The Trump administration just dropped a bombshell on the Consumer Financial Protection Bureau (CFPB), calling its funding setup flat-out illegal.
In a move that could spell the end for the agency, the administration has ruled that the CFPB’s financial lifeline from the Federal Reserve is invalid, potentially shutting down the bureau by early 2026, as Newsmax reports.
Let’s rewind to the Dodd-Frank Act of 2010, when Democrats birthed the CFPB to watchdog the consumer finance market after the financial crisis.
Fast forward to late Monday, when a federal court filing revealed the Trump administration’s stance: the CFPB can’t legally draw funds from the Fed anymore.
Why? The Federal Reserve has been in the red since 2022, and according to the Department of Justice’s Office of Legal Counsel, the CFPB is only entitled to the Fed’s profits, not its losses.
“If the Federal Reserve has no profits, it cannot transfer money to the CFPB,” the Justice Department bluntly stated. Well, that’s a mic drop if there ever was one—without profits, the CFPB’s piggy bank is officially empty.
Here’s the kicker: while the CFPB has reserves to limp along until the end of 2025, it’s projected to run dry by early 2026.
Without new congressional appropriations, the agency could grind to a halt—and with Republicans largely opposed to its very existence, don’t hold your breath for a bailout.
Acting Director Russ Vought, a known skeptic of the CFPB’s structure, has been hinting at this phase-out for months, and now he’s frozen much of the agency’s activity while seeking court approval to slash its workforce.
This decision is a feather in the cap for conservatives who’ve long argued that the CFPB operates outside congressional oversight, lacking the accountability our Constitution demands.
They cheer the potential rollback of regulatory overreach, claiming it could ease the burden on lenders and small businesses strangled by red tape.
On the flip side, Democrats and consumer advocates are sounding the alarm, warning that dismantling the CFPB could leave the $18 trillion consumer debt market without federal guardrails—a risky gamble, they say.
Adding fuel to the fire, the Justice Department’s opinion hasn’t yet tackled whether billions transferred from the Fed since 2022 were lawful, nor whether the CFPB’s actions during that time hold water.
Meanwhile, the D.C. Circuit Court of Appeals is mulling over a ruling that could side with the administration, potentially speeding up the agency’s wind-down.
For critics of bureaucratic overreach, this moment marks a defining win in the Trump administration’s broader push to rein in what it sees as unchecked executive agencies—proof that sometimes, less government is the best medicine.
