Off the Record, On the Issues with John

​Trump’s actions and H.R. 1 bring major CFPB rollbacks and new credit union compliance changes.

By John Alexander, DakCU Director of Legislative & Regulatory Affairs

Trump executive order limits disparate impact enforcement   
President Trump signed an Executive Order directing federal agencies like the Department of Justice and CFPB (Consumer Financial Protection Bureau) to stop using disparate impact theory to enforce civil rights and fairness laws. Disparate impact theory holds that even neutral policies can be discriminatory if they disproportionately harm protected groups (like women or minorities). While this order changes enforcement priorities, it doesn't eliminate existing laws, and courts have previously upheld disparate impact as valid under laws like the Fair Housing Act.  
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Financial institutions should remain cautious about abandoning fair lending analysis because: courts can still apply this legal theory independent of executive branch directives, state laws may still protect against disparate impact, and the long statute of limitations means current practices could face enforcement under future administrations.  

Financial institutions should continue conducting thorough fair lending analysis despite the executive order for three reasons:  

1. Courts can still apply this legal theory independent of executive branch directives 
2. State laws may still protect against disparate impact  
3. The long statute of limitations means current practices could face enforcement under future administrations.  

CFPB shifts 2025 enforcement priorities
The CFPB is dramatically restructuring its approach to enforcement and supervision for 2025, focusing on clear consumer harm (particularly fraud affecting servicemembers and veterans) while reducing examinations by 50%. The Bureau will prioritize large banks, emphasize consumer remediation over penalties, and avoid actions based solely on statistical evidence or novel legal theories.

Key changes include making mortgages the top priority, pursuing only intentional racial discrimination cases, abandoning statistical redlining assessments, and deprioritizing areas including medical debt, peer-to-peer platforms, student loans, remittances, consumer data, and digital payments. Prudential banking regulators may maintain different priorities despite the CFPB's new direction.

CFPB asks court to strike down medical debt reporting ban 
The CFPB and Cornerstone Credit Union League jointly asked a court on April 30, 2025, to invalidate the Bureau's rule that prohibited reporting medical debt to creditors, acknowledging the agency exceeded its authority. The court canceled a planned injunction hearing and ordered all parties to submit briefs on a pending intervention motion by May 7.

CFPB halts section 1071, plans complete rewrite 
The CFPB announced plans to restart the rulemaking process for Section 1071 of Dodd-Frank, which requires collecting small business lending data, after facing strong opposition from financial institutions. The Bureau has paused compliance deadlines for plaintiffs in the Texas Bankers Association lawsuit and announced it will deprioritize enforcement for all other entities. A new Notice of Proposed Rulemaking is expected soon, potentially changing requirements for all covered institutions. Meanwhile, Congressional efforts to repeal Section 1071 entirely continue, with the House Financial Services Committee recently advancing the "1071 Repeal to Protect Small Business Lending Act."

Congress blocks CFPB overdraft fee cap
Congress has overturned the CFPB's overdraft rule through the Congressional Review Act, sending a resolution to President Trump that will nullify regulations capping overdraft fees at $5 for large institutions or requiring them to treat overdrafts as loans under Regulation Z. This action permanently prevents the CFPB from issuing similar fee cap regulations without new Congressional authorization.

Court strikes down credit card late fee limits
A Texas federal court vacated the CFPB's Credit Card Late Fee Rule (which would have reduced late fees from $32 to $8) through a consent judgment, ruling it violated both the CARD Act and the Administrative Procedure Act. Despite these regulatory rollbacks, financial institutions should still review their fee structures, as state-level enforcement and private litigation targeting unreasonable or unclear fees remain a significant risk.

CFPB stops defending UDAAP manual changes
The CFPB has reached an agreement with banking associations to end litigation over its UDAAP exam manual changes. It will dismiss its appeal, abandoning efforts to categorize discrimination as an unfair practice across all financial products, including deposit accounts. This reverses the agency's attempt to expand discrimination oversight beyond traditional lending products.
  
Compliance Implications of H.R. 1 - One Big Beautiful Bill Act
The U.S. House of Representatives passed H.R. 1, One Big Beautiful Bill Act (the "Bill"), on May 22, 2025. Below are several provisions within the bill that could impact credit unions and their compliance obligations. Keep in mind that the legislation now moves to the Senate, which is expected to make some changes. Once the Senate makes their changes, the two bills must be reconciled and passed by both chambers before being signed into law by President Donald Trump. Without further ado, here are the main provisions that affect credit unions and their compliance programs.

Excise tax on executive compensation for tax-exempt organizations
Under the Tax Cuts and Jobs Act, current law imposes an excise tax on "excess" compensation paid to certain highly compensated employees by applicable tax-exempt organizations. This was limited to the top 5 employees who make over $1 million annually (including annual compensation and deferred compensation payouts). The new bill applies the excise tax to all employees making over $1 million annually. This is unlikely to affect the vast majority of credit unions. Here is a member only FAQ on this excise tax put together by America's Credit Unions' Regulatory Advocacy Team.

Excise tax on remittances 
The Bill places an excise tax of 3.5% on remittances made by non-U.S. citizens to other countries, to be collected by the entity sending the remittance. Under the Bill, credit unions that offer remittance services will have to collect and send the taxes to the government, and they will have to provide paperwork to U.S. citizens who will claim a tax credit on their annual taxes for any remittance taxes they paid. The Compliance Team has published a member only FAQ on this issue that can be found here.

Excise tax on parking and transportation benefits
The Bill adds a new excise tax on parking and transportation benefits. This provision amends the tax code to increase the unrelated business taxable income of a tax-exempt organization by including the amount paid or incurred for any qualified transportation fringe benefit, including parking. While this isn't a traditional financial institution compliance issue, this may be a tax compliance issue that the credit union will need to watch out for.

Long term savings accounts or "Trump accounts"
The Bill adds a new type of account that credit unions can offer. These "Trump Accounts" are very similar to 529 college savings plans. Amounts in Trump Accounts would be required to be invested in equity investments. However, similar to a 401k and 529 plan, funds could be used for education, homeownership, entrepreneurship, etc. Credit unions will be able to offer these accounts to members, though they may have to work through a CUSO or third-party provider to offer the product.

"No Tax on Overtime"
The Bill includes a "no tax on overtime" provision that allows a deduction in an amount equal to the qualified overtime compensation received during a tax year. Notably, this provision will require employers to include the total amount of qualified overtime compensation in a W-2. Similar to the tax on transportation/parking benefits above, this is not a traditional financial institution compliance issue. This is a pure administrative function and is unlikely to be a huge burden, but it will change payroll processing and withholding.

Regulatory modernization and efficiency
The Bill also adds a provision that the Office of Management and Budget shall pursue regulatory modernization and efficiency at a number of agencies, including the CFPB. While it is unclear what will change from this provision, it will likely continue to put pressure on the CFPB to reduce regulatory burdens.

As noted above, credit unions should be aware that the above may change now that the Senate is reviewing the Bill and drafting their own version. Stay tuned, America's Credit Unions is monitoring the situation and will notify credit unions as changes occur.

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