The recent tax and spending legislation signed by President Donald Trump significantly reduces the annual budget of the Consumer Financial Protection Bureau (CFPB), raising concerns among critics about potential decreases in oversight of financial institutions and increased risks for consumers.
Adam Rust, director of financial services at the Consumer Federation of America, voiced strong opposition to the funding cut, stating, “There’s no way to paint a positive picture about it.”
The CFPB was established in response to the 2008 financial crisis, designed to consolidate consumer protection efforts within a single regulatory body, a role that was previously divided among various agencies.
This agency has been tasked with overseeing a range of financial entities, including banks, payday lenders, credit bureaus, debt collectors, and servicers of student loans.
‘Half a David’ versus Goliath
Unlike most federal agencies, the CFPB does not receive its budget through congressional appropriations. The agency’s structure, which the Supreme Court confirmed as constitutional last year, is designed to provide it with a degree of independence from political influences.
Instead, the CFPB is funded through the Federal Reserve, with its budget for the 2025 fiscal year capped at 12% of the Federal Reserve System’s operating expenses. This percentage has remained unchanged since fiscal year 2013.
The legislation branded as the “big beautiful bill” that Trump signed on July 4 lowers that funding cap to 6.5%, nearly halving the budget.
According to the Congressional Research Service, the adjusted funding limit for the CFPB for the 2025 fiscal year stands at $823 million, a rise from $598 million in 2013. With the newly established 6.5% cap, the CFPB’s funding would be restricted to $446 million, marking a significant decrease of approximately 46%.
Chi Chi Wu, director of consumer reporting and data advocacy at the National Consumer Law Center, expressed concern that this reduced budget would hinder the CFPB’s ability to effectively supervise large financial institutions.
Wu remarked, “It takes a lot of resources to go after the big dogs,” adding, “It was already David and Goliath. This just makes the situation worse. Now you have half a David.”
The CFPB has not yet provided a response to requests for comments.
Same watchdog duties, less money
According to Wu, the CFPB’s responsibilities include enforcing existing laws, supervising financial institutions, and handling consumer complaints.
Since its establishment, the agency has returned $21 billion in relief to more than 205 million consumers and has imposed over $5 billion in penalties against financial companies while addressing approximately 7 million consumer complaints, predominantly concerning credit reports.
Financial services attorney Eamonn Moran, who previously served as counsel for the CFPB during the Obama administration, observed that the agency now faces the same obligations but with a diminished budget to execute them.
Initial proposals from Senate Republicans aimed to eliminate the CFPB’s budget entirely; however, the Senate parliamentarian ruled this would violate chamber rules.
Sen. Tim Scott, R-S.C., chair of the Senate Banking, Housing, and Urban Affairs Committee, stated that the budget cap reduction is intended to “reduce waste and duplication in financial regulation” without impairing the agency’s “statutory functions.”
Despite these assurances, Rust from the Consumer Federation of America voiced skepticism regarding the CFPB’s capability to perform its essential functions in this “weakened state.”
May not be much difference under Trump
The CFPB has never fully exhausted its annual spending cap; funding requests have fluctuated with changing leadership, as noted by the Congressional Research Service.
During Trump’s first term, the largest budget shortfall reached $282 million in the 2018 fiscal year, while the lowest was $30 million in 2023 under President Joe Biden, according to CRS.
Experts suggest a reduced budget may not lead to significant changes under Trump’s renewed administration.
Moran offered his perspective, stating, “It’s not really, in my view, going to be a notable departure from what we’ve seen since the end of January.”
Currently, acting CFPB Director Russell Vought is contemplating staff cuts from 1,700 to 200, aiming to achieve budgetary savings that could significantly impact the agency’s capacity. This proposal is under review in federal court.
Following the Supreme Court’s recent ruling, the Trump administration has been permitted to proceed with mass layoffs across government, though the implications for the CFPB remain unclear.
Looking ahead, Moran indicated that expectations for substantial regulatory developments from the CFPB are low in the coming years.
However, the consequences of reduced funding may be felt more acutely in future administrations, as Wu pointed out, “This is a funding cut that goes beyond the next 3½ years.”
