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While the Consumer Financial Protection Bureau (CFPB) is likely to slow down any federal regulatory enforcement under the new administration, financial institutions should be ready to see an increase in state-specific regulations. In an effort to protect their constituents, certain states may try to enact their own regulations to fill the void left by the CFPB. Adhering to these regulations, and in some cases, potentially competing regulations between states, could result in a minefield for financial institutions that serve customers in multiple states.
CFPB Leadership Transition
As the transition to the new administration began, Rohit Chopra, the outgoing director of the CFPB, published several documents advocating for stronger state-level enforcement abilities. Chopra and his team published the following during the final days of his tenure:
- An article in the Harvard Journal on Legislation (co-authored by Seth Frotman) discussing the use of the Consumer Financial Protection Act by state regulators in enforcing and building on federal regulations1
- A report issued by the CFPB recommending changes to state laws to further federal-state cooperation and facilitate state-level enforcement2
- A compendium of interpretive guidance (compliance bulletins, circulars and other legal interpretations) for courts and enforcement agencies to rely upon in future litigation3
These publications may empower states to take the lead on the regulation and enforcement of consumer financial protections as federal actions slow down.
A State-Level Example: The Illinois Interchanged Fee Prohibition Act
Illinois recently passed the Interchanged Fee Prohibition Act (IFPA), which was set to go into effect on July 1, 2025. In December 2024, the U.S. District Court for the Northern District of Illinois, Eastern Division issued a preliminary injunction which enjoined enforcement of the IFPA, due to a challenge brought by the Illinois Bankers Association, the American Bankers Association, the Illinois Credit Union League, and America's Credit Unions.
The IFPA bans the collection of interchange fees on sales tax and gratuity amounts for debit and credit card transactions in Illinois. Plaintiffs in this challenge claimed the IFPA was preempted by federal laws such as the National Banking Act (NBA) and the Home Owners' Loan Act (HOLA). Plaintiffs also stated in their complaint that "[i]f allowed to take effect, the Act would not only throw well-operating payment card systems into chaos" and claimed that "Plaintiffs' members do not have the capabilities, systems, or processes to comply with the IFPA's Interchange Fee Prohibition or Data Usage Limitation."
While enforcement of the IFPA has been put on hold, other state regulations will continue to arise in the aftermath of the freeze on federal activity. Whether it is fee regulation or new privacy laws (which over 20 states have passed recently), navigating these changing regulations across states will become more and more complex.
Utilizing Your Data
Understanding your data and how it can be utilized in an efficient and effective manner will be paramount in this increasingly complicated environment. With states enacting similar but likely different regulations, it will be difficult for core processors to come out with "one size fits all" modules to isolate and analyze the data necessary to be compliant. Take, for example, the IFPA mentioned above. It would be a significant amount of work to separate all the parts of a transaction to charge the interchange fee on the purchase amount, less sales tax and gratuity. However, data manipulation and analytical tools such as Python, R, or SQL can be used to extract the necessary information from the core processor data extracts or archived reports. This process can be used during the litigation or enforcement and then be automated to ensure continued compliance going forward.
Depending on the size of the institution, responding to these inquiries can involve several types of data, thousands of reports, and billions of data records. Analyzing this amount of data can be difficult for a bank or a credit union to handle in-house.
Footnotes
1. https://journals.law.harvard.edu/jol/2025/01/15/state-enforcement-as-a-federal-legislative-tool/
2. https://www.consumerfinance.gov/about-us/blog/strengthening-state-level-consumer-protections/
3. https://www.consumerfinance.gov/compliance/compliance-resources/compendium-of-recent-cfpb-guidance/
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
