WASHINGTON— Community banks say a sharp pullback at the Consumer Financial Protection Bureau has created an uneven playing field, with smaller lenders still subject to consumer compliance exams while large banks face fewer enforcement actions and nonbank financial firms remain lightly regulated, according to reporting by Politico.
The CFPB writes consumer protection rules for all lenders but directly enforces them only at banks with more than $10 billion in assets. Enforcement for smaller banks falls to prudential regulators such as the Office of the Comptroller of the Currency, the Federal Reserve and the Federal Deposit Insurance Corp., which community banks say continue routine exams even as CFPB activity slows, the report noted.
‘Severe Competitive Disadvantage’
“We are at a severe competitive disadvantage,” said Jack Hopkins, CEO of CorTrust Bank and chair of the Independent Community Bankers of America, told Politico, adding that compliance costs persist for smaller lenders while large banks see enforcement ease.
As the CU Daily has been reporting, under the Trump administration, the CFPB has moved to terminate most staff, freeze spending and argued in court that it cannot seek new funding from the Fed, an argument a federal judge recently rejected. Politico noted the agency has filed just one enforcement action in 2025, down from more than two dozen annually in recent years, and has dropped 22 pending cases, including one involving Navy Federal Credit Union.
‘Regulatory Parity’ Cited
Republicans say deregulation will help community banks, though some on Capitol Hill want a plan to ensure consumer rules are still enforced at large banks. Rep. Andy Barr (R-KY) said “regulatory parity” is essential, while House Financial Services Chair French Hill (R-AR) has sought a transition plan if the CFPB curtails its work.
However, as Politico reported, large banks counter that oversight remains robust through other regulators and state attorneys general, citing tools such as CAMELS ratings. But bank trade groups and former officials warn that weakening the CFPB could leave nonbank lenders largely unchecked, Politico added.
The U.S. Court of Appeals for the D.C. Circuit is set to hear arguments on the CFPB’s future in late February.
