The Consumer Financial Protection Bureau (CFPB), a federal agency championed by Massachusetts Senator Elizabeth Warren in 2011 to protect consumers against predatory financial services, has ramped up enforcement actions against fintech and financial services companies under President Biden. In 2023, it ordered $3.1 billion in fines and refunds for consumer relief, the largest sum it had ordered since 2015. Just yesterday, it finalized a rule saying that some big tech firms like Apple that offer payment apps will be subject to CFPB supervisory exams, like banks. But with the advent of a Republican-controlled Congress and a second Donald Trump administration, dramatic changes are coming to the agency.
Penny Lee, who leads Washington, D.C.-based lobbying group the Financial Technology Association, expects CFPB Director Rohit Chopra to resign over the next couple of months. Other policy experts agree, since federal agency heads typically leave at the time of an administration change. Yesterday, for example, Securities and Exchange Commission Chair Gary Gensler announced he’ll step down on January 20, 2025, Trump’s inauguration day.
Many also predict lighter regulation and oversight during Donald Trump’s second term. Fintech companies will have “a little more room to innovate–to try new products and services without fear of regulatory or enforcement reprisal,” says one financial services policy expert. The number of CFPB regulatory advisories and enforcement actions will likely shrink.
At the top of D.C. insiders’ list for the next CFPB director is Brian Johnson, the former deputy director of the CFPB during Trump’s first administration. He’s currently a managing partner at financial services consultancy Patomak Global Partners. Jonathan McKernan, a board member at the Federal Deposit Insurance Corporation (FDIC), the federal agency that insures consumer deposits and supervises banks, has also been discussed as someone who could fill in temporarily as acting CFPB director. Johnson and McKernan didn’t respond to our requests for comment.
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Bank mergers and acquisitions could see a boost too, partially because the CFPB’s director gets a seat on the board of the FDIC, which oversees bank mergers. The changes coming to the CFPB don’t mean enforcement actions will cease altogether or every merger will be green-lit, but the philosophy and approach will swing heavily in that direction.
Even more noteworthy, the CFPB’s funding structure could be at increased risk. Since its creation, the agency has always been funded through the Federal Reserve, not through appropriations by Congress. For its 2024 and 2025 fiscal years, the CFPB estimated its budget at $763 million and $811 million. Some Republicans think the agency under Biden has expanded its activities beyond what was originally envisioned when the CFPB was created, and now they see an opportunity to change how it’s funded and what it does.
French Hill, a Republican Congressman from Arkansas who’s vice-chairman of the House Financial Services Committee, told us in a statement, “Republicans will not only continue to champion reforms like putting the CFPB on congressional appropriations and converting it into a bipartisan commission, but we must also work with the new CFPB Director to rein in the agency with statutory direction.”
Some in Congress have also considered using reconciliation–a special process that lets Congress pass laws affecting government spending, taxes and debt limits without facing a Senate filibuster (in other words, with just a simple majority)—to change how the CFPB is funded. Hill declined to comment on the idea through a spokesperson, and House Representatives Andy Barr and Bill Huizenga, also Republican members of the House Financial Services committee, didn’t respond to our requests for comment.
Changing the CFPB’s funding structure would be an uphill battle since it would be perceived by many as an attempt to take the bureau’s budget to zero. But the concept “has been on every wish list I’ve seen from House Republicans for the last 10 years or more since its creation,” says a former Capitol Hill staffer who has worked with the House Financial Services Committee.
The new head of the CFPB will also likely aim to reduce the agency’s staff size. In its 2024 fiscal year, it had 1,758 employees, up 5% from the year prior.
One hot area of fintech the CFPB has recently addressed is earned wage access, where companies let consumers withdraw the wages they’ve already earned almost immediately, instead of requiring them to wait for the typical two-week pay period to end. A large number of fintechs ranging from New York-based DailyPay to San Francisco digital bank Chime have built growing businesses on top of this feature.
In November 2020, the CFPB under President Trump issued an advisory saying that earned-wage-access products shouldn’t be legally considered loans if they met certain criteria, which meant they wouldn’t be subject to heavier regulatory requirements like disclosures of finance charges and annual percentage interest rates. But in July 2024 under Chopra, the CFPB reversed course, proposing an interpretive rule that said many paycheck-advance products were loans subject to such disclosures.
DailyPay, which says it has five million active customers, “strongly disagreed” with the proposal, arguing its earned-wage products are different from loans because they don’t require credit checks or risk assessments and aren’t reported to credit agencies, among other reasons. Digital bank Chime released its own earned-wage product, MyPay, in May and structured it as a loan to avoid potential regulatory fallout. MyPay has attracted two million users since its launch six months ago, Chime says.
Under new CFPB leadership, many expect the bureau’s recent interpretive rule to be rescinded or not enforced. Such a rollback could be a boon to all earned-wage-access companies because it would lessen their regulatory burden and reduce their costs.
Buy-now, pay-later loans have also been under the CFPB’s microscope–the agency issued an interpretive rule last spring saying that buy-now, pay-later providers are the same as credit card issuers and should be required to investigate when consumers dispute a purchase and send out monthly customer statements.
Penny Lee at the Financial Technology Association says the interpretive rule is ill-fitting and unnecessary, citing differences between open-ended, revolving credit card loans and short-term buy-now, pay-later loans. She adds that consumers don’t need additional disclosures and that buy-now, pay-later loans have low default rates of under 2%. Many now expect the interpretive rule to be rescinded or not enforced, like the earned-wage-access rule.
The CFPB issued a credit card late fee rule in March, which aims to reduce the average late fees consumers pay for credit card payments from $32 to $8, and it faces a more uncertain fate. Banks hate it because they feel the $8 fee is too low. It’s already being challenged by litigation. But because it went through the formal rulemaking process, it’s harder to rescind than an interpretive rule or advisory opinion–the bureau would have to open a new rule-making process to change it.
It’s also harder to predict what will happen to the new rule that subjects the largest digital payment apps to CFPB supervisory examinations, since it went through the traditional rulemaking process as well. The rule targets the often-criticized, all-powerful big tech companies, so it might garner support from both consumers and banks. Yet under new leadership, the CFPB could delay enforcement of the rule to research it further. Congress could also overturn it through the Congressional Review Act (CRA). And it could get mired in litigation.
All these changes don’t mean fintechs should change their business models, or even rejoice, since few of these shifts are probably permanent. Bipartisan laws with staying power would be even better for their businesses, since it’s hard to know the best way to play the game when the rules keep changing.
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