Trump's big bill does a big number on the nations top consumer protection bureau

The CFPB's budget is cut nearly in half, leaving the agency's future in doubt

Consumers’ hearts don’t race when they see a news headline about the Consumer Financial Protection Bureau, a/k/a the CFPB. Just some more Washington alphabet salad, is the usual reaction. Bureaucrats speaking in circles.

But that’s not really the case. Since its creation 14 years ago the bureau has been hyperactive in its protection of consumers. It has returned billions of dollars to defrauded consumers and has generally been a thorn in the side of the financial services industry, both the small-time grifters and the big-time Wall Streeters.

Since it was dreamed up and birthed by U.S. Senator Elizabeth Warren (D-Mass.) during the Obama administration, the CFPB has gone to bat for the little guy — time after time defending consumers from outrageous overdraft charges, usurious interest rates, self-renewing contracts and all the other sleazy little ways that big money interests jam their hands into consumers’ pockets.

Now the Trump administration wants to close it, and Trump’s big brutal bill has done a pretty good job of starting the process.

Trump’s bill cuts off its lifeline

The huge bill changes the amount that the CFPB may receive from the Federal Reserve from a maximum of 12% of the Fed’s inflation-adjusted total operating expenses in 2009 to a maximum of 6.5%. Senate Republicans, who proposed that provision, said it does not affect the bureau’s ability to request funds from Congress or the ability of the bureau to function. They added that it will save $2 billion.

The provision decreases the CFPB’s funding cap by 46%, according to the Republicans.

Banking Committee Republicans originally proposed eliminating all CFPB funding by decreasing its funding cap to 0%. However, the Senate Parliamentarian ruled that provision could not be offered in the budget bill.

The House-passed version of the reconciliation measure would have set funding for 2025 at no more than $249 million, with an annual adjustment for inflation. That provision was not included in the bill.

Republicans on Capitol Hill have long argued that the CFPB was unaccountable. They have advocated for the bureau being funded through the annual appropriations process. However, the Supreme Court has ruled that the funding method is constitutional.

The Banking Committee did not address the fact that the CFPB is only allowed under Dodd-Frank to be funded out of “combined earnings of the Federal Reserve System.” Parties have argued that because the Fed has been losing money since September 2022, there currently are no combined earnings of the Federal Reserve System. No court has yet ruled that there are no combined earnings.

Senate Banking, Housing and Urban Affairs Committee Chairman Sen. Tim Scott, R-S.C. was pleased that his committee’s CFPB provision was included in the bill.

“For the first time since the passage of Dodd-Frank, Congress is reining in the unaccountable Consumer Financial Protection Bureau and decreasing its mandatory funding cap by 46%, which will save over $2 billion and require the Bureau to be fiscally responsible,” he said.

No one to pick up the slack

The committee’s Ranking Democrat, Sen. Warren, sharply criticized the provision.

“The Consumer Financial Protection Bureau is the financial watchdog to keep people from getting cheated on credit cards, mortgages, Venmo, payday loans, and a zillion other transactions,” Warren said. “When this financial cop can’t do its job, there is no one else in the federal government to pick up the slack.”

There has been some speculation that the CFPB funding cut could help the Trump Administration in its court battle to resume shrinking the agency, Law360 reported. For several months, an injunction obtained by the National Treasury Employees Union, has stopped the administration from firing the majority of the CFPB staff and canceling its contracts.

Law360 speculated that the new law could assist the administration in its argument that the CFPB should shrink.

Time goes backwards

Time is already running in reverse at the CFPB. Under the new management put in place by the Trump gang, already settled cases are being withdrawn and, in some cases the agency is returning fines that perpetrators have already paid.

The most egregious to date concerns the nation’s largest credit union, Navy Federal. In 2024, it agreed to a consent order under which it paid $80.6 million in direct restitution to consumers and $15 million for the CFPB’s victim relief fund.

Now the CFPB wants to give the money back, an action denounced as an outrage by consumer leaders.

“The CFPB cannot reverse this consent order and simultaneously claim that it is prioritizing the interests of servicemembers,” said Adam Rust, director of financial services for the Consumer Federation of America (CFA). “They have literally stolen millions of dollars meant to compensate servicemembers, their families, and employees of the Department of Defense for Navy Federal’s illegal overdraft practices.”

Outrageous it may be but Trump is just getting started. Stay tuned for the next atrocious chapter.