What's next for CFPB, $35B Capital One-Discover merger in June

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Bankers are staring down the barrel of more regulatory changes and the impact of record-breaking industry mergers.

The gradual unwinding of the Consumer Financial Protection Bureau kept its pace throughout May, with the agency backing away from roughly half of its pending cases and withdrawing nearly 70 guidance documents.

The $35 billion merger between Capital One Financial and Discover Financial Services reached its end after more than 15 months of deliberation and courting industry regulators and investors alike. Now begins a new, albeit slower, race to integrate Discover into Capital One.

These trends and more below.

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Navy Federal offers members a debt-free path to credit

Article by Melinda Huspen

Members of Navy Federal Credit Union can now build their credit scores through rent and utility bills, thanks to the credit union's work on consumer-permissioned data sharing.

Navy Federal is offering its members the ability to report recurring payments to credit bureaus. This can enable consumers to qualify for credit from lenders that accept the information.

The credit union partnered with Bloom Credit, a credit data infrastructure platform, to offer its consumer-permissioned data product Bloom+ to its 14 million members as a checking account feature in late March. The partnership was formally announced by Navy Federal on April 7.

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Fiserv outage underscores importance of contingency planning

Article by Joey Pizzolato

Banks have largely recovered from a Fiserv outage on May 2 that resulted in the loss of multiple money movement services, including peer-to-peer payments platform Zelle. But the loss of services reiterates the importance of contingency planning. 

"On Friday morning, we experienced an internal issue that temporarily disrupted service. The issue was fully resolved Friday, and all impacted transactions have since been successfully processed," a Fiserv spokesperson told American Banker.

Consumers were unable to send money through Zelle as a result of the outage, according to posts on DownDetector, a website that provides real-time monitoring and reporting of online service outages. ACH was also affected.

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Angus Mordant/Bloomberg

Ex-Wells Fargo exec who battled OCC sounds off

Article by Kevin Wack

The Wells Fargo fake-accounts scandal upended David Julian's life.

Julian, whose seven years as the bank's chief auditor overlapped with the sales-abuse mess, said he was pushed into early retirement at age 58. Then for more than five years, he waged a legal showdown against the bank's main regulator.

Initially, the Office of the Comptroller of the Currency sought a $2 million penalty. After Julian refused to settle, the agency raised its demand to $7 million. The case went before an administrative law judge, who preliminarily sided with the OCC.

Finally, early this year, the OCC's acting head moved to impose the $7 million penalty. But once Julian filed notice that he planned to appeal the fine in federal court, the OCC backed down. The agency agreed to settle recently for $100,000 — or just 1.4% of the penalty it announced in January.

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Examiner discretion takes center stage in CAMELS debate

Article by Kyle Campbell

As freshly appointed agency heads aim to refocus their approaches to supervision, an emerging question is how much discretion will be left for bank examiners — if any at all.

Regulators and lawmakers have already sought to remove one key discretionary tool by barring the consideration of reputational risks. But some policy specialists want them to go further.

During a recent House Financial Services Committee hearing, Republican members and witnesses representing the banking industry called for curtailing — if not outright eliminating — the management component of the so-called CAMELS ratings, which are central to determining a bank's safety and soundness. CAMELS stands for capital adequacy, asset quality, management, earnings, liquidity and sensitivity to market risk, and banks are assessed on each of those metrics by their federal regulators, though their individual ratings are not made public.

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Bloomberg

What Capital One must do to realize its payments ambition

Article by Catherine Leffert and Kevin Wack

Now that the priciest U.S. bank merger of the last 15 years has closed, Capital One Financial has begun the process of integrating Discover Financial Services. It will be a marathon, not a sprint.

The merger, valued around $35 billion when it was announced in early 2024, is not a run-of-the-mill bank deal that centers on streamlining business models or expanding geographies.

While Capital One and Discover both owned large credit card portfolios and sizable online deposit franchises, the latter company also ran its own payment network, presenting Capital One with opportunities and challenges as it seeks to wring value from its purchase, which closed on May 18.

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Frank Gargano

Trump's CFPB drops half of all pending litigation

Article by Kate Berry

The Consumer Financial Protection Bureau has dismissed or withdrawn more than half of its pending enforcement cases as the Trump administration clears the docket of work it inherited from the Biden era. 

Since February, acting CFPB Director Russell Vought has dismissed 18 lawsuits and three civil investigative demands — 21 cases out of a total of 38 pending enforcement actions. Of those 21 dismissals or withdrawals, 19 were brought by former CFPB Director Rohit Chopra.

While there appears to be no clear pattern among the dismissed cases — aside from their dating from the prior administration — some lawyers said the CFPB appeared to favor banks and payday lenders. The reversals also are inconsistent with the CFPB's priorities under Vought that were outlined in a memo last month by Mark Paoletta, the bureau's chief legal officer.

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How banks can persuade customers to stop using checks

Article by Cheryl Winokur Munk

President Donald Trump's recent order to the Treasury Department to stop issuing paper checks for federal disbursements paves the way for banks to try to curtail paper check use among customers. 

Paper check use has been dropping, according to Federal Reserve data, but banks have many incentives, including fraud concerns, to further chip away at their usage. A 2024 survey by the Federal Reserve showed checks were the No. 2 most frequently reported fraud and loss type, with fraud attempts up 10% from the year prior. Trump's order may accelerate that trend.

"Now might be the right time to revisit [phasing out] checks when there are more electronic options than ever before that provide very clear benefits to all parties involved," Bob Meara, a principal analyst with Celent's banking practice, told American Banker.

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CFPB rescinds 70 guidance and enforcement documents

Article by Kate Berry

The Consumer Financial Protection Bureau is cutting enforcement by withdrawing nearly 70 guidance documents, citing Trump's mandate to eliminate regulations and reduce costs for businesses. 

In a major change for the public, the CFPB will no longer publicly disclose consumer complaint narratives or certain credit card complaint data, eliminating key information in the bureau's consumer complaint database in which consumers criticize banks and financial firms. 

In a 10-page document released on May 9 — and expected to be published in the Federal Register on May 12 — Vought, the acting CFPB director and Office of Management and Budget director, withdrew eight policy statements, seven interpretive rules, 13 advisory opinions and 39 guidance documents.

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Digital dollars? The stablecoin impact on banks, payments

Article by Kyle Campbell

Stablecoins are poised to become a fixture in the regulated banking space at some point this year, but just what that means for the broader banking and payments landscape is far from clear.

Two bills establishing a legal framework for dollar-pegged digital assets are making their way through Congress. In May, the Senate voted to wind down the debate over the GENIUS Act, putting it a step closer to finalization. A companion bill in the House, the STABLE Act, recently emerged from the Financial Services Committee. 

The legislation would create a sanctioned process for banks and other companies to issue payment stablecoins. It also sets parameters around how those coins maintain their dollar pegs, subjects them to anti-money-laundering rules and establishes other requirements. Proponents say these regulated stablecoins would serve as digital dollars that enable faster and cheaper transactions.

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Frank Gargano

CFPB seeks to block states from enforcing federal laws

Article by Kate Berry

The Consumer Financial Protection Bureau has withdrawn guidance from the Biden administration that had expanded states' rights, allowing individual states to broadly enforce violations of federal consumer protection laws.

The CFPB under former CFPB Director Rohit Chopra interpreted the Consumer Financial Protection Act of 2010 broadly and wrote an interpretive rule that allowed states to bring claims against banks and financial institutions not only under the CFPA, but also under federal laws such as the Truth in Lending Act or the Fair Credit Reporting Act. 

Vought rescinded the interpretive rule last week and published his analysis in the Federal Register on May 15. Vought called Chopra's interpretation of states' rights under the CFPA "improper," and instead claimed that "the most natural reading" of the act was to limit states from enforcing federal law.

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