Should You File for Bankruptcy in 2026?

Capstone believes the Trump administration is intent on taking apart the Consumer Financial Protection Bureau (CFPB), even as the agencyconstrained by restricted budget plans and staffingmoves forward with a broad deregulatory rulemaking program beneficial to industry. As federal enforcement and guidance decline, we expect well-resourced, Democratic-led states to action in, creating a fragmented and uneven regulatory landscape.

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While the supreme outcome of the litigation stays unidentified, it is clear that consumer financing companies throughout the environment will take advantage of decreased federal enforcement and supervisory risks as the administration starves the company of resources and appears committed to minimizing the bureau to a company on paper only. Considering That Russell Vought was named acting director of the agency, the bureau has dealt with lawsuits challenging numerous administrative choices planned to shutter it.

Vought likewise cancelled many mission-critical agreements, provided stop-work orders, and closed CFPB offices, among other actions. The CFPB chapter of the National Treasury Worker Union (NTEU) instantly challenged the actions. After evidentiary hearings, Judge Amy Berman Jackson of the United States District Court for the District of Columbia released an initial injunction stopping briefly the reductions in force (RIFs) and other actions, holding that the CFPB was attempting to render itself functionally unusable.

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DOJ and CFPB legal representatives acknowledged that removing the bureau would need an act of Congress and that the CFPB stayed responsible for performing its statutorily needed functions under the Dodd-Frank Wall Street Reform and Customer Protection Act. On August 15, 2025, the DC Circuit released a 2-1 decision in favor of the CFPB, partially vacating Judge Berman Jackson's preliminary injunction that obstructed the bureau from carrying out mass RIFs, however remaining the choice pending appeal.

En banc hearings are rarely approved, but we expect NTEU's demand to be authorized in this instance, offered the detailed district court record, Judge Cornelia Pillard's lengthy dissent on appeal, and more recent actions that signal the Trump administration means to functionally close the CFPB. In addition to litigating the RIFs and other administrative actions intended at closing the firm, the Trump administration intends to construct off budget cuts incorporated into the reconciliation bill passed in July to further starve the CFPB of resources.

Dodd-Frank insulates the CFPB from direct appropriations by Congress, instead authorizing it to request funding straight from the Federal Reserve, with the quantity capped at a portion of the Fed's operating costs, subject to a yearly inflation modification. The bureau's ability to bypass Congress has routinely stirred criticism from congressional Republicans, and, in the spirit of that ire, the reconciliation bundle passed in July reduced the CFPB's funding from 12% of the Fed's business expenses to 6.5%.

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In CFPB v. Community Financial Solutions Association of America, accuseds argued the financing method broke the Appropriations Clause of the Constitution. While the Fifth Circuit agreed, the United States Supreme Court did not. In a 7-2 choice in May 2024, Justice Clarence Thomas' bulk viewpoint held the CFPB's funding technique constitutional. The Trump administration makes the technical legal argument that the CFPB can not legally request funding from the Federal Reserve unless the Fed pays.

The technical legal argument was filed in November in the NTEU lawsuits. The CFPB stated it would lack money in early 2026 and could not lawfully request financing from the Fed, citing a memorandum viewpoint from the DOJ's Office of Legal Counsel (OLC). Using the arguments made by offenders in other CFPB litigation, the OLC's memorandum opinion interprets the Dodd-Frank law, which allows the CFPB to draw financing from the "combined revenues" of the Federal Reserve, to argue that "earnings" indicate "profit" rather than "revenue." As an outcome, due to the fact that the Fed has been running at a loss, it does not have "combined earnings" from which the CFPB may lawfully draw funds.

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Appropriately, in early December, the CFPB followed up on its filing by sending letters to Trump and Congress saying that the company required around $280 million to continue performing its statutorily mandated functions. In our view, the new but repeating funding argument will likely be folded into the NTEU litigation.

Most customer financing business; mortgage loan providers and servicers; auto lenders and servicers; fintechs; smaller customer reporting, debt collection, remittance, and automobile finance companiesN/A We expect the CFPB to press strongly to carry out an enthusiastic deregulatory program in 2026, in tension with the Trump administration's effort to starve the firm of resources.

In September 2025, the CFPB published its Spring 2025 Regulatory Program, with 24 rulemakings. The program follows the company's rescission of nearly 70 interpretive guidelines, policy declarations, circulars, and advisory opinions dating back to the firm's creation. The bureau released its 2025 guidance and enforcement top priorities memorandum, which highlighted a shift in supervision back to depository organizations and mortgage loan providers, an increased focus on locations such as fraud, assistance for veterans and service members, and a narrower enforcement posture.

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We view the proposed guideline modifications as broadly beneficial to both consumer and small-business loan providers, as they narrow potential liability and direct exposure to fair-lending analysis. Especially relative to the Rohit Chopra-led CFPB throughout the Biden administration, we expect fair-lending guidance and enforcement to practically vanish in 2026. Initially, a proposed guideline to narrow Equal Credit Chance Act (ECOA) regulations intends to eliminate disparate impact claims and to narrow the scope of the discouragement arrangement that forbids creditors from making oral or written statements meant to discourage a customer from using for credit.

The new proposal, which reporting suggests will be settled on an interim basis no later on than early 2026, dramatically narrows the Biden-era guideline to leave out certain small-dollar loans from coverage, reduces the limit for what is thought about a little company, and removes numerous data fields. The CFPB appears set to provide an upgraded open banking rule in early 2026, with considerable implications for banks and other traditional banks, fintechs, and information aggregators throughout the consumer financing community.

The guideline was settled in March 2024 and included tiered compliance dates based upon the size of the financial organization, with the biggest needed to start compliance in April 2026. The final guideline was right away challenged in May 2024 by bank trade associations, which argued that the CFPB surpassed its statutory authority in issuing the rule, particularly targeting the restriction on charges as illegal.

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The court issued a stay as CFPB reassessed the guideline. In our view, the Vought-led bureau may think about allowing a "affordable charge" or a similar standard to enable information suppliers (e.g., banks) to recoup expenses associated with supplying the information while also narrowing the risk that fintechs and information aggregators are evaluated of the marketplace.

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We expect the CFPB to drastically decrease its supervisory reach in 2026 by settling four bigger individual (LP) guidelines that establish CFPB supervisory jurisdiction over non-bank covered persons in different end markets. The modifications will benefit smaller operators in the consumer reporting, auto financing, customer financial obligation collection, and worldwide money transfers markets.