Finance chiefs planning deals in the months ahead face a notably diminished federal regulatory apparatus, but a combination of individual state enforcement actions and private litigation is quickly moving to fill gaps in enforcement.
What precisely that means for dealmaking over the remainder of 2025 isn’t yet clear, but researchers at Wolters Kluwer say it may end up creating even more complications for businesses.
That’s among the takeaways from the Dutch information services and accounting firm’s latest Regulatory Violations Intelligence Index released Tuesday. Wolters Kluwer found that, over the first half of 2025, both the number and severity of penalties levied against American financial services firms declined compared to the prior year.
The firm’s index tracks enforcement actions against “commercial banks, broker-dealers and other financial services firms.” Wolters Kluwer specifically watches for enforcement actions in response to offenses related to consumer protection, competition and general financial practices. In the latest report, officials found declines across all three areas, amounting to a 37% decline in enforcement across the board. Enforcement against financial offenses dropped 53% — the highest of the three — while enforcement for competition-related offenses fell 50%. Consumer protection enforcement actions dropped by 22%, per the index.
The monetary value of penalties across these three areas dropped 32% overall, though that was hardly spread evenly among them. For instance, penalties for competition-related offenses dropped by a whopping 97% but just 24% for consumer protection offenses.
Wolters Kluwer’s analysis included actions taken by federal regulatory bodies, such as the Consumer Financial Protection Board and the Federal Deposit Insurance Corp., as well as instances of private litigation.
The other side of the coin
Elaine Duffus, senior specialized consultant with Wolters Kluwer’s financial services compliance program management solutions team, said in an interview that businesses should brace for the “flipside” of regulatory relief. Historically, various crises and pullbacks in regulation have often been met with new regulations down the road. She pointed to the creation of the New York Department of Financial Services, formed in 2011 in the wake of the 2008 fiscal crisis. And, following regulatory pullbacks during President Donald Trump’s first term in office, states like California, Illinois and New York stepped up scrutiny of fintechs and payday lenders.
“You’re getting the discretion to decide the right way to do business,” she said of this year’s decline in regulatory enforcement. “When the regulatory pendulum swings back, is that going to be considered the right way to do business? We don’t know.”
Then there’s the added complexity from as many as 50 different regulatory regimes instead of a single federal one. In the absence of federal protections, some states have taken it on themselves to create “mini-CFPBs,” as Duffus put it. And it’s not just historically “blue” states; she noted that Texas, for instance, has a “very robust consumer protection framework in place.”
“Financial institutions face a greater patchwork of state-level enforcement that could be even more complex and burdensome than the federal framework it’s replacing,” said Chuck Ross, VP and segment leader of Wolters Kluwer’s investment compliance solutions and compliance program, in a statement.
How should the finance department prepare for such a “patchwork”? Duffus recommended first evaluating existing tools and workflows, then finding an automated tool to keep tabs on changing state regulations. “To get your arms around all that absolutely requires automation,” she said. “My advice is to get an RFP out there.” She also emphasized that, however automated information-gathering becomes, there “always has to be a human in a loop,” especially when it comes to policy changes.
“There are just too many nuances,” she said.
And, where many tech evangelists have pushed artificial intelligence tools to help guide future decisions, Duffus suggested using them to keep careful track of past ones.
“Automation is the place to document all decisions, and who made them,” she said. “When institutional knowledge leaves with an employee, nobody remembers why decisions were made. … It just doesn’t make sense not to automate that part of your house.”
She said documentation of decision-making will become even more important in an era where boards are charged with “making a lot more discrete decisions that formerly were managed by guidance from regulators.”
It’s worth noting, too, that many elements of the new administration’s deregulation push remain in flux. Duffus pointed to the Consumer Financial Protection Bureau’s stated plan to withdraw 67 guidance documents. “That really didn’t go away; it’s for review,” she said. “So, some of it may come back, but everybody seems to think it’s gone.” Other elements of deregulation remain tied up in litigation.
The decline in federal enforcement activity isn’t exactly a surprise for many observers. When Trump returned to the White House earlier this year, he made plain his plans to significantly pare back federal regulations. Among his first executive orders was one titled “Unleashing Prosperity Through Deregulation,” which called for executive agencies to repeal 10 regulations for any new one they proposed.
Still, though many expected a wave of deregulation, Duffus, who’s worked in compliance for three decades, said she was struck by the speed with which it’s happened so far. “What stuck out to me, just from being in the industry for so long, is how fast everything took place, and how quickly the agencies all got into lockstep to follow the path this administration is pursuing,” she said.
