Attorney General Bonta Opposes Trump Administration’s Proposed Rule to Roll Back Bank Oversight, Kneecap Consumer Protections

Rolling back oversight risks financial calamity, repeating conditions that led to Great Recession

OAKLAND — California Attorney General Bonta joined a coalition of 16 attorneys general in filing a comment letter strongly opposing a proposed rule from the Office of the Comptroller of the Currency (OCC) and the Federal Deposit Insurance Corporation (FDIC) that would significantly limit federal banking regulators’ authority to supervise banks and enforce banking laws. The proposed rule undermines vital consumer protections and effectively abandons the federal government’s responsibility to police unsafe or risky conduct from banks, especially at a time when the U.S. is experiencing new financial products and innovations. This proposal continues the Trump Administration’s attempt to shirk its responsibility to protect Americans and leave consumers on their own to fend off potentially harmful actions from their banks. 

“Proactive and robust supervision of banks is crucial for our nation’s financial health and to protect the millions of Americans who rely on our financial system. Now, the Trump Administration is attempting to remove enforcement tools from the regulators who ensure that the banks where we keep our savings and deposit our checks are acting responsibly,” said Attorney General Bonta. “The Trump Administration is ignoring the lessons of the Great Recession, making the same mistakes that nearly crashed our economy and upended the lives of Americans nationwide. Weakening supervision over banks is indefensible and puts working people and our economy at serious risk — I urge the Administration to reverse course.”  

Less than 20 years after the Great Recession, active supervision of state and national banks remains essential to keep U.S. financial markets safe and stable. The purpose of bank supervision is to promote a safe, sound, and efficient banking system that supports a strong economy. The purpose is not to protect the banks themselves; rather, it is to protect Americans who rely on banks for deposit, safekeeping, and transmissions of money. Effective bank supervision includes identifying and addressing weaknesses before they threaten the financial stability of banks and possibly spread through the financial system. For example, recent bank supervision identified issues with potentially illegal overdraft fees and led to consumer refunds of nearly $250 million.  

The proposed rule scraps this proactive approach and continues the Trump Administration’s abandonment of consumer protection work, this time by giving up the responsibility of monitoring and identifying unsafe or risky behavior at the country’s largest financial institutions. 

In the letter, the attorneys general argue that the proposed rule should be dismantled because it:

• Unwinds banking protections put in place by Congress to ensure federal banking regulators address significant consumer protection issues.  
• Undermines effective supervision by abandoning, without justification, a proactive approach for one in which banking regulators cannot issue supervisory warnings for practices that could result in bank or consumer harm. 
• Prohibits banking regulators from looking at significant threats that are not yet imminent, including the rapid rise of new financial products and structures, like cryptocurrency and crypto-adjacent products; private credit offered by hedge funds, private equity firms, and other nonbanks; and the enormous investment to support ongoing development of artificial intelligence.

In submitting the comment letter, Attorney General Bonta joins the attorneys general of New York, Arizona, Colorado, Connecticut, Hawaii, Illinois, Maryland, Massachusetts, Minnesota, New Jersey, New Mexico, Oregon, Rhode Island, Vermont, and the District of Columbia. 

Attorney General Bonta is committed to protecting consumers in the financial marketplace. Last week, he filed a lawsuit challenging the Consumer Financial Protection Bureau’s (CFPB) unlawful decision not to fund the agency’s operations, preventing it from performing legally mandated functions. Shortly after taking office, the Trump Administration launched a campaign of destruction and systemic shuttering of the CFPB, threatening catastrophic harm to hardworking families and consumer financial markets nationwide. Attorney General Bonta has been an outspoken critic amid these attempts and has submitted amicus briefs in Mayor and City Council of Baltimore v. Consumer Financial Protection Bureau and in National Treasury Employees Union v. Vought, lawsuits challenging the Trump Administration’s efforts to dismantle the CFPB.

In October, the CFPB prematurely terminated the consent order that documented its settlement with Citibank for allegedly discriminating against Armenian-American credit card applicants in Southern California, sending a strong message of the Trump Administration’s abandonment of these critical protections for consumers. Attorney General Bonta responded by issuing a consumer alert reminding consumers and lenders that credit discrimination is illegal under both California and federal law and sending a letter to the Trump Administration opposing their plan to eliminate critical rules that help fight discrimination.  

In March, Attorney General Bonta issued a statement after Congress overturned a CFPB rule that would have limited overdraft fees to $5. Typically, banks charge $35 for an overdraft. The rule was expected to have saved Americans billions of dollars each year. 

In April 2024, he supported a rule that would close a regulatory loophole that enables banks to extract billions of dollars from consumers by charging overdraft fees without adequately disclosing basic credit terms. And in February 2024, he warned smaller banks and credit unions that overdraft fees disproportionately penalize lower-income consumers and consumers of color, and may violate consumer protection laws.