State Regulatory Activity To Increase Despite CFPB Funding Ruling

State financial regulators and attorneys general are expected to increase oversight of consumer finance — including auto lending — in 2026 even though a federal court has ordered that the CFPB continue to receive funding.​

What the article is saying

• Auto lenders should expect more state supervisory and enforcement activity in 2026, alongside relatively limited new examinations and investigations from the CFPB while its funding and priorities remain in flux.​

• A December 30, 2025 order by U.S. District Judge Amy Berman Jackson requires the Trump administration to keep requesting and providing funds for the CFPB, averting an immediate shutdown but not restoring the Bureau to full strength.​

Why state activity will increase

• With the CFPB narrowing or pausing parts of its supervisory, enforcement, and rulemaking agenda, states are positioning themselves to “step into the Bureau’s shoes,” particularly in Democratic‑leaning jurisdictions.​

• Many states already have authority to enforce federal consumer‑protection laws and are expected to use that power more aggressively on issues like fair lending, servicing practices, fees, repossessions, and debt collection.​

Context: CFPB funding rulings

• In May 2024, the U.S. Supreme Court held that the CFPB’s basic funding structure — drawing money from the Federal Reserve rather than annual appropriations — is constitutional, removing one major cloud over its legality.​

• More recently, litigation over how and when the Trump administration may restrict or delay funding has produced additional court orders, leaving the Bureau funded but operating under political and budgetary pressure that is likely to temper its activity.​

Practical implications for lenders

• Nonbank lenders and auto‑finance companies should treat state AGs and regulators as primary enforcement risks, with special attention to states like California, New York, Massachusetts, and Illinois that have signaled heightened consumer‑protection priorities.​

• Maintaining robust compliance programs aligned with both federal and key state standards — including documentation of fair‑lending, servicing, collections, and credit‑reporting practices — will be critical as oversight shifts from a single national regulator to a more fragmented state‑driven model.​