Why the Senate should protect funding for the CFPB

The Consumer Financial Protection Bureau has been an effective watchdog for consumers, and its secure, independent funding is key to its effectiveness. That’s why a new proposal from the Senate Banking Committee for the massive budget bill now quickly moving through Congress (H.R. 1) to eliminate this source of funding for the Consumer Bureau is so dangerous.

Congress wisely created this funding structure, as it has with other financial regulators, to help the agency fulfill its mandate to protect consumers without political interference from the companies it regulates.

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Through a law enacted by Congress, the CFPB receives an amount of up to 12% of the Federal Reserve’s inflation adjusted profits in 2009. This new Senate plan would reduce that amount to 0%, completely cutting off money the agency’s dedicated workers used to hold financial predators accountable for their bad acts and return $21 billion to consumer pockets in the process. The bureau’s rulemaking, guidance and enforcement also have help prevent a repeat of the 2008 Financial Crisis, which crashed the national economy and cost millions of people their homes, jobs, and savings.

This type of funding stream for the CFPB, independent of the annual congressional appropriations process, has been used for nearly all of the nation’s history, such as for the U.S. Mint, which was established in 1792. Congress funds around 60% of our current federal spending this way, including for Medicare, Medicaid and Social Security.

Nearly all federal financial regulators are funded independent of the annual congressional appropriations process, including the Federal Deposit Insurance Corporation, Federal Housing Finance Agency, Federal Reserve Board, National Credit Union Administration, and Office of the Comptroller of the Currency.

The Congress that enacted the Dodd-Frank Wall Street Reform and Consumer Protection Act, which established the CFPB, found “assurance of adequate funding, independent of the Congressional appropriations process, is absolutely essential to the independent operations of any financial regulator.”

Senator Dodd’s Committee cited “repeated Congressional pressure” through this annual process as limiting the effectiveness of the former regulator of Fannie Mae and Freddie Mac. Due to Fannie and Freddie’s aggressive lobbying, their regulator was underfunded, understaffed, and disempowered – despite high-profile warnings about risks in weak oversight. The companies collapsed in 2008.

Similar efforts to dismantle the Securities and Exchange Commission (SEC) in the runup to the financial crisis illustrate how industry lobbyists have used Congress to starve financial regulators of funds needed to do their job and to weaken oversight. Back then, many members of Congress discouraged the SEC from regulating Wall Street. Just before the economic crash, between 2005 and 2007, SEC staff was reduced by over 10 percent and its spending curtailed by $75 million.

Dodd-Frank “specified acceptable levels of [SEC] funding,” but just a year after the law’s enactment, Congress was “already breaking its promise to investors” by appropriating below the first minimum threshold. Dodd-Frank tasked these agencies with additional regulatory duties, but funding is grossly insufficient – meaning technology and staffing are also.

Across the political spectrum, voters get this. In a 2024 poll, over three-quarters of voters agreed with the following statement: “Wall Street and predatory lenders want fewer rules and less strict enforcement so they can rip off consumers, and they are trying to use their wealth and connections in Congress to make it happen by restructuring and weakening the CFPB. We need an independently funded CFPB, like it always has been, that cannot be influenced by political pressure and money from Wall Street.”

The U.S. Senate should protect consumers and the nation’s financial system and reject efforts to defund the CFPB.