Trump administration determines CFPB’s funding mechanism is unlawful
The Trump governance has steadfast that the Consumer Financial Protection Bureau’s (CFPB) current funding mechanism, which relies on drawing funds from the Federal Reserve’s profits, is unlawful. According to a recent legal opinion from the Office of Legal Counsel, the Federal Reserve has not been profitable since 2022, meaning the CFPB cannot legally access funds from the Fed adn is expected to run out of money by early 2026. This ruling coincides with ongoing budget cuts and mass layoffs at the agency, which was created under Senator Elizabeth warren. The administration is preparing a report to Congress about the funding shortfall, but it remains uncertain whether Congress will appropriate new funds. Republicans, who generally oppose the CFPB, have pushed unsuccessfully to defund the agency’s operating budget. The future of the CFPB remains uncertain amid these financial and political challenges.
Trump administration determines CFPB’s funding mechanism is unlawful
The Consumer Financial Protection Bureau said on Monday it cannot legally draw funds from the Federal Reserve and expects to run out of funding by early 2026.
The announcement comes as the Trump administration has slashed the watchdog agency, created by Sen. Elizabeth Warren (D-MA), with mass layoffs and budget cuts throughout 2025. With the newly announced interpretation, the future of the CFPB hangs in the balance.
Lawyers for the Trump administration notified a federal court of their findings in a Monday letter, which came as a filing in the National Treasury Employees Union’s lawsuit against acting director of the CFPB Russell Vought.
“Defendants respectfully submit this notice to inform the Court and the parties that the Consumer Financial Protection Bureau anticipates exhausting its currently available funds in early 2026. Under the Office of Legal Counsel’s opinion, issued on Friday, ‘the Federal Reserve currently lacks combined earnings from which the CFPB can draw,’” the notice from the Department of Justice lawyers reads.
In a Nov. 7 memo, assistant attorney general for the Office of Special Counsel T. Elliot Gaiser wrote that the OSC determined the “combined earning of the Federal Reserve System,” which fund the CFPB, refer to the profits of the Federal Reserve, and the Federal Reserve has not been profitable since 2022.
“If the Federal Reserve has no profits, it cannot transfer money to the CFPB,” Gaiser wrote. “Because the only lawful source of funding from the Federal Reserve has dried up, the proper method for obtaining additional funds is to request them from Congress.”
A DIMINISHED CFPB, ELIZABETH WARREN’S BRAINCHILD, SURVIVES LATEST GOP THREAT
In the DOJ’s notice to the court of the expected lapse in funds, the Trump administration said Vought is “preparing a report to the President and to congressional appropriations committees,” but that the CFPB “does not know whether and the extent to which Congress will appropriate funding” for the watchdog.
With a majority in both chambers of Congress, Republicans largely frown upon the CFPB. Senate Banking Committee Republicans sought, unsuccessfully, to completely defund the agency’s operating budget this year.
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