Taming the CFPB and Trump’s return

2024 has come and gone, leaving behind three successive interest-rate cuts from the Federal Reserve, a suite of newly implemented regulations drawing contempt from bankers and the return of Donald Trump to the White House. These changes and many others have many wondering what 2025 will hold for banking.

Recent weeks have seen a wave of top federal regulators announce their departures from office in advance of Trump’s Jan. 20 inauguration, including Sandra Thompson, director of the Federal Housing Finance Agency, and Michael Barr, the Federal Reserve’s vice chair for supervision. 

Barr will retain his membership on the Fed’s board of governors, which includes leading its internal committee on supervision and regulation until his successor is announced. Fed Gov. Michelle Bowman, one of two appointees remaining at the central bank from Trump’s first term, is a top contender to succeed Barr.

“It’s got to be Gov. Bowman or Gov. Waller, if [Trump] wants a Republican,” David Zaring, a professor of legal studies and business ethics at the University of Pennsylvania’s Wharton School, told American Banker’s Kyle Campbell. “Waller is certainly a mainstream, typical Republican governor. Bowman, a bit less so, but she’s got supervisory experience, so she may end up getting the job.”

Read more: Barr’s self-demotion changes little for regulatory outlook

Unlike Thompson and Barr, Fed Chairman Jerome Powell has remained adamant that he will serve out the remainder of his term in office, answering questions about whether or not he would succumb to external resignation pressures with a resounding “no.”

Rohit Chopra, director of the Consumer Financial Protection Bureau, is another major political figure who plans to fulfill the obligations of his role. Chopra has suggested that while he would not volunteer to resign, he acknowledged during congressional hearings last month that “the president can remove us at any time, any day and obviously, we completely respect that.”

In addition to putting many key regulatory figures in flux, 2024 saw the ever-contentious trend of credit union purchases of banks hit a record high.

American Banker calculations based on S&P Global data found that the 22 credit union-bank mergers announced last year — an all-time record — amounted to roughly 20% of deal activity across the industry for the year.

“ICBA and community bankers continue calling for Congress to hold hearings and to consider an ‘exit fee’ on credit union acquisitions of tax-paying banks to capture lost tax revenue resulting from these deals,” Rebeca Romero Rainey, president and CEO of the Independent Community Bankers of America, said in a press release.

Read more: Credit unions bought a record-breaking 22 banks in 2024

Learn more about the top issues kicking off 2025 below, ranging from lawsuits challenging the CFPB final rule on excluding medical debt from credit-score calculations to one Montana bank’s loan challenges.

First Interstate’s $49.3 million answer to a problematic loan

First Interstate Bancsystem in Billings, Montana, recorded a $49.3 million partial chargeoff in its loan to an unnamed distribution company this month, signaling the end of what was one of the largest — and most problematic — loans for the bank.

According to First Interstate’s filing with the Securities and Exchange Commission, the $30 billion-asset bank determined that it would realize a loss on the $62.8 million commercial and industrial loan earlier this month. Executives assigned the loan a “non-accrual” status in the first three months of last year and began proceedings to sell off substantially all of the borrower’s assets last week to repay the loan.

First Interstate maintained a $26.5 million reserve especially for this loan, as of Sept. 30, 2024, and said it plans to allocate more funding to cover the remainder of the loan. Share prices dropped by 3.7% following the announcement.

Read more: First Interstate takes bigger-than-expected hit on loan

Amanda Andrade-Rhoades/Bloomberg

FDIC’s potential new leader touts regulation cuts, crypto engagement

Reducing the regulatory burden currently facing banks, creating a more welcoming environment for engaging with digital assets and pulling back from climate-focused requirements — all of these are top priorities for Federal Deposit Insurance Corp. Vice Chair Travis Hill if appointed to the lead role at the agency.

One such weight is the future of the Basel III endgame capital proposal, which is still rife with redundancies that conflict with other federal regulations, Hill said during a Jan.10 meeting of the American Bar Association’s Banking Law Committee. Specifically, he said the Fundamental Review of the Trading Book requirement would dissuade trading activity when combined with the Federal Reserve’s Stress Capital Buffer and the Global Market Shock.

“Using both the point in time capital framework and the SCB to address these deep tail risks will make some of  these activities uneconomical for banks to engage in, and as a result damage financial market functioning,” Hill said.

Read more: FDIC’s Hill aims to cut regulation, halt climate efforts

Al Drago/Bloomberg

Fed rate pause likely following healthy job report

Despite a relatively steady unemployment rate of 4.1% in December, more than 256,000 nonfarm jobs were added alongside positive employment trends in health care, government, social assistance and retail, according to the U.S. Bureau of Labor Statistics’ recent jobs report.

Federal Open Market Committee members expressed policy uncertainties during last month’s meeting regarding 2025 quarterly outlooks, many of which were tied to the proposals introduced by the incoming Trump administration or the administration itself.

But following the results of the jobs report, predictions that Federal Reserve’s “entering a new phase” of monetary policymaking will mean working to keep rates steady. “We are at or near a point at which it will be appropriate to slow the pace of further adjustments,” Jerome Powell, chairman of the Federal Reserve, said during a post-meeting press conference last month. 

Read more: Strong job report bolsters odds of a Fed pause this month

Ting Shen/Bloomberg

Debt collectors go after CFPB rule excluding medical fees

The debt collection agency trade group ACA international and Specialized Collections Systems, a Houston-based debt collector, have jointly filed charges against the Consumer Financial Protection Bureau and its director Rohit Chopra over a final rule excluding medical debt from credit reports and forbidding lenders from using such information in lending decisions.

Both parties claim the CFPB’s rule is based off “outdated data from a poorly constructed study” and that the original notice of proposed rulemaking failed to include the agency’s justification for the final rule, thereby excluding it from any comments.

This is the second such lawsuit filed against the CFPB since the final rule was issued on Jan. 7. The first was filed by the Consumer Data Industry Association and Cornerstone Credit Union League on the day the rule was announced.

Read more: Debt collectors sue the CFPB for ‘overreach’ on medical debt

CFPB rules, OCC M&A standards on regulatory chopping block

As President-elect Donald Trump readies himself for a second term in office, he and other members of his administration wielding the Congressional Review Act of 1996 will step into a regulatory environment overseen by Republican control of all three major branches of government.

This dynamic will afford Trump a greater degree of success in undoing many controversial policies across the banking industry, including the CFPB rules on overdraft fees and open banking.

“Republicans control both chambers of Congress, which gives them the power to pass CRA resolutions on a partisan basis by a simple majority vote,” Jon Skladany, partner at Jenner & Block, told American Banker’s Ebrima Santos Sanneh. “A Republican in the White House means those CRA resolutions — which will target rules issued by the previous Democratic administration — are unlikely to be vetoed.”

Read more: CFPB rules, M&A standards most likely CRA repeal targets