The budget bill signed by President Trump on July 4 will make massive cuts to the CFPB's budget.
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.
However, committee Ranking Democrat Sen. Elizabeth Warren, D-Mass., 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.
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