State regulatory activity to increase despite CFPB funding ruling

Auto lenders will likely continue to face an uptick in state regulatory activity and limited probing from the Consumer Financial Protection Bureau in 2026, despite a court-ordered continuation of the bureau’s funding. The Consumer Financial Protection Bureau will continue to be funded following an order from federal district Judge Amy Berman Jackson directed at the Trump administration filed on Dec. 30, 2025, in the U.S. District Court for the District of Columbia . Jackson ruled that the administration must continue to request funding for the bureau from the Federal Reserve . The court order follows questions surrounding the legality of the CFPB’s funding raised by a Department of Justice notice on Nov. 7, 2025, that defined the DOJ’s interpretation of the “combined earnings” of the Federal Reserve as referring to its profits. Since the Fed had not been profitable since 2022, the DOJ ruled there were not any funds available for the bureau. “It appears the defendant's new understanding of combined earnings is an unsupported and transparent attempt starve the CPFB of funding and yet another attempt to achieve the very end the court's injunction was put in place to prevent,” Jackson wrote in her ruling. The ruling argued that acting CFPB Director Russell Vought ’s decision to not request CFPB funding based on the “unsupported interpretation of the Dodd-Frank Act” violates the initial injunction. CFPB action ahead? Though the ruling ensures CFPB funding requests will continue, it does not necessarily indicate an uptick in activity from the bureau this year. “It is the Trump administration's position that it doesn't want a CFPB, so the funding doesn't necessarily tell us that there will be action,” Leigh Hoffman , partner at law firm Lippes Mathias , told Auto Finance News . Hoffman’s expertise includes auto finance compliance. “It will be interesting for us to watch what 2026 brings because, if there's funding, will there be action or will the action be a further retreat on the pieces of litigation that have existed prior to the arrival of this administration?” she said. In 2025, the CFPB did not bring any new action against lenders, she added. While the CFPB will remain in place, it will be a “significantly retrenched version of prior CFPBs,” Kenneth Rojc , managing partner at Nisen & Elliott ’s Auto Finance Group, told AFN. In fact, the CFPB has already taken steps to pull back in several areas of enforcement in the past year: It proposed changes to the definition of larger participants in the auto market, which will affect nonbanks; It shifted to a “ more limited vision for enforcement and supervision activities ”; and It limited its scope of examinations to priority markets. States ramp up enforcement In tandem with a pullback by the CFPB, states are picking up enforcement through their attorneys general , legislatures and state examiners, Rojc said. This trend also be helped by an influx of former CFPB personnel assuming roles in state governments, Chris Capurso , counsel who specializes in compliance at Troutman Pepper Locke 's consumer financial services practice group, told AFN . As many as 1,483 CFPB employees received reduction in force notices in April 2025. At the time, there were 1,700 employees on staff at the bureau. For example, former CFPB Director Rohit Chopra assumed a senior adviser role at the Consumer Protection and Affordability Working Group, an affiliate of the Democratic Attorneys General Association . “There are a lot of former CFPB folks ending up at the state level,” Capurso said. The question, because of the personnel pipeline, is “will some of those initiatives be continued at the state level?” Some states have already adopted regulations after a pullback in federal activity: California in October 2025 passed the Combating Auto Retail Scams (CARS) Act, that resembled the FTC ’s CARS rule that was struck down by the U.S. Court of Appeals for the Fifth Circuit in January 2025 because procedural steps were allegedly skipped when the rule was instated; and New York in December 2025 passed the Fostering Affordability and Integrity through Reasonable (FAIR) Business Practices Act, which expands the attorney general’s power to include the ability to prohibit deceptive and unfair practices. The act becomes effective Feb. 17. “A lot of folks in the industry cheered the end of the CARS rule, but that's left us with the patchwork quilt of regulations at the state level,” Brooke Conkle , parter in Troutman’s consumer financial service department, told AFN . “The challenge that has resulted from that is, without uniformity at the federal level, we have a lot of non-uniformity at the state level,” she said, noting this makes it difficult for auto financiers to adjust their compliance practices. Auto Finance News will present multiple invaluable events for industry professionals in 2026, starting with Auto Finance Summit East and Auto Finance Capital Summit in May. To see event agendas and register, visit autofinance.live .

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