Trump administration reviews CFPB regulations to limit unlawful guidance

In the United States, the Trump administration took significant steps to reassess the practices at the Consumer Financial Protection Bureau (CFPB), primarily focusing on the use of regulatory guidance. This initiative was formally announced in a memo issued by Russell Vought, director of the Office of Management and Budget and acting director of the CFPB. In the memo, Vought expressed concerns about how the agency had previously interpreted its legal authority, suggesting that it had treated statutory restrictions as obstacles rather than laws. As such, the administration decided to implement an immediate prohibition on issuing guidance documents that could impose undue rights or obligations on external parties. This decision reflects a broader strategy of curtailing regulatory reach that the administration perceives as excessive. The intent behind this initiative is to rectify practices that the administration claims have historically circumvented proper legal processes, depriving the public of clarity regarding which actions could lead to enforcement actions or penalties. Following this announcement, the CFPB commenced a comprehensive review of existing guidance documents to ensure compliance with the new directives outlined by Vought, indicating that the review would take about 14 days, and presented cases like an interpretive rule from 2021 that expanded definitions of discrimination. The outcome of this process could dramatically reshape the CFPB's regulatory framework and might lead to the rescission of numerous past guidance documents that do not align with the new criteria outlined by the Office of Management and Budget. Concurrently, the Federal appeals court partially ruled in favor of the Trump administration, permitting a downsizing of the CFPB while blocking efforts to dissolve it entirely. This situation has provoked various legal challenges, with unions and other organizations arguing against the measures taken to reduce the agency's size. As the CFPB was established to provide consumer protection after the 2008 financial crisis, the actions taken by the Trump administration have ignited heated debates about the agency's role and effectiveness in regulating financial norms, with some lawmakers criticizing it as having gone 'rogue' in its governance.