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State attorneys general and state bank regulators are already moving to fill the gap left by a scaled‑back CFPB, and that trend is expected to intensify through 2026. For banks and fintechs, this means less uniform federal oversight but a more fragmented, aggressive state landscape—especially around consumer protection, fees, and emerging products.
What is changing at the CFPB
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The CFPB has sharply narrowed its supervision and enforcement to a smaller set of “clear” statutory mandates, reducing broad UDAAP and rulemaking initiatives.
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Some enforcement, supervision, and litigation activity is paused or significantly slowed while new leadership re‑sets priorities, creating a perceived “CFPB gap.”
How state attorneys general are stepping up
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State AGs are using Dodd‑Frank §1042 and similar provisions to directly enforce federal consumer financial laws, including the Consumer Financial Protection Act, TILA, FCRA, FDCPA and EFTA.
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Democratic AGs are filing large cases against banks, lenders, and payment platforms, while Republican AGs are targeting ESG/DEI and some fintech practices, producing a bipartisan rise in state‑level enforcement.
Role of state bank and financial regulators
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State banking and financial services departments are increasing examinations of mortgages, small‑dollar credit, earned‑wage access, and digital‑finance products, often coordinating multistate investigations and settlements.
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Several states are tightening licensing, interest‑rate caps, and UDAP/UDAAP standards, using them to police conduct that the CFPB is no longer prioritizing.
Federal bank regulators and the FTC
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Commentary from enforcement practitioners expects federal bank regulators (OCC, FDIC, Federal Reserve) and the FTC to re‑assert more traditional consumer‑finance roles if the CFPB remains constrained.
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These agencies are more likely to focus on safety‑and‑soundness, deception, and competition theories, leaving many innovative product issues primarily to the states.
Practical implications for banks and fintechs
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Compliance risk is shifting from one centralized federal agency to a patchwork of state AGs and regulators, increasing the chance of overlapping or conflicting demands.
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Firms should enhance multistate monitoring, prepare for coordinated AG investigations, and align practices with the strictest likely state standard rather than relying on reduced CFPB scrutiny.
Why this is happening now
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Under the current federal policy direction, the CFPB is taking a more limited, statute‑specific approach, and parts of its prior enforcement and supervisory footprint have been scaled back.
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Legal and industry analyses predict that this “CFPB gap” will persist into 2026, with state enforcement trends from 2025 seen as a preview of even more aggressive state activity going forward.
Practical implications for banks and fintechs
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Financial institutions now face a more fragmented, state‑driven regulatory environment, with varying standards and expectations across jurisdictions.
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Compliance programs must pay closer attention to high‑activity states and multistate AG coalitions, not just to federal guidance, because state actors are increasingly the frontlineenforcers in consumer finance.
Several states have very clearly ramped up consumer‑finance enforcement in response to a perceived CFPB pullback, with a core group repeatedly identified as the most active. The pattern is strongest among large “blue” states but includes some others with specific initiatives.
Most active enforcement states
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New York and California are consistently flagged as leading the pack, expanding AG staffing and launching high‑profile cases involving financial services, fintech, and deceptive practices.
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Massachusetts, Colorado, Illinois, Pennsylvania, Texas, and Connecticut are frequently cited as key members of multistate AG coalitions targeting consumer‑finance practices.
Other states stepping up
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States including Hawaii, Idaho, Oregon, and Texas (through their financial regulators) have taken part in recent multistate mortgage and licensing settlements, reflecting more assertive supervision.
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Broader commentary notes heightened activity by Democratic AGs on consumer‑finance abuses and by some Republican AGs on issues like ESG/DEI, showing that increased enforcement spans both parties, though with different priorities.
How they are filling the gap
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These AGs and regulators are using state UDAP laws and their concurrent federal powers (for example under Dodd‑Frank Section 1042) to pursue banks, nonbanks, and fintechs even when federal agencies are less active.
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They are also coordinating multistate investigations and settlements, meaning a single issue can now trigger broad state exposure even without CFPB leadership at the federal level.
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