At this point, the Trump administration’s strategy with respect to the Consumer Financial Protection Bureau (“CFPB”) is completely transparent. Instead of seeking the dissolution of the agency through the legislative process, it has sentenced the CFPB to death by financial starvation. In February 2025, the President appointed Russ Vought, the current Director of the Office of Management and Budget, as the Interim Director of the CFPB. Interim Director Vought promptly initiated sweeping layoffs of CFPB employees and told other employees to stay home and avoid performing any work tasks. He also oversaw the CFPB’s withdrawal or dismissal of numerous enforcement actions, directed the termination of active investigations, and terminated requests for agency funding from the Federal Reserve.
“Starve the CFPB”
Interim Director Vought’s “starve the CFPB” strategy triggered litigation by 21 states seeking an injunction to compel the continued funding of the agency. While the Federal District Court ruled in favor of the states and entered an injunction directing the continued funding of the agency, the CFPB has appealed the case to the Circuit Court of Appeals. At the end of 2025, the D.C. Circuit Court of Appeals (the next step beneath the United States Supreme Court) entered an order requiring the Interim Director to continue to seek funding for the CFPB during the appeal. Interim Director Vought reluctantly complied with the Order and requested funding for the CFPB through March, 2026. At this point, the litigation continues.
Of course, most bankers have never been fans of the CFPB, and many are supportive of the administration’s approach. However, the CFPB’s demise, as well as the administration’s general strategy of reducing the regulatory reach of the federal government, may have unintended consequences. The elimination of the CFPB may leave a vacuum in the regulation of consumer financial services. This vacuum may be filled by state regulation and enforcement activity, producing a patchwork approach to the regulation of financial services.
From a banking perspective, the state-by-state regulatory approach may present undesirable roadblocks to the marketing and origination of financial products on a national basis. For example, the Tenth Circuit Court of Appeals recently issued a decision holding that Colorado could enforce its interest‑rate caps on loans made to Colorado borrowers by out‑of‑state state‑chartered banks. The underlying statutes and case precedent are complicated, but the upshot of the decision is that loans extended by non-Colorado state-chartered banks may be subject to Colorado’s usury restrictions. Colorado’s success, coupled with the elimination of the CFPB, may trigger similar actions by other states. In any event, 2026 is setting up to be an interesting year in the world of financial services regulation. Stay tuned!
Contact a Davenport Evans lawyer at 605-336-2880, [email protected], or find a specific attorney on our Our Lawyers page.
Davenport, Evans, Hurwitz & Smith, LLP, located in Sioux Falls, South Dakota, is one of the state’s largest law firms. The firm’s attorneys provide business and litigation counsel to individuals and corporate clients in a variety of practice areas. For more information about Davenport Evans, visit www.dehs.com.