CFPB’s Massive Withdrawal of Guidance

QUESTION 

The CFPB recently withdrew guidance for many policies and legal interpretations. As my company’s  Chief Risk Officer and General Counsel, I was asked by our Board to provide an outline of the CFPB's withdrawn guidance and the effect such withdrawal will have on lending and servicing. I have reviewed all the withdrawn documents and written an analysis of their impact. However, I still can’t figure out the difference that the withdrawn guidance makes in our legal and regulatory risks. 

So, I am writing you for some feedback. I don’t need an outline of every withdrawn document. What I’m looking for is some insight into the overall impact of withdrawing the guidance. Our external law firm provided an excellent overview. But I would like something more conclusory with respect to the practical effect caused by the withdrawal. 

Long time subscriber! Thank you for your outstanding articles. We appreciate your clarity and straightforward responses. 

What impact does the withdrawal of the massive withdrawal of CFPB guidance documents have on mortgage originators and servicers? 

SOLUTION 

CMS Tune-up

RESPONSE 

Thank you for your kind words! My articles are a labor of love. I enjoy writing them, and I am grateful that you read them. Before I dig into the implications of the CFPB’s withdrawal of numerous guidance issuances, let me offer a few historical facts. 

Recent History 

The withdrawals of guidance stems from an Executive Order (EO) 13891 that goes back to 2019, which directed agencies to avoid using guidance documents to create regulatory burdens on the private sector.[i] President Trump issued the EO in his first term, and the Biden administration later rescinded it. 

The CFPB is maintaining that the principles the EO outlined are consistent with the requirements of the Administrative Procedure Act (APA), which are noted in the CFPB’s April 11, 2025 internal memo. The memo imposed a moratorium on the issuance of new guidance documents and initiated a full review of all existing guidance. The CFPB is supposed to complete the review by April 25^th. Any guidance not explicitly flagged to be retained, with a clear justification, would be subject to rescission.[ii] 

Three Reasons for the Withdrawal 

There are three ostensible reasons for the withdrawal of these guidance issuances: 

1.   The CFPB will now only issue guidance when it is truly necessary and when such guidance will lower, rather than raise, compliance burdens for regulated entities. 

2.   In response to President Trump’s deregulatory initiatives aimed at reducing bureaucracy, the CFPB is scaling back its enforcement activities and, as a result, does not require interpretive guidance to remain in effect at this time. 

3.   The CFPB has determined that there are no significant reliance interests justifying the retention of the withdrawn guidance. This is because parties generally recognize that guidance is nonbinding and does not create substantive rights. 

The Bureau says that while some guidance, or parts thereof, may be reinstated, it does not intend to prioritize enforcement against parties that do not conform to them during the period of withdrawal. 

What a Difference a Difference Makes 

In your inquiry you state that you “can’t make sense of the difference it makes in our legal and regulatory risks.” Frankly, I think your confusion is justified. I will explain shortly. Suffice it to say, for now, that withdrawal of the guidance documents will have little legal effect. Before getting to my view, let me mention a few areas that seem to be headlining as regulatory issues.

Free Market Dogma

QUESTION 

I am a former employee of a lender whose president is a hard-core hater of the CFPB. He believes that our government is out of control and the CFPB has been overreaching for years. He is glad that the CFPB is being shut down. I was a paralegal in the legal department. After having to put up with his railing and cursing about the government in general and the CFPB in particular, I decided to resign. Since then, I have been with a law firm and continue to attend law school. 

It's not as if his mortgage company has been in trouble with the CFPB. It complies with all the rules and regulations, and every audit by states and the CFPB itself has shown that the company complies adequately. There have been no administrative actions or fines. 

From what I can tell, the CFPB is a kind of anti-scam police. They are also involved in protecting consumers' financial interests with respect to financial products and services. I can't figure out why this is such a bad thing that it should be destroyed. I thought regulating on behalf of consumers is what good government is supposed to do. We can debate what overreach and unnecessary regulations are, but destroying the agency that actually helps consumers seems really dangerous. 

My former boss takes the position that any government involvement in the free market is an attack on free enterprise, which to him means running his business the way he wants to run it. And, any agency, like the CFPB, that regulates his company is an attack on its survival. I think that's really very extreme. I got tired of trying to convince him otherwise. 

I know this is controversial. I want to widen the lens a bit. You have always been willing to discuss controversial subjects. My former president reads every post you've written for years. I'm sure he will recognize me as the questioner, though I didn't tell you his name or company name. It may bother him that I am writing to you. Fortunately, I am no longer an employee. 

He often discusses your views and interpretations of the law. I have subscribed for years. I think you are a reliable resource for regulatory guidance. I want to know your view. It would really help! 

Is government involvement in free markets justifiable? 

COMPLIANCE SOLUTION 

Management Tune-up 

RESPONSE 

I respond to controversial subjects as they may relate to many aspects of regulatory compliance. I make no apologies. I know they are controversial because we predictably get a small tranche of unsubscribes whenever I discuss a topic that bugs the unsubscribers. Sometimes, the unsubscribers write to me, and we have enjoyable correspondence. 

We offer this newsletter as a labor of love. It's free! All are welcome. However, I discuss the regulatory landscape with all its ups and downs, controversies, and wrangling, and always try to ensure that compliance with the law is clarified. My goal is to educate and offer some helpful guidance. 

Anyone who does not recognize that the government partners with markets, be it mortgage or any other economic market, exhibits a view that borders on willful ignorance. I have taught graduate classes on market action relating to mortgage origination, and one obvious factor we discuss is the "free market" concept, which is the thesis that markets should not allow government involvement (often framed as "government interference"). 

"Free market" lingo wears several masks, such as "free trade" and "free enterprise," but the notion that any economic market is free of government involvement is belied by the fact that the government must be involved in ensuring and monitoring its legal and regulatory framework. 

Now, for a dose of reality: 

There has never been a free market in the history of the world.

Never. Nowhere. Not now. Not ever. 

The concept indirectly stems from an economic theory called "laissez-faire" – which, in French, means "allow to do" – which is a financial concept that purports to inform free markets and capitalism. In that scenario, the government does not regulate business, taxes, or tariffs. Instead, it proposes that a market self-regulates through the economic mechanism of supply and demand of products and services. And, it asserts that individuals drive markets through self-interest, which, somehow, leads to social and economic benefits.

Guilty Until Proven Innocent?

QUESTION 

I am the Chief Executive Officer of a lender and servicer. Last week, the CFPB hit us with a Civil Investigative Demand. Our in-house lawyer has put a team together from various departments to respond to it. And you kindly referred us to an attorney who specializes in this process. We are retaining the attorney you recommended. 

At this point, many people in the company are aware that we received the Civil Investigative Demand, and I am very concerned about reputation risk. We have built a fantastic company, yet rumors have already started that we did something to violate laws and regulations. I need a way to calm everyone down and not worry. 

Because of the rumors, some employees now think we are guilty of wrongdoing. We intend to fight any such charges! I need to issue a statement that explains the process in plain and simple language. I need your help in providing information that helps them to understand the process. 

What is the CFPB’s Civil Investigative Demand? 

Are we guilty until proven innocent? 

COMPLIANCE SOLUTION 

CMS Tune-up®  

RESPONSE 

Rumour doth double, like the voice and echo,

The numbers of the feared.

Henry IV, Part 2, Shakespeare 

Allow me to put the above lines into our modern idiom: An unconfirmed report expands like an echo growing louder and louder, magnifying the perceived size and threat. 

DO NOT IGNORE THE RUMORS! 

Perhaps you think that the truth will reduce the rumors. Sometimes, it does; sometimes, it does not. One of my favorite literary figures, Jonathan Swift, once said that “falsehood flies, and the truth comes limping after it.” He cautioned that by the time people become “undeceived,” the “jest” is over, and the “tale” has already had its effect.  

Reputation risk is real, and adverse issues can hobble a company financially, even when there’s nothing to the allegations of wrongdoing. Some rumors don’t have a scintilla of truth, but they thrive nonetheless. Like a garden of weeds, pull out one, and another takes its place. Your aim should be to control the message. However, do not ignore rumors! 

PEEKING BENEATH THE CFPB HOOD 

I am going to give you a peek into the CFPB’s Civil Investigative Demand process. The acronym is “CID,” and for brevity, I will use this acronym. If you’re wondering if the CFPB has coopted the authority to conduct CIDs, you might be interested in knowing that it certainly does have the authority pursuant to the Dodd-Frank Act.[i] A primary access point to the authority is Unfair, Deceptive, or Abusive Acts or Practices (UDAAP),[ii] which

 “…take any action . . . to prevent a covered person or service provider from committing or engaging in an unfair, deceptive, or abusive act or practice under Federal law in connection with any transaction with a consumer for a consumer financial product or service, or the offering of a consumer financial product or service…”[iii] 

Most CIDs are triggered by CFPB examination. However, the examination is not the only source of the CID. I’ll get back to examinations momentarily. 

NON-EXAMINATION SOURCES OF CIDs 

Other sources can trigger a CID, many of them being external to the company itself. For instance, the Office of Enforcement monitors the CFPB’s Consumer Complaint Database for potential violations.[iv]