The results from the 2024 Elections caused the federal regulatory pendulum to swing back the other direction with profound changes in the White House, in Congress, at the Consumer Financial Protection Bureau, and at the Federal Trade Commission. These changes brought about further regulatory and policy transformations. In this article, we’ll discuss some of those policy changes, provide you with some strategic considerations, and ways in which you may navigate these choppy waters in 2025 and beyond.
Policy Changes and Regulatory Outlook
We all expected a change in direction on the regulatory front when the Trump administration took office, but boy-o-boy did we get that and a whole lot more! Things are changing fast. So, don’t be surprised if the current situation when you read this article is different from the date of this writing.
On February 1, President Trump fired Rohit Chopra. He then appointed Treasury Secretary, Scott Bessent, as Acting Director. In less than a week, Trump replaced Bessent with Russell Vought, the Director of the Office of Management and Budget.
Acting Director Vought got immediately to work by embarking on an employee firing spree. He started with CFPB probationary employees, followed by term and contract employees. Before he could continue, a CFPB employee union sued him for allegedly firing the employees unlawfully. The court, in that case, enjoined Vought from any further firings. It also prohibited him from deleting any CFPB data. The pleadings in that case provide some behind the scenes information. It alleges that Vought intended on deleting CFPB data, shutting down the Consumer Response complaint portal and shuttering the entire CFPB. Additionally, and separately, Vought informed the Federal Reserve that the CFPB would not be taking its next draw of funding. Finally, Vought shut down the CFPB’s headquarters and put most of its employees on administrative leave. The CFPB, as we understand it, has a small number of employees working, as necessary to sustain its statutorily mandated duties.
During these events, on February 11, Trump appointed Jonathan McKernan as the permanent Director of the CFPB, subject to Senate confirmation. McKernan appeared before the Senate Banking, Housing and Urban Affairs Committee on February 27th beginning the confirmation process. By the time you read this article, McKernan could be sitting in the CFPB Director’s chair.
Presumably McKernan knows what he’s getting into. During his confirmation hearing, he said that the CFPB needed to be right-sized, re-focused and made accountable. It’ll be interesting to see what’s left of the agency when McKernan begins his work, assuming he’s confirmed. As for his credentials, McKernan has solid ones. He has a strong public service record and direct experience in financial services. His latest role was being a member of the FDIC Board of Directors.
As a result of all this, the CFPB will be subdued and stick to its statutorily mandated duties. The Consumer Response complaint portal will continue to be operational, though less robustly. Supervision will continue but tampered down with less referrals to enforcement. So, we’re likely going back to pre-2005 days with fewer public consent orders, more nonpublic MOUs and/or informal actions and remediation.
The change at the FTC was less dramatic. Lina Khan stepped down as FTC Chairperson. Since her term expired in the fall, this created a vacancy on the Commission. As expected, Trump appointed Andrew Ferguson, an existing Commissioner, to be the new Chairman. He then appointed Mark Meador to be a new Commissioner, subject to Senate confirmation. Having already been confirmed, Ferguson immediately took over as Chairman. We are still waiting for the Senate confirmation process to begin for Meador.
As for his policy positions, Ferguson strongly opposed Khan’s decisions and policy stances, particularly on anti-trust. However, he is no fan of big-tech. He believes they interfere with competition and restrict free speech. He believes that AI should not be regulated too quickly because it’s in a nascent stage, which will impede innovation. Under Ferguson’s leadership and with Republicans holding a majority on the Commission, the FTC will continue its enforcement work, but violations will need to be clear and the legal claims on which they are based, longstanding and established.
Overall, there will be less regulation by enforcement, and much less rulemaking. A Trump Executive Order requires an agency to examine 10 rules for any new one it seeks to promulgate. That’s a high bar. Finally, regulation by blogpost, bulletin, circulars, reports and other informal “guidance” will stop.
When considering these developments, companies should keep top of mind that too little federal regulation is not all good news. At some point, a new, less industry friendly administration will take office. That could happen as soon as a little less than four years from now. What then? Also, another crisis could occur—one that is blamed on financial services. In either case, the result would be a tidal wave of regulation. A balanced, more centrist approach is best for industry.
Congress
The Republicans have a very slim majority in both the Senate and House of Representatives. The current balance of power in the Senate is 53 Republications to 47 Democrats and Independents. The current balance of power in the House is 218 Republicans to 215 Democrats, with Rep. Matt Gaetz resigning last November and Rep. Michael Waltz resigning effective Jan 20th to become the national security advisor. Elections were held to fill Rep. Gaetz’s and Rep. Waltz’s vacant seats with a special election to be held on April 1st. The Republicans are favored to keep those seats, so the slim majority will likely remain post-elections. Also, Rep. Elise Stefanik is expected to resign soon (TBD) to become U.S. Ambassador to the United Nations, but with the ultra-slim majority in the House her nomination is being slow-walked.
With the Republicans having control of the Senate, that means the Senate Banking Committee is Republican-led as well. The Senate Banking Committee is chaired by Senator Tim Scott (R-SC), an outspoken critic of the CFPB. However, the Ranking Member (most senior member of opposite party) is Elizabeth Warren (D-MA) and the CFPB is her baby. Also, with the majority in the House, the House Financial Services Committee is now led by Rep. French Hill from Arkansas. Maxine Waters (D-CA) is the Ranking Member and she too been very vocal and passionate about keeping the CFPB.
With the latest efforts to kill the CFPB and the Republicans having control over the House and Senate, it may tee up the argument (again) that the CFPB leadership should be a Commission structure, rather than a single-Director structure. But, the Republicans probably don’t have 60 votes to make that change. And, we may see a push in the budget reconciliation process to reduce the amount of the money the CFPB can request from the Federal Reserve from 12% down to 2%.
Executive Orders
President Trump was not shy about signing Executive Orders; signing 26 of them on day 1. Many of these are/could have significant impacts on federal agencies, including independent agencies like the CFPB, and the financial services industry. Ones to read include: Regulatory Freeze Pending Review (halts new rule proposals until review by a department or agency head appointed after January 20, 2025, and withdraws unpublished rules for review); Hiring Freeze (imposes a federal civilian hiring freeze); Unleashing Prosperity Through Deregulation (Orders that for each new regulation issued, at least 10 prior regulations be identified for elimination); Implementing the President’s “Department of Government Efficiency” Workforce Optimization Initiative (OMB to submit plan reducing federal workforce; agencies must hire 1 for every 4 departures, prioritize RIFs, and consult DOGE); and Ensuring Accountability for All Agencies – impacts “independent regulatory agencies.”
Strategic Considerations: What’s on the Radar for 2025?
So, what do we think you need to keep on your radar for 2025?
Well, before leaving their posts the CFPB Director Chopra and former CFPB General Counsel Seth Frotman showed states the way – they published an article in the Harvard Law Journal on Legislation on January 15, 2025 titled “State Enforcement as a Federal Legislative Tool.” The CFPB also issued new recommendations to the states on how they can update their laws and regulations to meet new risks and challenges in a blog post on Jan. 14: “Strengthening State-Level Consumer Protections” that came with a 34 page Report that provides numerous consumer protection recommendations for the states. The CFPB also issued a 363 page “Guidance Compendium of Recent CFPB Guidance” which contains its circulars, bulletins, advisory opinions and interpretive rules as a guide to the states (and courts!).
On the Attorney General front, even though the FTC’s CARS Rule was recently vacated, state AGs enforce state unfair and deceptive acts and practices. State AGs will likely “pick up the slack” from the sidelined CFPB and take a more active role in enforcing federal laws (as Dodd-Frank permitted them to do) as well as state laws. Some states to watch out for include those states that have some form of a mini-CFPB agency (e.g., CA, IL, MA, NY, NJ, PA) and the so-called “blue states” with a democrat AG.
As for specific issues that companies should keep on their radar, the first is AI. Artificial intelligence will be active at the state level. In 2024, 45 states, Puerto Rico, the Virgin Islands and DC introduced AI bills. Three states passed AI laws, with Colorado being one of the strongest. We are seeing a strong showing of AI bills in 2025. AI is always in the news and on the top of mind of consumers, employees, industry and legislators.
The second issue is privacy. We have seen many states enact comprehensive privacy acts in the last several years. That trend is continuing, with a twist. States that already enacted comprehensive privacy acts are going back and making refinements. Some seek to narrow the exclusions provided for GLBA data and GLBA-regulated entities. Others are revising definitions. The bottom line is that existing comprehensive privacy acts are being expanded and many states that do not have one are proposing to enact one. Finally, we’ve seen attorneys general, both from blue and red states, bring privacy and data security enforcement actions against companies, including this year. So, privacy will continue to be a hot topic issue.
How Do We Navigate Choppy Waters in 2025?
With fast-moving events and seemingly a lighter touch regulatory environment, what’s the best action for finance companies? Stay the course! Don’t take your eye off the compliance ball. Use this newfound time to improve and update your CMS, and if you don’t have one, to put one into place. The pendulum always swings back; it’s just a matter of time. Don’t waste this precious “free” time thinking that the current regulatory tone is permanent.
Additionally, once you’ve improved and updated your CMS, take advantage of this newfound time to train your people on the laws and regulations that apply to your business, as well as on your CMS. Even if we see less regulation and enforcement at the federal level, the states will become more active like we saw with the first Trump administration.
No matter who is in the White House and how aggressive federal regulators are, a company should always carefully manage its consumer complaints. Complaints can be a good thing. The consumer is giving the company a chance to resolve his/her issue, instead of going directly to a regulator or to a plaintiff’s attorney to sue the company. Remember that individual lawsuits could turn into copycat lawsuits, or even worse, a class action if the facts and claims involved are substantially similar. Additionally, complaints are a red flag for potential vulnerabilities and issues within the company. A company should track complaints, review reports for trends, and perform root cause analysis to uncover problems in its operations and/or violations of law. While it could be painful, it usually yields improved business practices for the consumer and the company.
Finally, it’s a great idea to keep up with the evolving landscape and developments. Things are moving so quickly now and its more important than ever to monitor legal and regulatory developments by reading things like President Trump’s Executive Orders; following contributors on Twitter/X; sign up for CFPB and FTC press releases (if any); subscribe to various industry publications and blogs and legal reporting services; and to House and Senate Committee press releases. Keeping abreast of changes in the legal and regulatory compliance world can help you navigate these choppy waters heading into 2025 and beyond!
©Copyright 2025 Patricia E.M. Covington and Eric L. Johnson. All rights reserved. Single print publication rights Non-Prime Times.
