What it means for you

A massive tax and spending law that President Donald Trump signed last week slashes the Consumer Financial Protection Bureau’s annual budget — and critics of the move say they fear it may lead to less oversight of financial firms and bring more harm to consumers.

“There’s no way to paint a positive picture about it,” said Adam Rust, director of financial services at the Consumer Federation of America, a consumer advocacy group.

The CFPB was created in the wake of the 2008 financial crisis to serve as a single agency policing the financial ecosystem for consumer harm, a function previously scattered among multiple regulators.

The watchdog has overseen banks, payday lenders, credit bureaus, debt collectors, student loan servicers, private student lenders and other financial firms.

Unlike most federal agencies, the CFPB’s budget isn’t provided by congressional appropriations. The structure — the constitutionality of which was upheld by the Supreme Court last year — was meant to insulate it from politics.

Instead, the CFPB is funded via the Federal Reserve.

The CFPB’s annual funding for the 2025 fiscal year is capped at 12% of the operating expenses of the Federal Reserve System. This fixed percentage has been in place since the 2013 fiscal year.

The so-called big beautiful bill that Trump signed into law on July 4 nearly halves that cap, lowering it to 6.5%.

The CFPB’s funding limit, which is adjusted each year for inflation, is $823 million for the 2025 fiscal year, which ends Sept. 30, according to the Congressional Research Service. (It has risen from $598 million in 2013.)

With a 6.5% cap, the CFPB’s funding would have been maxed out at $446 million this year, a roughly 46% reduction.

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Chi Chi Wu, director of consumer reporting and data advocacy at the National Consumer Law Center, said a slimmer budget would likely mean greater challenges with policing financial firms, especially large institutions.

“It takes a lot of resources to go after the big dogs,” Wu said.

“It was already David and Goliath,” she said. “This just makes the situation worse. Now you have half a David.”

The CFPB didn’t return a request for comment.

The CFPB has three primary functions, Wu said: enforcement of laws on the books; supervising financial firms (kind of like a bank examiner, but with a consumer protection mission); and fielding consumer complaints.

The agency recouped $21 billion in relief for more than 205 million consumers since its inception, according to CFPB data as of Dec. 3.

Over that time it had imposed more than $5 billion of penalties on financial firms and fielded about 7 million consumer complaints, the majority of which were about credit reports, according to agency data.

“The agency is still seemingly going to have the same responsibilities, just with less money to carry them out,” said Eamonn Moran, a financial services attorney at law firm Holland & Knight and former CFPB counsel during the Obama administration.

Senate Republicans had initially sought to cut the CFPB’s budget to zero, a move the Senate parliamentarian deemed a violation of the chamber’s rules.  

Sen. Tim Scott, R-S.C., chair of the Senate Banking, Housing, and Urban Affairs Committee, said in a June 26 statement that reducing the CFPB’s budget cap helps “reduce waste and duplication in financial regulation” without affecting its “statutory functions.”

Rust, of the Consumer Federation of America, questioned whether the CFPB would be able to fulfill its core functions in a “weakened state.”

CFPB officials haven’t ever maxed out their annual spending limit, though funding requests generally wax and wane with changing leadership, the Congressional Research Service wrote on June 16.

For example, the largest shortfall was $282 million during the 2018 fiscal year, during Trump’s first term in office, while the lowest was $30 million in 2023 under former President Joe Biden, CRS said.

Some experts say they think a reduced funding amount may not matter much during Trump’s second term.

“It’s not really, in my view, going to be a notable departure from what we’ve seen since the end of January,” Moran said.

For example, acting CFPB Director Russell Vought proposed cutting staff from 1,700 to 200 people, both reducing its budget and possibly agency operations, CRS wrote in June.

That move is currently being weighed in federal court. The Supreme Court on Tuesday allowed the Trump administration to move forward with mass layoffs across government, but said the high court wasn’t expressing its legal views on any specific agency’s cuts. It’s unclear what this means for the CFPB case.

“People aren’t expecting anything big regulatory-wise coming out of the CFPB for the next few years,” Moran said.

However, funding could matter more during future administrations, experts said.

“This is a funding cut that goes beyond the next 3½ years,” Wu said.