Here's what brokers need to know about CFPB regulatory changes and potential layoffs
The Consumer Financial Protection Bureau (CFPB) is once again in the headlines, as the Trump administration’s tax bill slashed funding caps for the agency. Potential layoffs still pending in the courts and some regulatory oversight being shifted to the states have raised questions over how the changes could impact the mortgage industry and brokers.
Peter Idziak (pictured top), senior associate and mortgage attorney at Polunsky Beitel Green, believes the reduction in the funding cap included in Trump’s "Big Beautiful Bill" won’t have a significant effect on the CFPB, at least for now.
“It went from 12% to 6.5% of the Fed's 2009 operating budget, adjusted for inflation,” Idziak told Mortgage Professional America. “If you look at how that compares to what (former director Rohit) Chopra had requested in his last year, he requested almost the full amount that he was entitled to.”
However, Idziak notes that the current director, Russell Vought, did not request any new funds for 2025. Vought also indicated he planned to spend down what the CFPB has in its existing account.
“So, at the moment, I don't think that going from 12% to 6.5% affects the way the bureau is currently operating,” Idziak said. “Because it's operating far below that and is not requesting any funds.”
Potential funding cuts are just one of the issues facing the CFPB. While the Supreme Court gave the Trump administration the go-ahead to downsize and reshape the government, this ruling doesn’t impact the CFPB’s proposed reduction-in-force (RIF).
“What was in front of the Supreme Court was essentially the executive order that said agencies are to plan for reductions in force in accordance with applicable law,” Idziak said. “And the Supreme Court said, 'You can't enjoin that district court because it's basically just the planning stage of the RIF. We don't actually have the proposed RIFs in front of us right now.'”
Idziak said the Trump administration plans to operate the CFPB at the minimum level of staffing. The questions will be what that minimum is, and how much influence the president has in setting that number.
“If you look at what the administration has said,” he pointed out, 'they basically said, ‘We are going to operate the CFPB at its statutorily required minimum.’ What will be interesting to see is when the courts really dig into how much discretion the executive has to determine what that is, and how much supervision are you really going to see.
“Does supervision need 50 employees or 75 employees? I think that if it does reach the Supreme Court, it will be interesting. Given the makeup of this court, I think that they will give a fair amount of latitude to the executive to determine what those minimums are.”
Moving regulations to the states
If the CFPB downsizes as planned by the administration, some of the regulatory oversight will be shuffled to the states. Idziak said that one way this will happen is through new state legislation.
“New state laws passed might affect consumer finance in the mortgage industry,” he said. “We've seen two of those, and one passed in California, the new mortgage servicing rules. And then in New York, there's the FAIR Business Practices Act, which adds ‘unfair and abusive’ to the existing Deceptive Practices Act. It creates a mini UDAP (unfair, deceptive or abusive acts or practices) that the New York Attorney General can enforce.”
While New York Governor Kathy Hochul hasn’t signed the law yet, Idziak expects that to happen. He said it will assist in going after junk fees, which is something that Chopra used UDAP authority for during his tenure.
Another area where states will pick up the slack is through attorneys general.
“Then you have attorneys general,” Idziak said. “They have the general remit to enforce state law, and they can also enforce the federal consumer financial statute. I would expect that might be an area that you see Democratic state agencies focus on. Consumer finance and issues that they may previously have left to the federal government to focus on.”
Era could be scrutinized later
State regulators will also play a crucial role in filling in the gaps where the CFPB left off. However, Idziak wonders how many regulators will have the funds to increase enforcement significantly.
“There are a lot of them who don't have the surplus in their budget where they can just scale up and take over additional functionalities, supervision and enforcement that the feds had been doing in the past,” he said. “You have budget limitations in a lot of areas that would prohibit them or prevent them from going on a hiring spree.
Idziak noted that some employees who have left the CFPB have found their way to states to help with enforcement, but he believes that state budgets will limit hiring.
Even though things may change regarding who is enforcing the rules, Idziak said brokers should expect them to be enforced.
“Until you see that a statute or a rule has been changed, they are still in effect,” he said. “And even though the CFPB might have de-prioritized supervision enforcement in some of these areas, there are still the states out there, there are still private rights of action under a lot of these consumer statutes.
“The rules of the game haven't necessarily changed. There's a lot of noise there, and you have to pay attention to a lot more information sources today than you maybe did in the past to see how things are developing.”
The Consumer Financial Protection Bureau (CFPB) is preparing to rescind 67 policy and regulatory guidance documents, including several related to mortgage lending, credit reporting, and consumer complaint processes.https://t.co/O9LdG6QRHi
— Mortgage Professional America Magazine (@MPAMagazineUS) May 15, 2025
Because Republicans made these changes, Idziak expects that if Democrats take over Congress and the White House again, brokers can expect this era to receive extra scrutiny.
“Historically, the look-back period on a lot of the examinations and enforcement actions has been anywhere from five to seven years,” he said. “I would say, operate with the idea in the back of your mind that in 2028, you could have a Democratic administration and a CFPB that decides to take a very close look at the behavior of business practices or lenders during this time period.”
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