On June 18, the CFPB published a proposed rule that would rescind its authority to use money from the Civil Penalty Fund for consumer education and financial literacy initiatives. The proposed changes would amend the CFPB's 2013 rule implementing the Civil Penalty Fund provisions of the Consumer Financial Protection Act (CFPA) and restrict the Fund's use exclusively to harmed consumers.
The Civil Penalty Fund, created by Section 1017(d) of the CFPA, pools civil money penalties collected in CFPB enforcement actions. While the statute allows the Bureau to use remaining funds for consumer education "to the extent victims cannot be located or such payments are otherwise not practicable," the new proposal would strip all such references from the implementing rule and eliminate the mechanism entirely.
Notably, the CFPB has used this discretionary authority rarely, allocating $28.8 million for consumer education since its inception, compared to $3.6 billion it has disbursed to harmed consumers.
Putting It Into Practice: The move is in line with the CFPB's April 2025 internal memorandum where Chief Legal Officer Mark Paoletta stated that the Bureau "will focus on redressing tangible harm by getting money back directly to consumers, rather than imposing penalties on companies in order to simply fill the Bureau's penalty fund." (See our previous discussion here). Given the CFPB has only used its discretionary authority rarely, we expect it to have little impact on the Bureau's overall operations.
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