Consumer debt oversight hangs in limbo amid political and legal standoff
The Consumer Financial Protection Bureau will run out of money in early 2026 after the Justice Department ruled its funding mechanism illegal, potentially putting the Wall Street watchdog on a path to extinction, according to court filings.
Acting CFPB director Russell Vought announced late Monday that the agency would exhaust its available funds in early 2026. The bureau has enough money to operate through at least the end of 2025.
The Justice Department’s Office of Legal Counsel ruled that the CFPB’s money can flow only when the Federal Reserve’s balance sheet shows a profit, and the central bank has not reported one since 2022, The Washington Times reported. Charles E.T. Roberts, a department lawyer, noted that the agency could still ask Congress for a direct appropriation of funds.
“Under the Office of Legal Counsel’s opinion, issued on Friday, ‘the Federal Reserve currently lacks combined earnings from which the CFPB can draw,’” Roberts said.
The Dodd-Frank Act, which created the CFPB, requires the Fed to transfer from the “combined earnings of the Federal Reserve System” the amount the CFPB director determines necessary to operate the agency, with certain limits, POLITICO reported. The Justice Department now interprets “combined earnings” to mean profits.
“If the Federal Reserve has no profits, it cannot transfer money to the CFPB,” the DOJ wrote.
Republicans, who control Capitol Hill, have long opposed the agency, and President Trump has sought to shut it down, The Washington Times reported. The closure would be unprecedented in the 17 years since Congress created the bureau in response to the 2008 financial crisis.
The CFPB, the brainchild of Democratic Sen. Elizabeth Warren of Massachusetts, was designed to draw its funding from the Federal Reserve to remain insulated from congressional budget control. President Obama signed the agency into law in 2010 as part of sweeping reforms following the 2008 Wall Street collapse.
Warren, then a Harvard professor, advocated for a consumer watchdog independent of political pressure. The Supreme Court upheld the Federal Reserve funding arrangement in a 2024 decision.
Democrats warn the shutdown would remove oversight from the nation’s $18 trillion consumer debt market as delinquencies on credit cards, auto loans, and student loans remain elevated. It remains unclear who would handle consumer complaints or enforce federal consumer protection laws if the bureau closes.
