Congress isn’t waiting to see whether the Consumer Financial Protection Bureau will be allowed to fire most of its employees. A battle is underway over whether the agency will be able to afford to operate at all. Senate Republicans unveiled legislative text as part of their broader tax and spending package, and the proposal would eliminate the CFPB’s ability to receive funding from the Federal Reserve, which is the agency’s primary funding source, and instead require it to rely on annual appropriations from Congress.
- The proposal, if enacted, would reduce the cap on CFPB funding from the Fed from 12% to 0% of the Federal Reserve System’s 2009 operating expenses.
- The House version of the plan, passed as part of H.R. 1, would cut the cap to 5% and slash the CFPB’s fiscal 2025 funding by about 70%.
State of play: The Bureau is already facing a near-freeze in operations under acting Director Russell Vought, who canceled the CFPB’s most recent funding request and barred the use of the agency’s $711.6 million in reserves.
“We have a reserve, but under Russ Vought, he’s not allowing us to do our work and use the budget that is available to us to actually protect consumers and do oversight of the big banks,” said CFPB Union President Cat Farman at a press conference Thursday.
Vought defended the funding freeze in a February post on X, calling the bureau’s cash balance “excessive” and stating, “This spigot, now long contributing to CFPB’s unaccountability, is now being turned off.”
The backdrop: Under the Dodd-Frank Act, the CFPB is funded directly by the Fed to insulate it from political influence. The Supreme Court upheld that structure in May. But the new GOP proposal would override it legislatively and fold the agency into the standard appropriations process.
- Union officials warned that the freeze combined with the proposed budget cuts would render the bureau’s remaining reserves effectively moot.
Between the lines: The broader legislation includes a series of other agency funding rollbacks, such as restructuring Federal Reserve employee pay, eliminating the Office of Financial Research, and transferring Public Company Accounting Oversight Board functions to the SEC.
- Senate Banking Committee Chair Tim Scott [R-S.C.] said the Republican plan would save $8.4 billion over 10 years and “reduce waste and duplication in financial regulation.”
- Meanwhile, Sen. Elizabeth Warren [D-Mass.], a chief architect of the CFPB, vowed to challenge the cuts during Senate reconciliation procedures. “This will not stand,” she said.
What’s next: Whether the CFPB provisions survive the so-called Byrd rule, which determines what can be included in budget reconciliation, will fall to Senate Parliamentarian Elizabeth MacDonough. Warren is expected to raise a point of order if the cuts aren’t stripped.
Meanwhile, litigation is still pending over efforts to lay off CFPB staff and cancel contracts.
