NEW YORK (AP) — Senate Republicans have moved to cut the funding of the Consumer Financial Protection Bureau by roughly half, as part of President Donald Trump’s “Big Beautiful Bill,” which is likely to lead to hundreds of job cuts at the nation’s financial watchdog agency.
It would be a major blow to the CFPB, which was created after the 2008 financial crisis to police potential bad actors in the financial services industry, and it would be a win for the GOP, who have largely wanted to make the CFPB go away since its creation.
The CFPB is funded through the Federal Reserve, not the congressional appropriations process. But in the latest version of the bill to come out of the Senate Banking Committee, the CFPB’s funding would be cut from 12% of the Federal Reserve’s profits to 6.5% of the central bank’s profits.
The CFPB requests its annual budget from the Fed every year, effectively as a line of credit from the central bank. It has never needed the entire 12% of the Fed’s profits, but it has come close in previous years to using much of what the Fed would allocate to it. For example, last year the CFPB requested $762.9 million from the Fed, which was close to the transfer cap of $785.4 million.
But cutting the transfer cap by roughly half would mean the CFPB would have to cut its budget significantly or seek to supplement its budget from Congress through the traditional appropriations process, a goal that Republicans have been seeking for years.
“The committee’s language decreases the Consumer Financial Protection Bureau’s funding cap without affecting the statutory functions of the Bureau,” said Sen. Tim Scott, the chairman of the Senate Banking Committee.
Under President Joe Biden, the bureau was a potent regulator that often gave banks and other financial services companies headaches on a regular basis. The previous director, Rohit Chopra, used the bureau to look into a broader array of financial services beyond the banks, investigating bad practices at credit card companies, payday lenders, buy now, pay later companies and other financial technology firms. The bureau has returned billions of dollars to consumers since its creation through its enforcement actions.
But since Trump came into office, the bureau has been effectively inoperable. Russell Vought, the President’s budget director, is currently the acting director of the Bureau and has stopped all enforcement and supervision work, the bureau is not writing new rules or regulations and employees are being told not to communicate with banks or outside parties. Employees are logging in once or twice a day to check emails, but there is little supervisory or enforcement work happening at the bureau. Even emails to the CFPB’s press office go unanswered.
While the bureau’s operations tend to grow and narrow in scope depending on who is in the White House, the current administration seems to want the CFPB entirely eliminated. Under President Trump’s first term, the CFPB was still doing enforcement actions and supervisory work, most notably fining Wells Fargo $1 billion for its scandalous sales practices. Even the bureau’s most controversial case, involving allegations of discrimination against Black homeowners known as the Townstone Financial case, was started under President Trump’s previous CFPB director, Kathy Kraninger.
Even Elon Musk, before he left the Trump White House, expressed his opinions about the CFPB by tweeting, “ CFPB RIP.”
House Republicans held a hearing on Wednesday attacking Chopra’s work, calling the former director and his appointees out-of-control bureaucrats who targeted small businesses vindictively. The CEO of a company labeled by the GOP as a small business — but was basically a chain of check cashing and payday lending shops — testified that she spent years having to go back and forth with the CFPB over its operations. Democrats have vigorously defended the CFPB since its creation, saying that financial services companies need to be closely watched after what happened during the last financial crisis and the fact that many technology companies are moving into banking-like services.
The Senate Republicans’ move comes after their original proposal to cut the CFPB’s budget to zero was ruled in violation of Senate rules by the Senate Parliamentarian. Congressional Republicans are using a process known as “reconciliation” to pass this bill, which only requires a 51-vote majority in the Senate to pass.
This new proposal did pass Parliamentarian muster, but Senate Democrats are expected to fight to remove the provision on the floor.
“Donald Trump and Republicans tried to shut down the CFPB by gutting its entire operating budget to (zero),” said Sen. Elizabeth Warren, the ranking member of the Senate Banking Committee, and also the original proposer of the CFPB nearly 20 years ago. “Now, Senate Republicans will bring to the floor a proposal that slashes the agency’s available budget so they can hand out more tax breaks for billionaires and billionaire corporations.”
