The Trump administration’s efforts to effectively dismantle the Consumer Financial Protection Bureau are raising new concerns among community banks, which say the move could leave them at a competitive disadvantage compared to larger financial institutions, according to a published report.
While the CFPB writes consumer protection rules that apply across the financial services sector, its enforcement authority is limited to banks with more than $10 billion in assets. Smaller institutions fall under the supervision of prudential regulators such as the Office of the Comptroller of the Currency, the Federal Reserve, and the Federal Deposit Insurance Corporation. Those agencies, community banks say, continue to conduct consumer compliance exams even as CFPB enforcement activity grinds to a halt. For companies in the credit and collection industry, the list of regulatory overseers includes state Attorneys General and the Federal Trade Commission.
That dynamic, they argue, has created a supervisory gap. Smaller banks must still devote resources to consumer compliance, while larger banks may face reduced scrutiny as the CFPB winds down.
“We are at a severe competitive disadvantage,” said Jack Hopkins, CEO of CorTrust Bank and chair of the Independent Community Bankers of America, in the report. “We are having to allocate resources to compliance exams, while the big banks are seeing those costs and fines reduced or eliminated. And the nonbanks don’t even have the prudentials regulating them.”
The administration has taken aggressive steps this year to curtail the CFPB, including attempts to terminate roughly 90% of its staff and freeze spending. Administration officials are also arguing in court that the bureau is legally prohibited from seeking additional funding from the Federal Reserve, its primary funding source, raising the possibility that the agency could run out of money entirely.
The slowdown in enforcement has been dramatic. According to the CFPB’s website, the agency has filed just one enforcement action this year, down sharply from annual averages under both the Biden administration and President Trump’s first term. Advocacy groups say dozens of pending enforcement actions have also been dropped.
Some Republicans on Capitol Hill, including members of the House Financial Services Committee, have begun pressing the administration for clarity on how consumer protection rules will be enforced if the CFPB is dissolved or sidelined. While many support deregulation, they warn that uneven enforcement undermines regulatory parity.
Large banks counter that oversight has not disappeared, pointing to overlapping state authority and existing supervisory tools. But critics note that eliminating the CFPB would also weaken federal oversight of nonbank lenders and fintech platforms, which increasingly compete with banks while operating outside traditional regulatory frameworks.
With the D.C. Court of Appeals set to hear arguments later this winter in a case that could determine the CFPB’s future, banks of all sizes are watching closely. As one former regulator put it, short-term relief may come with long-term uncertainty … especially if political winds shift again.
