“When you start dismantling an agency by cutting its staff, draining its funding, and freezing its work, you are not just changing policy. You are changing the entire landscape.”
That is how Stephanie Lyon, SVP of financial services at Ncontracts, described the state of the Consumer Financial Protection Bureau during her recent conversation with Sarah Snell Cooke on The Credit Union Connection.
Sarah pushed the issue head-on. Will the CFPB even remain standing? With leadership in flux, lawsuits pending and critical mortgage rules stalled at the Office of Management and Budget, credit unions are left watching the ground shift beneath them. The uncertainty can have significant consequences for how institutions plan, budget and, most importantly, serve their members.
Stephanie’s perspective was not all about risk. She suggested that this turbulent period offers credit unions a rare opening. With regulatory change slowed, now is the moment to shore up internal practices. Training, documentation, fair lending safeguards, and member complaint processes can all be strengthened without the usual rush of new rules piling up.
The conversation turned candid when Sarah remarked how absurd it was that the CFPB would, not so long ago, change regulations by press release. Both agreed that such surprise guidance left credit unions scrambling to react with no warning and no chance to prepare. Those days may be over, but the memory of them underscores why institutions must build resilient compliance programs.
Stephanie’s closing note was striking. Credit unions are not like other lenders. Their member ownership is a distinction that should guide every compliance decision. No matter how Washington shifts, the mission remains the same: protect members and serve them fairly to maintain the foundation of trust.
NOTE: The following transcript has been trained to make you keep reading. And you should.
Sarah Cooke
Hello and welcome everybody. My name is Sarah Snell Cooke, as you know, I’m your host here at The Credit Union Connection. As my guest today, I have the lovely, wonderful Stephanie Lyon, welcome.
Stephanie Lyon
Thank you, Sarah for having me. I’m very excited to be here today,
Sarah Cooke
Absolutely, absolutely, because we have lots of important regulatory stuff to discuss today. Now. Stephanie, I may have hinted a little there is the SVP of financial services at Ncontracts. Why don’t you do a little more deeper dive on your introduction and about uncontracts?
Stephanie Lyon
Absolutely. So I joined in contracts about seven years ago. Prior to in contracts, I was a regulatory attorney at what is now America’s credit union, before it was NAFCU, and I’ve always been involved in looking at the regulations, what’s happening in Capitol Hill, what’s happening at the agencies to help credit unions navigate the ever changing landscape of regulations. Now at Ncontracts, I have the pleasure of having a team of attorneys and other compliance experts who look at all the regulatory changes happening every day, and we input that into our various solutions and systems to make it a little bit more automated and easier for credit unions to navigate this challenging landscape.
Sarah Cooke
You said it challenging, and especially right now, because, well, I want to say, you know, since the shift in administration in the White House, things have changed very rapidly. And here we are August, and it’s still all changing very rapidly. And one of I really wanted to focus on the Consumer Financial Protection Bureau. There’s been a little confusion here and there about what the heck is going on? Is it gonna exist? Does it have to exist? You know, what? What about the regulations that were promulgated? What about the ones that were in process? What, you know, nobody knows what to expect, really. So there were three mortgage related Oh, and actually, let me back up a little there. Talk about just the overview of what’s going on CFPB at first.
Stephanie Lyon
Sure. So CFPB, like you mentioned, ever since January. Rohit Chopra, the prior director, was fired by the Trump administration, and there really hasn’t been a permanent director since then. We currently have someone as an acting director who is behind the scenes orchestrating the dismantling of the Bureau, and they’re not being very coy about it. They are kind of out there, kind of putting, you know, out this, the fact that they don’t think the CFPB is fulfilling any real need for the American people. That is, of course, open to a lot of arguing, but generally speaking, what’s been happening is a freeze on most of the CFPB actions. So anything from examination, supervisions, rule making, we haven’t seen the staff be actually able to work in a committed way like they were able to do in the past four years. And the reason for that is because there is, in the meantime, a huge attempt to fire over 1200 CFPB employees. There is some litigation right now ongoing. So like you said, it’s changing every single day, but right now there is a lawsuit that is attempting to freeze the firing of this 1000 plus CFPB employees, which would only leave around 200 CFPB employees to do everything, and we’ll talk about what everything means, but definitely not a lot of people to do a lot of jobs. Just like compliance. We have a lot of hats. They’re going to get to experience what that’s like. But at the CFPB, the court of appeals that is currently listening to whether or not the CFPB can be dismantled, has just said you can go ahead and begin the firings, and if the Trump administration does fire let’s say 100 folks. Each of these 100 people, have protections that they can pursue as individuals through court, so they would have to restart their litigation. And that is not going to be any fun for anyone. It’s going to be really reactive. At that point, you’ve already dismantled most of the systems, the tooling and now the people. So we’re going to likely see the decline, the rapid decline, of this agency, not to mention they’ve already lost most of their funding. So with the big one, big, beautiful bill, we did see the CFPB funding cut from 12 to 6% so it’s already happening, and it’s going to continue to go faster now that the Court of Appeals has given the green light for the Trump administration to begin that really systemic dismantling.
Sarah Cooke
Yeah, that’s a whole other issue about allowing that to go on while the litigations is pending. But so the CFPB. Has submitted three mortgage related rule makings to the Office of Management and Budget, and they’re very they’re very significant. Can you talk a little bit about each of those and what that might mean for credit unions?
Stephanie Lyon
So the CFPB basically submitted to the Office of Budget and Management, or Management and Budget, OMB, basically something around loan origination compensation. So what’s interesting about this is there’s currently a rule that prohibits dual compensation of loan originators, meaning you can’t, you can’t pay them for making a specific type of loan. You pay your loan originators as salaried employees, for example, or as hourly employees. Well, we are seeing now the Trump administration having appetite to revisit whether that is the best way to compensate loan originators. And let’s remember why this rule was put in place. It was put in place to avoid steering or to avoid loan originators actually telling you, Hey, Sarah, I think you should apply for these three loans, because if you apply for this high cost loan, I make more money, right, right? That’s really not beneficial for finding for our consumers and also credit unions, we know that our members are the people we serve as well and that they’re also the owners, so you’re not trying to harm them or get them into loans that they can’t afford. And reopening this rule making could create some incentives, potentially, to start compensating people in a way that makes it risky to make loans again. So I think that is a little problematic when it comes to how we are attempting to dismantle some consumer protections through this administration. But again, there’s arguments out there, like there’s ways to do it that wouldn’t be as risky, for example, by allowing credit unions to do contributions to folks retirement accounts, for example, that tends to have a less immediate impact on compensation, less likely for people to act badly because of that type of incentive, but a huge on.
Sarah Cooke
I understand too, because, you know that can change. I mean, obviously any of this can change on a dime, but that’s really going to affect how credit, you know, budgeting and everything else I assume. So yeah, the and then, what about the servicing provisions that are affecting reg X and REG Z.
Stephanie Lyon
So our regular, our alphabet soup, regex, exactly, yeah. So regex currently allows and requires a specific type of servicing, but we’ve already seen the Trump administration remove some of the protections from the covid era, some of those that require providing foreclosure protections and to just really allow borrowers to go through their mortgage servicing mitigation process. So basically, if you’re a borrower who can’t afford your mortgage, there were some protections built in place to ensure that any credit union, bank or other mortgage company would help you think about all of the potential solutions, as opposed to just saying you can’t afford it, we’re going to go straight to foreclosure. I think again, because credit unions are so member centric, they’re likely to continue to have those controls built in their place, regardless of what law regulation is out there. But that is a choice that, should this get dismantled, you will be able to make a decision as to who and how much you want to assist borrowers before you do begin the foreclosure process. And I will say for the loss mitigation and servicing, we haven’t gotten a lot of details as to what is going to be proposed. The issue here is the CFPB now has to go through the OMB, and that’s before we get to see what they’re proposing. We will have an opportunity through the ANPR, which is the advanced notice of proposed rulemaking process, to see what they’re talking about. But for right now, it’s all a little bit of word of mouth and our best guess as to what they may propose, right?
Sarah Cooke
And I want to go back to the first one you were talking about, because you were saying that credit unions or other lenders, as if there are any others, credit unions can choose who to work with to help work out their loan, or whatever it sounds like that would be Truth in Lending kind of issue like potential, I think I’m citing the right Reg, potential, discriminatory issue. How do you like? Obviously, it’s a proposal, but yeah, how do you mitigate that?
Stephanie Lyon
So yes, we’re talking now about our regulation be that fair lending, like you mentioned, and that’s also not one of the biggest areas of concern for the current administration. I will mention, but let’s, let’s not worry about what the administration is focusing on. We know as credit unions that fair lending matters. We want to ensure that our members get. Similar experiences, that nobody’s treated differently based on protected characteristics. That’s just point and blank. So it does open the door for potential issues if you have a loan officer who is being very helpful to maybe people who look like them and people who are from the same areas or hang out in the same groups, and they’re not as helpful for people who they don’t identify with, or they don’t have that close connection. And that’s how these disparate treatments start to happen. Because it’s not like someone comes out to work and goes, I don’t want to help people of this race, ethnicity or gender. It starts to happen with I want to go the extra mile for these people I feel very close with. That’s really what we see when it comes to a lot of the current violations of Fair Lending is those small changes and tweaks that, over time, create a big statistical, impactful discrimination or change. So for credit unions, I would say the biggest thing you can do is to ensure you have very clear procedures again, who we want to help and how we want to help them should be written down in a way that you know you’re not going to be creating disparities. So who we want to help could be folks who are attempting to make payments, folks who are picking up the phone call, who are calling us back, people who do come into the branches for whatever kind of workout plans you want to have, and people who are following the workout plans. Those are characteristics that have nothing to do with protected classes. But if we start not writing it down, and we start allowing people to make decisions based on how they feel that day, that’s likely going to lead some to some longer term disparate treatment. And let’s talk about that for a second, because most of the issues we saw during the last four years that were regarding fair lending all occurred during the first Trump administration. So there is a four year, four to five year look back period for these fair lending violations. So anything you do now, guess what? The future administration may have something to say. So whether it’s not a big deal for the current Trump administration today, it may be a big deal the next president come around, the next administration, and even more so, we do have the ability to see some class action lawsuits from your members. We also have the potential of seeing state attorney generals. There’s a lot of state attorney generals who are very active right now who want to fill in the gap that they feel is being left behind by the CFPB dismantling. So there’s a lot of areas of risk that you could stumble upon if you start making bad, fair lending decisions at this time.
Sarah Cooke
Yeah, yeah. So it sounds like just document, document, and use whatever kind of data you can, like those who are calling you back, for example, absolutely.
Unknown Speaker
Document training, too.
Sarah Cooke
That’s a big one, for sure. So I wanted to move on now, if we could, if you, if we covered everything, I think, pretty, pretty at a high level anyway, the small business lending rule that had just happened.
Stephanie Lyon
Two years of my life to this rule.
Sarah Cooke
Now we can’t go on talking for two years, but, what’s been going?
Stephanie Lyon
Let’s just talk about we finished that. We went through the finish line of getting that rule all the way to being finalized, and then immediately it was challenged in the courts. So we already know 1071 has gone through a lot of litigation, and that litigation still has not been resolved. So let’s start there. From before Trump administration came on, we already had litigation that’s just carried over into 2025 and likely to see all of 2025 continuing to be something we have to worry about. But during the Trump administration, we also know that 1071 has already gone through something called the Congressional Review Act, which is where Congress says we don’t want this law we take it back. It’s not going to happen, and it was vetoed by President Biden. So that means there is no way for us to go through a CRA again, like a lot of the rules went through when President Trump came into office. So a lot of people ask, Why is this not just being voided? And the answer is, because it already had its pass, and it did not make it all the way through. And today, what we can expect is litigation has made it very difficult for this rule to fully go through in effect. And there is a consumer protection group that sued the CFPB during the first Trump administration, and that’s a group based out in California, along with some business owners and folks out around the Midwest, and they actually sued the CFPB because 1071 is a law. It’s part of Dodd Frank, so CFPB has to implement it, whether they like the rule or don’t. It doesn’t really matter. Congress already said we need to have this in place. And so during the first lawsuit, the Trump administration. Administration said, Okay, we’re going to go through the rule making process, and now the group is back. They’re back because they don’t feel like there’s been any progress. And they’re not wrong between all the lawsuits, but most importantly, between what the CFPB is saying and doing today, that’s giving a lot of signals that they’re really not trying to implement 1071, so what do I mean by that, they went out and had a news article that said they’re not going to enforce 1071, for anyone right now. So that’s number one. Number two, CFP did a court filing where they basically said we’re going to go back and rewrite the whole rule. We’re going to withdraw what we have and we’re going to rewrite it. So two very clear indicators that they’re not trying to go ahead and enforce something that they were already in trouble for not enforcing six years ago. So like I said, it’s been a long time, and so now this court is ongoing, and in this court case, the judge could compel the CFPB to start enforcing it. So that’s what’s different. There is all this litigation going on that has frozen the rules for the majority of lenders out there, including credit unions, who are members of the America’s credit union, and if that other court goes through first and says, You have to start enforcing it. Now we’re going to get into some weird legal challenge between which court case is going to reign supreme, and which one should we be paying attention to? And also, do we need to just drop everything and start preparing if we keep prior compliance dates? So all of these things are happening, but just to give you a summary in like one sentence, we need to if you’re a large lender, meaning you make a lot of small business loans today you’re a tier one institution, you should be paying very close attention to these, and you should also start making progress against some of the more important areas of the rule, for example, having written applications, making sure you are training your loan officers to collect the specific information. The information may change. I know for a fact we’re likely going to see less data points to collect with the new administration, but the vast majority of the data points are written in the statute. So if you pay attention to the statute, what it says, and you start working against the statute, as opposed to the rule, you’re going to be in a pretty good shape to just make the small tweaks that the final rule from the CFPB, the new final will give us that clarity. So that’s my advice. Is like, you don’t want to just completely ignore town 71 is happening regardless of litigation, and you do want to start making some progress against things that are going to help you long term, no matter what. And you also want to start looking at the data. You can look at you can’t collect people’s demographic information, like sex, gender, ethnicity, but you can collect their gross annual revenue to start determining if that is the kind of business you would be collecting data from. You can start collecting application information, for example, how much low, how much was asked for to be blended? How long did it take to go through the process? What was the outcome? Those things are best practice collections today, so that you can then just be more comfortable implementing demographics down the road.
Sarah Cooke
Yeah, that sounds like it makes perfect sense. Yeah. Get ahead of the game, I guess, if you will, collect what you can. And then there’s, there’s another thing that came out of the CFPB that’s more of a procedural thing, which normally is more wonky, but this is actually really sounds like it’s really important, is that the CFPB people accuse them of making rules by press release, and it sounds like they’re gonna kind of put a stop to that. So can you talk a little more about that one?
Stephanie Lyon
Absolutely. So you are right. The CFPB during the last four years had been very active in their way of issuing interpretations that did not go through formal rulemaking, and I think that has already been significantly withdrawn. We have seen over 100 plus guidance documents, interpretive letters, Q and A’s newsletter releases like you mentioned, being pulled back from the agency and dropped into an archive in the CFPB website. Because a lot of these are really dictating how credit unions can and should comply with regulations. But rather than saying this is a new way of looking at the world, so we’re going to ask for common letters from the industry, the CFPB would just write it down and push it out. So now, under the new administration, what we’re seeing is this desire that they only issue rule makings if it’s gone through the right process. And they’re also giving us a very specific what is the right process, what is that advanced notice of proposed rulemaking, proposed rule, and then final rule, and then the second that the CFPB publishes a final rule on their website. They’re also now. Coming up with a publication that said you can start taking that date as the date in which it is official, as opposed to having a way for the Federal Register to get around and publishing it. So we really don’t know what is the final rule. What is the final date? We can’t start getting ready. They’re giving us a little bit more clarity as to what that final rule or date would be. So that’s helpful, but I think, like you said, what’s most important is that we stop seeing a lot of novel interpretations make their way into newsletters. And sometimes we’re talking about hundreds of pages, there’ll be something dropped into a paragraph there that’s also probably not going to be happening under the new administration, since they have completely different priorities of examination and supervision.
Sarah Cooke
That’s just crazy that every other every other agency has to go through the Federal Register and the comment process and all that. And CFPB is just like, Here you go. We’re gonna release it to the consumers at the same time that you get every Friday before a long weekend.
Stephanie Lyon
That was their favorite to drop something. I couldn’t believe that I’m like, You just ruined the Fourth of July.
Sarah Cooke
That’s too funny. Oh man. So, yeah, I always allow my guests to have the final thoughts on these. We’ve talked CFPB, ad nauseam, just a lot, and it’s very important stuff, obviously, for credit unions to follow. So what would you like to leave our credit union audience with?
Stephanie Lyon
I think right now we’re going to start a period, and have already started a period of deregulation. And I think what’s most essential for credit unions to remember is who you’re serving. You’re serving members. We’re very different in that way. You are not a for profit institution that has the shareholders. You have to please your people are your members. So right now is not a time where I would recommend dismantling your systems, your controls, your compliance program, your risk programs. It’s actually a time to start looking about, how can we do it better? Where can we automate? Where can we take away some of the manual processes you’re about to have, what we rarely get, which is a period to just breathe. So take that period and really take advantage of it. We’re not going to be busy implementing new rules like we would have been if all the rules had made it through, which were mostly dismantled through the beginning of 2025 so take this period and look at your policies, look at your procedures, look at your training, and really start thinking, are we doing a good job managing consumer protection risk? Are we doing a good job serving all of the communities we should be serving? We shouldn’t wait to see there’s enforcement actions out there and fair lending issues and Consumer Protection enforcements, we should be looking proactively, and this is the best time to do so. So my call to action to everyone is double down on the things that work. Start removing the things that are too manual, that are not likely really going to help you in the long term, and look at your foundational programs of your compliance management system, from policies to training, to ensure you have a dedicated compliance function that is fairly strong and well trained and can do the right jobs, looking at your member complaints. That’s essential right now. Sarah, I think that we forget sometimes they are going to come to us first, if we give them a place to come, and we can resolve things faster that way. And if we don’t, they’re going to go to their attorneys, they’re going to go to NCUA, they’re going to go to the CFPB, if it’s still there to go to, right? But that’s really the important thing, is they’re giving us an opportunity our members, and it’s up to us to take it and to be better at serving them, and it shouldn’t really be up to the CFPB or any other agency out there to tell us that we should be doing the right thing for these folks. So that is kind of what I would like to leave you with.
Sarah Cooke
Amen. All right, thank you so much for your time and expertise. Stephanie, I appreciate it. My absolute pleasure. Take care.
Stephanie Lyon
Thank you. Bye.