Key points
- The Trump administration says the Consumer Financial Protection Bureau (CFPB) funding mechanism can no longer withdraw money from the Federal Reserve.
- The CFPB expects to exhaust its remaining funds by early 2026, which could effectively shutter the agency unless Congress intervenes.
- The move is part of a years-long effort by conservatives to dismantle the agency that was created after the 2008 financial crisis to protect consumers from predatory lending.
The Trump administration has stepped up its campaign to defund the Consumer Financial Protection Bureau, beginning what could be its effective shutdown within a year.
In a File a lawsuit(PDF) This week, the administration said the CFPB cannot request additional money from the Federal Reserve — its usual source of operating funds. The office said it has sufficient reserves to last through December but “expects to exhaust its currently available funds in early 2026.” Without congressional action, this timeline would spell the end of the CFPB’s ability to operate.
The Department of Justice’s Office of Legal Counsel (OLC) issued the legal opinion supporting the decision. The OLC argued that under Dodd-Frank ActThe CFPB can only receive money from the “pooled profits of the Federal Reserve System.” Because the Fed has recorded losses since 2022 (about $77.6 billion last year), the administration maintains that there are no “profits” to transfer.
“The Federal Reserve currently lacks pooled earnings from which the Fed can derive,” the opinion stated. If the Fed doesn’t have profits, it won’t be able to transfer money to the CFPB.
This interpretation redefines “consolidated profits” to mean net profits and not total income, a reading that may be subject to interpretation. The Supreme Court upheld the CFPB’s funding structure as constitutional in 2024, without adopting that definition.
What will happen next is not yet clear.
Would you like to save this?
We’ll email you this article, so you can come back to it later!
Ongoing campaign to weaken the CFPB
The latest move extends a years-long Republican effort to dismantle the CFPB, which was created in 2010 as part of the Dodd-Frank financial reform law in the wake of the 2008 crisis. The agency was designed to be insulated from congressional appropriations so it could regulate banks, credit card companies and lenders without political interference.
There was a driving force to close the CPFB.
In April, the Trump administration pushed through layoffs of 90% of CFPB employees. A federal judge quickly blocked the order.
During negotiations on the Big Beautiful bill, the House sought to cut funding for the CFPB, but that was blocked in the Senate.
Legal effect
The Justice Department’s interpretation introduces new uncertainty for both the agency and the financial industry.
This argument could have far-reaching consequences. If “pooled profits” must mean profit, the same logic could apply to other fiat transfers by the Fed, which could undermine the central bank’s own operations.
This specific move is undoubtedly an attempt to cripple the CFPB after the Supreme Court closed other constitutional challenges. But it could have a greater impact.
The administration’s position also puts it at odds with some conservative officials. Texas Attorney General Ken Paxton, a Republican He previously rejected the idea That the CFPB can only be funded by Fed profits, calling the argument inconsistent with the Dodd-Frank text.
Consumer impact and the future of financial supervision
If the CFPB runs out of money, the impacts will ripple across consumer finances. The agency oversees federal laws governing credit cards, mortgages, payday loans and student loans — markets totaling about $18 trillion in consumer debt. It also handles hundreds of thousands of complaints each year from borrowers and consumers alleging deceptive or abusive practices.
Consumer advocates warn that closing the CFPB would leave a significant gap in enforcement as household debt levels and loan delinquencies soar. Credit card, auto and student loan delinquencies are all near or above their post-recession highs. Without the bureau’s oversight, they say, lenders may face fewer consequences for predatory behavior or data privacy violations.
Currently, the CFPB remains operational but largely inactive. Much of its enforcement work has slowed, and pending legal cases could be at risk if courts decide the agency lacks valid funding authority.
Congress could, in theory, appropriate funds directly to the CFPB to continue its operation. But given long-standing Republican opposition, such a move is considered unlikely.
This means that the agency’s future will likely depend on how the courts interpret the OLC’s opinion and whether they view the new administration’s reading of “consolidated earnings” as legally defensible.
Don’t miss these other stories:
Credit scores in the United States are flat as delinquencies rise
Top 10 Free Checking Accounts in November 2025
College Rankings and Loan Forgiveness Fraud: What to Know
Editor: Colin Greaves
The post Trump Administration Could Stop Funding the CFPB by 2026 appeared first on The College Investor.
