What banking deregulation could mean for your money: 4 key changes to watch for

Sweeping changes at the Consumer Financial Protection Bureau (CFPB) signal what would be a significant shift in banking regulation under the Trump administration. While regulatory changes might sound like distant bureaucratic shuffling, these potential rollbacks could directly impact your wallet, from the fees you pay to how your complaints are handled.

Not only did the administration fire the CFPB chief and effectively halt the agency’s operations, it also ordered the federal agency to stop all of its work in early February, signaling that the U.S. may be entering an era of financial deregulation.

With the watchdog agency stripped of its teeth, what happens to the rules the CFPB has implemented over its roughly 15-year tenure? And what can you do to protect yourself from unfair, deceptive or abusive practices? Here’s everything you need to know about the potential impacts of financial deregulation on your day-to-day banking.

How the CFPB currently protects your bank accounts

Created in response to the 2008 financial crisis, the CFPB is responsible for protecting consumers in the financial marketplace from unfair, deceptive or abusive practices. The CFPB supervises banks and credit unions with assets of $10 billion or more, in addition to non-depository institutions like credit reporting agencies and student loan servicers. The CFPB’s rules also apply to smaller depository institutions.

The CFPB enforces their rules through enforcement actions, requiring banks and credit unions to pay fines if they violate the agency’s rules. Consumers can file complaints on the CFPB’s website, which helps them get responses, and potentially redress, from banks or credit unions if they have an issue. Consumer redress is also commonly part of the CFPB’s enforcement actions.

The CFPB oversees many important aspects of your relationship with banks, including:

1. Fee structures: Many banks have reduced or eliminated junk fees in response to the CFPB’s rules and enforcement actions.
2. Account disclosures: The CFPB requires banks to notify consumers about their terms, including changes in their annual percentage yield (APY).
3. Complaint resolution: Consumers can file complaints on the CFPB’s website, which helps them get assistance directly from banks or credit unions.
4. Fair lending practices: The CFPB enforces laws that prevent discrimination in banking services.

How deregulation could affect banking

The Trump administration has signaled a different approach to the CFPB — one focused on deregulation. This philosophical shift could substantially change how Americans interact with their banks.

It’s still an unknown how banks and credit unions will behave with the federal watchdog gone. These are four potential aspects that may be impacted.

1. Overdraft and banking fees

Under current regulations, banks must disclose overdraft fees clearly and get consumer consent before enrolling someone in certain overdraft programs. The CFPB has also clamped down on other types of junk fees, including non-sufficient funds fees.

These actions have led many banks to change their policies surrounding these fees, which the agency says will save consumers more than $6 billion annually. The CFPB also recently closed a loophole that exempted overdraft loans from lending laws.

Still, overdraft fees have remained extremely lucrative for banks. Even with recent changes, banks racked up more than $5 billion in overdraft and non-sufficient funds fees in 2023, according to a CFPB study.

Deregulation could weaken these requirements, potentially leading to higher or less transparent fees. David Silberman, a former CFPB official and visiting lecturer in law at Yale Law School, says it’s still an unknown whether banks will slide back on these policies.

“My personal opinion is that banks won’t backslide to the extent they’ve made these changes and internalized them,” he says. “I don’t think we’ll see forward momentum without a strong regulator, but I wouldn’t expect a lot of backsliding.”

2. Account disclosures

The CFPB requires banks to provide standardized, easy-to-understand disclosures about account terms and conditions.

For example, the CFPB requires banks and credit unions to disclose changes in your APY at least 30 days before the change goes into effect.

Additionally, depository institutions are required to disclose the amount of any fee that may be imposed on an account holder, and they must outline the conditions under which the fee may be imposed.

Potential changes to disclosure requirements could make it more difficult for consumers to understand exactly what they’re signing up for. Fine print might become more complicated, and information about fees or interest rates could become harder to find.

3. Complaint resolution

Without an active CFPB, consumer complaints may experience longer response times and less transparency in the process. The CFPB’s complaint function appears to still be operating, but whether those complaints are still being referred to banks (per the usual process) remains to be seen.

Consumers can still turn to other agencies, such as the Federal Deposit Insurance Corp. (FDIC) and the Office of the Comptroller of the Currency (OCC). These agencies also take consumer complaints, though their authority is limited compared to the CFPB, according to Silberman.

However, without strong oversight, there may be reduced enforcement against institutions with high complaint volumes, potentially leading to fewer consequences for those that engage in unfair practices.

4. Fair lending practices

The Equal Credit Opportunity Act makes it illegal to discriminate on the basis of certain characteristics, including race, religion, sex and national origin. That means a creditor can’t refuse consumers credit if they qualify for it, discourage them from applying for credit or offer credit terms that are less favorable compared to someone with similar qualifications because of these characteristics.

The CFPB enforces these discrimination laws in banking, but it isn’t the only federal department with enforcement power, as the Department of Justice may also file lawsuits for violations of this act.

Deregulation could lead to less oversight of discriminatory lending practices, making it harder to detect and address violations. With fewer investigations and penalties, institutions may face less accountability for discrimination in lending.

What likely won’t change

The future of the CFPB remains in question, but one thing is certain: the CFPB’s rules won’t go away absent further action, according to Silberman. The CFPB’s rules won’t be extinguished just because the agency’s doors are closed, and so depository institutions will still be required to adhere to these disclosure requirements.

“The CFPB was created by an act of Congress,” Silberman says. “The Act says the CFPB shall — not may, but shall — regulate the offering and provision of consumer financial products and services, and lists many specific mandatory activities, including monitoring markets for risks to consumers, conducting supervisory examinations and promoting financial literacy. I don’t see any world without Congressional actions where the CFPB can cease to perform those functions.”

Moreover, several fundamental protections will remain in place.

• Deposit insurance: Deposit accounts are insured by the Federal Deposit Insurance Corp. (FDIC) for up to $250,000 per depositor, per FDIC-insured bank, per ownership category.
• Fraud protections: These will also remain in place, as neither of these are ever legally permissible. Consumers who find themselves a victim of a scam or fraud can contact their local police department or state attorney’s office.
• State-level banking regulations: Lastly, the U.S. maintains a dual banking system, meaning depository institutions are co-regulated by both the federal and state governments. Changes to federal banking regulation won’t immediately affect state laws.

How to protect your money regardless of rule changes

Without federal oversight, it’ll be more important than ever to closely monitor your account to catch any unauthorized charges or fees.

Here are some proactive steps to protect your bank accounts.

Monitor your accounts

In particular, you’ll want to keep track of overdrafts, as this can come with hefty fees. The average overdraft fee is $27.08, according to a Bankrate study. Here are some tips to avoid overdraft fees:

• Opt out of overdrafts. The CFPB requires banks to get the consumer’s consent before charging overdraft fees. If you’ve already consented, you can contact your bank to opt out.
• Sign up for low balance alerts. Track your balance to avoid overdrafts. Many banks offer alerts via email or text when your balance drops below a set amount.
• Link a savings account to cover overdrafts. Some banks let you link savings to checking, transferring funds automatically if your account is overdrawn.
• Switch checking accounts. If overdraft fees are a concern, consider switching to an account that doesn’t charge them. Here’s our guide to switching banks.

Know your rights

Consumers still have rights under federal (and sometimes state) law, including the right against discrimination under the Equal Credit Opportunity Act.

Under this act, you may file a complaint with the Department of Housing and Urban Development if you believe you’ve been a victim of any unfair credit transaction involving residential property. You may also file your own lawsuit for this and other violations of the act.

The Equal Credit Opportunity Act aside, you may also file a lawsuit if you believe your bank or credit union has violated a federal consumer protection law or regulation. The only caveat is that claims against large institutions will likely end up in arbitration, as national banks tend to have provisions in their customer agreements stating that claims must be arbitrated rather than decided in court.

“Consumer rights don’t go away, regardless of what happens to the CFPB,” Silberman says. “Consumers should continue to assert those rights just as they would have absent this turmoil.”

Bottom line

While the CFPB’s reduced oversight may lead to less protection against unfair financial practices, consumers still have rights under federal and state laws. To protect yourself, stay vigilant and monitor your bank accounts, opt-out of overdraft fees and be proactive about asserting your rights, including filing complaints or taking legal action if necessary. Despite the shift in federal oversight, key protections like deposit insurance and fraud safeguards will remain unchanged.