KBRA Financial Intelligence

Major Consolidation of U.S. Bank Regulators Begins to Take Shape

Trump Administration Begins Dismantling CFPB

President Donald Trump confirmed his intentions last week to eliminate the CFPB, one of the country’s four major bank regulators alongside the Federal Reserve, FDIC, and OCC. While such a move cannot be done unilaterally and would require an act of Congress, the White House has taken immediate steps to limit the bureau’s operations. Acting Director of the CFPB, Russ Vought, has ordered all staff to stay away from the office and not to “perform any work tasks,” effectively freezing ongoing investigations and rulemaking efforts.

This signals that the CFPB, which exercises supervisory authority over banks with a minimum of $10 billion in total assets and a number of other financial firms, is a central focus of the Trump administration’s efforts to consolidate spending on federal agencies. KBRA Financial Intelligence (KFI) warned in January that the CFPB could face an existential threat from the newly established Department of Government Efficiency (DOGE), which was created by executive order and is led by Elon Musk. Musk has previously suggested that the CFPB is "duplicative" and should be "deleted." In addition to the work stoppage, CFPB leadership plans to lay off a large portion of staff, reject its regular quarterly funding from the Fed, return existing cash reserves, and intends to cancel the lease on its Washington D.C. headquarters. These measures suggest a concerted effort to dismantle the agency’s infrastructure and workforce.

The CFPB has been accused of being an especially aggressive enforcer of consumer protection laws in recent years. In 2022 and 2023, consumer relief payments stemming from CFPB enforcement actions surged to their highest levels since 2015, prompting criticism from banking industry groups, which argued that financial regulation had become excessive. While the FDIC and OCC typically impose more modest annual penalties than the CFPB, their enforcement actions still resulted in more than $860 million in civil money penalties (CMP) in 2024, the highest total since 2020. These enforcement actions, along with those from the Federal Reserve Board (FRB) and National Credit Union Administration (NCUA), can now be tracked through KFI’s newly developed Dashboard, which allows users to filter cases by date, penalty amount, and institution.

Overdraft Fee Rule and Dozens of Other CFPB Policies in Limbo

With turnover at the White House imminent following November 2024’s presidential election, the CFPB rushed to finalize nine new regulatory measures ahead of inauguration day, including a rule capping overdraft fees at $5—a substantial reduction from the $35 average overdraft fee reported in 2022. The bureau estimates the rule, which is scheduled to take effect in October 2025, to reduce consumer costs (and, therefore, bank revenue) by $5 billion annually. That is a significant figure, considering that banks collectively reported $5.7 billion in overdraft fee revenue in 2024. Notably, this figure may be understated as only banks with assets exceeding $1 billion are required to disclose noninterest income from service charges on deposit accounts.

Even before this rule was finalized, a number of banks had voluntarily eliminated or reduced overdraft fees in response to competitive pressures or anticipated regulatory action. However, some institutions remained resistant to winding down their overdraft programs. 118 U.S. banks above the $10 billion threshold reported collecting overdraft fees in 4Q 2024, comprising as much as 5% of total revenue among institutions like Arvest Bank (KFI Score: B) and Bancfirst (KFI Score: B). Meanwhile, some smaller banks operating outside the CFPB’s jurisdiction reported overdraft fees equal to as much as 15% of total revenue. The Republican Chairs of both the Senate Banking Committee and House Financial Services Committee introduced Congressional Review Act (CRA) resolutions this month to rescind the CFPB’s overdraft rule.

Dozens of proposed rules, including 11 related specifically to banking, credit cards, access to credit, and fair lending, remain officially under development at the bureau, but it seems increasingly unlikely that these regulations will come to fruition. Outstanding rules enforced by the CFPB would remain in place even if the agency was disbanded, with enforcement responsibilities being redistributed to a different regulatory body, unless lawmakers are able to tie the rescinding of specific laws to the CFPB’s formal dissolution. Some regulations under the purview of the CFPB predate its own establishment, such as the 1968 Federal Truth in Lending Act (TILA). Rulemaking authority related to TILA was previously held by the Fed, but the passage of the 2010 Dodd-Frank Wall Street Reform and Consumer Protection Act established the CFPB and transferred those responsibilities to the newly formed bureau.

Broader Deregulatory Measures and Consolidation on the Horizon

The White House’s effort to neutralize the CFPB is not Trump’s first foray in narrowing the scope of Dodd-Frank regulations. In 2018, the Economic Growth, Regulatory Relief, and Consumer Protection Act rolled back portions of Dodd-Frank, raising the threshold for “systemically important financial institutions” (SIFI) to $250 billion from $50 billion in assets. This change exempted midsize banks, such as Silicon Valley Bank (SVB), Signature Bank, and First Republic Bank, from stricter liquidity and capital requirements.

Following the failures of these banks in 2023, the Biden administration argued that the deregulation of midsize institutions contributed to their collapse. However, a Federal Reserve post-mortem report on SVB’s failure stopped short of concluding that the pre-2019 regulatory framework would have prevented the bank’s collapse.

As KFI previously noted, new adjustments to capital requirements are currently under discussion with the final stage of Basel 3 Endgame implementation planned to be finalized in the U.S. in 2025. Current Fed Vice Chair for Supervision Michael Barr’s unexpected decision to step down, combined with Trump’s mandate to nominate new heads of various federal agencies, will further solidify the president’s influence over the shape of banking regulation throughout the next four years.

The administration may seek to further consolidate financial regulators beyond the CFPB. Discussions have reportedly taken place around folding some FDIC functions into the Treasury Department and merging its regulatory role with the OCC. If enacted, such a restructuring would represent the most significant overhaul of the U.S. financial regulatory framework in decades.

While details remain uncertain, KFI will continue to track developments as they unfold. For continued coverage of this topic and more in-depth research on the U.S. financial sector, subscribe to KFI Insights, powered by our comprehensive suite of banking and credit union data tools.