bureau. The CFPB took risks in finalizing certain controversial rules, as Congress could move to rescind final agency actions by using the Congressional Review Act (CRA), preventing the bureau from issuing a “substantially similar” regulation in the future. Many of Chopra’s midnight rules have also been challenged in court.

 

Medical Debt Credit Reporting Final Rule

The CFPB issued a final rule on Jan. 7 that would introduce sweeping changes to the use of information related to the payment of medical debt for underwriting purposes. The rule changes Regulation V to remove the financial information exception for medical accounts. It also adds a restriction that forbids CRAs from supplying medical account information to creditors when they determine a person’s ability to take on new debt or expand existing obligations. ACA International filed a lawsuit on Jan. 9 in the U.S. District Court for the Southern District of Texas, stating that the final rule goes beyond the CFPB’s regulatory authority and would damage the credit reporting system, as well as take funds from the pockets of health care providers. 

In Congress, Senate Banking Committee Chairman Tim Scott (R-SC) criticized the rule, noting that it will “reduce access to credit and important health care services while putting lenders and medical providers at risk.” Additionally, House Financial Services Committee Chairman French Hill (R-AR) voiced his concern over the final rule, adding that he would work with the incoming Trump administration to “rectify this misguided action.” The final rule could face a CRA challenge in the new Congress.

 

Overdraft Final Rule

In December, the CFPB finalized a controversial rulemaking that would fundamentally alter how banks and credit unions offer overdraft services. The rule would apply only to “very large” banks and credit unions with assets equal to or exceeding $10 billion. There is no current impact on institutions under this threshold. However, the final rule preserved the proposed rule’s language indicating the agency “plans to monitor the market’s response” to this rulemaking before revising regulations that govern smaller banks and credit unions. The rule’s effective date is Oct. 1, 2025, but several obstacles could prevent it from moving forward, including an ongoing legal challenge and the possibility of a CRA challenge. As the rule will not yet be in effect in January 2025, it was also captured by the regulatory freeze issued shortly after President Donald Trump took office. Brownstein’s analysis of the final rule can be found here.

 

Data Broker Proposal

The CFPB also released a sweeping notice of proposed rulemaking (NPRM) that would treat data brokers as credit reporting agencies, subjecting them to requirements under the Fair Credit Reporting Act (FCRA). The proposal would treat data brokers as consumer reporting agencies, subjecting them to requirements under the Fair Credit Reporting Act (FCRA). The proposed rule would also require consumer consent for data sharing and restrict the use of marketing for consumer reports. The rulemaking stems from President Biden’s Feb. 28 Executive Order (EO) on sensitive personal data, which recognizes the “particular risk” the data brokerage industry poses to U.S. national security. Brownstein’s full analysis and outlook are available here.

 

Digital Payments

On Jan. 10, the CFPB issued a request for input (RFI) and a proposed interpretive rule on digital payment privacy protections. The RFI seeks stakeholder comments on how digital payment companies “collect, use, share, and protect” personal financial data and how consumer privacy protection laws apply to new forms of digital payments. The proposed interpretive rule outlines how the Electronic Fund Transfer Act (EFTA) and Regulation E apply to new forms of digital payment platforms, including digital assets. This follows the Nov. 22 final rule that defines “larger participants” in the consumer payment applications market that fall under the CFPB’s supervisory authority. Digital payment apps and wallets that process more than 50 million transactions a year will be defined as larger participants, a major increase from the 5 million transaction threshold in the proposed rule.

 

Contractual Provisions in Consumer Financial Products

On Jan. 13, the CFPB issued a proposal under Regulation AA to prohibit “coercive” terms and conditions in agreements for consumer financial products. The proposal would prohibit terms that waive consumers’ rights provided by federal or state laws, and entities would not be allowed to issue unilateral amendments. Additionally, the proposed rule prohibits contract clauses that would restrict an individual’s ability to exercise free speech, such as leaving a review online. The comment period for the proposed rule is currently scheduled to end on April 1.

 

Regulatory Policy Sandboxes and No-Action Letters

In addition, the CFPB issued updated procedures for companies to receive regulatory safe harbors through regulatory sandboxes and no-action letters and will begin accepting proposals. The CFPB effectively suspended these programs in 2022, replacing the Trump administration’s Office of Innovation with the Office of Competition and Innovation which held “incubation events.” The new guidance would require applicants to promote innovations that solve unmet needs beyond “minor adjustments” to existing products. Firms would be prohibited from advertising the receipt of an approval, claiming that it could distort competition. Additionally, the CFPB will not consider applications from former CFPB attorneys representing firms as outside counsel. The incoming Trump administration may bring back its former Office of Innovation and alter its policy on regulatory sandboxes and no-action letters.

 

Other Items

The CFPB also rescinded its Trump-era 2020 advisory opinion on earned wage access (EWA) products, arguing that its legal analysis is “significantly flawed” and created “substantial regulatory uncertainty.” The CFPB notably did not finalize its proposed interpretive rule on EWA products that would have classified EWA products as loans, subjecting them to Truth in Lending Act (TILA) requirements.

In addition, the CFPB released an advanced notice of proposed rulemaking (ANPRM) on identity theft and coerced debt. The bureau also approved the first application from a standard-setting body under its section 1033 final rule, which is facing a legal challenge from industry groups.

 

Next Steps

The Trump administration will have numerous tools at its disposal to either halt, alter or continue various rulemakings and guidance established under Chopra’s CFPB. Acting Director Bessent and his yet-to-be-announced full-time successor will likely reverse a variety of formal and informal guidance issued over the last four years.

Brownstein’s Financial Services team is closely following and engaged in CFPB transition efforts and can continue to support clients through navigating any new opportunities or challenges.


THIS DOCUMENT IS INTENDED TO PROVIDE YOU WITH GENERAL INFORMATION REGARDING CFPB REGULATIONS UNDER THE NEW ADMNISTRATION. THE CONTENTS OF THIS DOCUMENT ARE NOT INTENDED TO PROVIDE SPECIFIC LEGAL ADVICE. IF YOU HAVE ANY QUESTIONS ABOUT THE CONTENTS OF THIS DOCUMENT OR IF YOU NEED LEGAL ADVICE AS TO AN ISSUE, PLEASE CONTACT THE ATTORNEYS LISTED OR YOUR REGULAR BROWNSTEIN HYATT FARBER SCHRECK, LLP ATTORNEY. THIS COMMUNICATION MAY BE CONSIDERED ADVERTISING IN SOME JURISDICTIONS.

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