CFPB Publishes Additional Proposals to Rescind "Unnecessary" Rules and Regulations
The CFPB continues on its path to rescind what it considers to be unnecessary regulatory guidance, with two additional proposals recently published. First, the agency published an interim final rule on May 16, 2025, to rescind certain protections for borrowers affected by the COVID-19 emergency under the Real Estate Settlement Procedures Act (the COVID RESPA Rule). Second, the agency subsequently published a direct final rule on May 21, 2025, to rescind the CFPB's procedures governing a state official's obligations to notify the agency when the official takes an action to enforce the Consumer Financial Protection Act of 2010 (CFPA) (the State Official Notification Procedures).
COVID RESPA Rule
The COVID RESPA Rule implemented "temporary procedural safeguards related to mortgage foreclosure" and "temporarily permitted mortgage servicers to offer certain loan modifications made available to borrowers experiencing a COVID-19 related hardship" in the wake of the COVID-19 pandemic. In addition to temporary amendments to Regulation X, these procedural safeguards were never intended to permanently alter agency guidelines. Rather, they were designed to ameliorate hardships faced by consumers until the termination of the national emergency. The agency highlighted the fact that the "procedural safeguards have been sunset by their own terms," as the "COVID-19 Public Health Emergency expired on May 11, 2023." Because the end of the COVID-19 pandemic eliminated the need for these procedural safeguards, the CFPB believes that the complications these regulations add to Regulation X outweigh any benefit imposed by the Rule.
The CFPB is not seeking prior notice and comment on this proposal, a position justified by the end of the COVID-19 pandemic and previous agency actions. In July 2024, the CFPB proposed a rule to "provide additional flexibility to servicers to offer streamlined loss mitigation options when borrowers seek payment assistance" and "would have removed the provisions implemented in response to the COVID-19 pandemic." The CFPB did not receive public comments on the proposed removal of those provisions, and because borrowers and servicers are no longer utilizing the loss mitigation options offered under the COVID RESPA Rule, the agency does not see it necessary for prior notice and comment here. However, as part of any future rulemaking, the CFPB states that it "would consider and address comments received in response to the 2024 proposed rule, including comments related to applying the loss mitigation lessons learned from the COVID-19 pandemic."
State Official Notification Procedures
The direct final rule seeking to rescind the State Official Notification Procedures is based on the CFPB's prominent goal of "eliminating unnecessary regulatory burdens and rescinding rules that are not necessary to effectuate Congress's statutes." Under Section 1042(b) of CFPA, state officials are required to notify "the prudential regulators" prior to "initiating any action in a court or other administrative or regulatory proceeding" to enforce any CFPA provision. The statute requires the notification to 1) be timely or "immediately upon instituting the action" in cases of emergency, 2) include a copy of the complaint to be filed in addition to a written summary of the action and 3) include written identification of the parties, alleged facts and "whether there may be a need to coordinate the prosecution of the proceeding so as not to interfere with any action, including any rulemaking, undertaken by the Bureau, a prudential regulator, or another Federal agency."
Following the codification of the notification procedures within the CFPA, the CFPB issued regulations at 12 C.F.R. 1082.1 concerning state officials' obligations to notify the CFPB and prudential regulators regarding actions arising under Section 1042. In the proposed direct rule, the CFPB emphasized that the regulations at 12 C.F.R. 1082.1 "merely restate the notification requirements codified in [S]ection 1042(b)" with only immaterial and "minor tweaks." The agency takes the position that where "Congress' statutes are sufficiently clear and prescriptive, regulations do little more than increase costs and cause confusion, and so are unnecessary." The direct final rule, therefore, would not affect the notification procedures codified under Section 1042 but rather remove nearly identical requirements stated within the Code of Federal Regulations.
These recent actions taken by the CFPB demonstrate the agency's comprehensive commitment to eliminating any and all proposed and final rules, regulatory guidance or documents that do not serve a substantive purpose. The influx of proposals to rescind various rules and regulations is likely to continue in light of the CFPB's recent agency-wide review of rules and guidance documents, as Holland & Knight previously reported. Following the CFPB's initial review, the agency took swift action to begin the process of eliminating rules where the regulatory burden exceeds the benefits to consumers, such as the Nonbank Registry Rule, and rules that reach beyond the scope of the CFPB's statutory authority, such as the State Enforcement Authority Interpretive Rule. While the CFPB has identified nearly 70 guidance documents that will be withdrawn, as Holland & Knight previously reported, the agency has not published a comprehensive list of rules that will be rescinded. Accordingly, the culmination of these proposals is yet to be determined.
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