CFPB in Limbo — Should FinTechs and Banks Stay the Course?

The phrase “manic Monday” is getting a pretty good workout these days. Far from being a cute top 40 song from the ’80s, the ongoing drama at the Consumer Financial Protection Bureau (CFPB) has put a new spin on catching up with the weekend news.

Here’s the short version: Two weeks ago, CFPB Director Rohit Chopra was fired, and Treasury Secretary Scott Bessent was named acting head of the agency. Then on Friday (Feb. 7), Bessent named Russell Vought acting head of the agency. On Saturday, Vought took his first official action, directing the agency’s employees to “cease all supervision and examination activity.”

And on Manic Monday, the industry was left to figure out what to do next as the agency’s employees were directed to stay home until Friday (Feb. 14), and the CFPB office was closed. The Treasury Department’s employees union has now filed suit against the CFPB.

“If nobody’s home, you have financial services entities just trying to make their best guess,” said former Obama administration assistant treasury secretary Amias Gerety in his weekly discussion with PYMNTS CEO Karen Webster. “‘Do your best’ is not a great way to run a financial services company.”

All of this against the widespread sentiment that the former director, Rohit Chopra, overreached, and the CFPB itself adopted an overly aggressive point of view on credit, fees and business models that underpin banking and payments — targeting both FinTechs and financial institutions under its remit.

“Not a lot of people are shedding tears,” Webster remarked.

Gerety’s concerns extend from his respect for the rule of law and a democratic process that he says supports rulemaking and enforcement by a director appointed by the president. If a CFPB director follows the process and creates rules and brings investigative and enforcement actions that are contrary to what people like or don’t, “that’s politics,” he remarked. The current situation is very different.

As to how he will advise his own clients at QED Investors, many of whom are FinTechs, Gerety is concerned about what he sees as unfinished business for the agency that has been that flashpoint for conservative free market advocates and the progressive appetite for regulation.

The fate of enforcing open banking Rule 1033 hangs in the balance, as does expected guidance on payday loans, buy now pay later (BNPL), lender access to medical records and digital wallets. Gerety believes that essentially suspending the CFPB’s activities is “a lawless act” because the agency was created by an act of Congress and validated by the Supreme Court.

However, the assault on the CFPB has raised critical questions about the agency’s future and the broader implications for financial regulation. Gerety outlined why this isn’t just another bureaucratic reshuffling.

At the heart of the controversy is what Gerety calls the CFPB’s statutory “shalls” — nonnegotiable mandates written into the agency’s charter. These include, according to Gerety, maintaining dedicated offices for service members, older Americans and fair lending as well as financial education and complaint collection.

“We are a nation of laws, not men,” Gerety told Webster. “The CFPB has obligations. Congress wrote a bunch of ‘shalls’ into the law. These are not ‘mays,’ these are not ‘authorized to,’ these are absolute requirements that the CFPB director has to do.”

The timing of this administrative upheaval is particularly significant given several pending regulatory initiatives. Rule 1033, which took effect on Jan. 17, and an upcoming payday lending rule set for March implementation, now face uncertain futures. However, Gerety noted a critical detail: Without official agency action to delay or modify these rules, their compliance deadlines remain legally binding.

“Until the rule changes, the rule is the rule,” he stressed, highlighting that statements about nonenforcement don’t eliminate legal obligations.

To the Courts

Legal challenges appear inevitable. The union representing CFPB employees has already filed suit over the office lockout. Gerety predicts this will likely result in “one more injunction,” noting that the executive branch’s fundamental responsibility is to “faithfully execute the laws.” He believes the situation could evolve into either a constitutional crisis if court orders are ignored or a more conventional policy shift through proper administrative channels.

For FinTechs navigating this uncertainty, Gerety’s advice is straightforward: Maintain current compliance policies and procedures. “Do not change your policies. Do not change your procedures,” he stated bluntly. The risk of noncompliance remains significant, as state enforcement authorities and private rights of action continue regardless of federal enforcement. Moreover, the statute of limitations extends beyond political cycles, creating potential future liability.

The irony, Gerety pointed out, is that attempts to create regulatory relief through agency shutdown may actually generate more uncertainty. Additionally, in the absence of CFPB oversight, he believes enforcement could shift to a patchwork of state actions and private lawsuits, potentially creating more complex challenges for financial institutions than the current regulatory framework.

As the financial services industry watches this situation unfold, Gerety sees a stark choice ahead: “Either [the administration]  starts complying with the law and just move the policies, or they go down the path of trying to assert that the law is whatever they say it is, and the courts likely will stop them.”