Potential Impacts of the New Administration on Financial Institutions

By Kelly H. Dove and Paloma Scheiferstein

The inauguration of President Donald Trump on January 20, 2025, is anticipated to bring significant changes to the regulatory landscape for financial institutions. A central aspect of this shift is the expected overhaul of key regulatory bodies. Notably, the Consumer Financial Protection Bureau (CFPB) is poised for leadership changes, with current Director Rohit Chopra likely to be replaced.¹ This transition may lead to a relaxation of regulations established during the previous administration, potentially reducing the frequency of enforcement actions against financial entities.

Current litigation may provide the incoming administration an opportunity to challenge existing regulations they perceive as burdensome.² In October 2024, the Bank Policy Institute, Kentucky Bankers Association, and Forcht Bank, a national bank, filed suit challenging aspects of the CFPB’s so-called Open Banking Rule issued under Section 1033 of the Dodd-Frank Act.³ The Open Banking Rule governs how consumers access their financial data and enables consumers to share their financial data with third-party providers through Application Programming Interfaces. The plaintiffs allege, in part, that the CFPB exceeded its statutory authority because Section 1033 does not authorize the CFPB to determine the terms on which banks must furnish consumer data to third parties.⁴ Despite legal challenges, the rule has garnered bipartisan support in Congress, which may push a new CFPB director to revisit the rule, addressing key concerns from the banking industry while ensuring the framework aligns with the broader vision of open banking as the future of financial services.⁵

With the anticipated deregulatory push at the federal level, state-level enforcement may intensify to fill any perceived gaps left by federal deregulation.⁶ State attorney generals, particularly from states with more stringent regulatory philosophies, may increase their oversight and litigation efforts targeting financial institutions.⁷ This dynamic suggests that while federal regulatory pressures might ease, financial institutions could face heightened legal challenges at the state level, necessitating a nuanced approach to compliance and litigation strategies.

As federal deregulation, state-level activism, and ongoing litigation intersect, financial institutions will need to navigate this complex and evolving landscape. By staying attuned to policy shifts, regulatory developments, and court rulings, they can anticipate potential risks and adapt their compliance and/or litigation strategies. This dynamic environment will require financial institutions to remain proactive and adaptable, enabling them to navigate risks effectively, seize emerging opportunities, and uphold consumer trust.