The law finally demands that the CFPB, after over a decade in existence as an exception to the Constitution, be defunded.

As seen in: https://www.nationalreview.com/2025/05/the-consumer-financial-protection-bureau-must-go/

From the earliest days of our republic, Congress’s power of the purse has universally been understood as not only assigning to the federal legislature the task of deciding how public funds are to be spent, but also as its most effective tool to check the other branches from amassing too much power. This fundamental constitutional principle, often taken for granted, is the result of centuries of Anglo-American history in which the House of Commons won the power of the purse through a long and bloody struggle with the monarchy.

King Charles I lost a civil war and his head after he raised taxes without the consent of Parliament. Today, the law commands that the Consumer Financial Protection Bureau (CFPB) lose its lifeblood — money — precisely because Congress designed the agency to be exempt from its power of the purse.

In the wake of the 2008 financial crisis, Congress enacted Dodd-Frank, which created the CFPB, an agency with vast authority to define and regulate every conceivable financial product and service while being shielded from oversight by the executive, judicial, and legislative branches. As originally conceived, Dodd-Frank ensured that the director of the CFPB did not have to fear dismissal by the president, directed the courts to give special deference to the agency’s determination of its own powers, and funded the bureau without congressional action. In contravention of our Madisonian system of checks and balances among the branches of government, the CFPB is supposed to be accountable to no one.

The combination of unchecked power and a condescending disposition toward consumers created a paternalistic disaster for the very people the CFPB purports to help. To wit, the agency’s payday lending rule was so burdensome, the CFPB admitted that it could destroy the payday lending industry that many lower-income Americans rely upon. Both houses of Congress recently voted to nullify a CFPB rule to cap bank overdraft fees. Though this rule may sound like a lifeline to some banking customers, it is utterly blind to the fact that its existence does not eliminate the costs or risks that must be borne by financial institutions and, therefore, could lead to the end of overdraft services or the imposition of significant fee increases for other services. The CFPB’s interminable meddling infantilized customers and made access to affordable financial services more difficult.

Now it’s the CFPB that should be denied financing. Dodd-Frank provided a unique funding mechanism by which the CFPB would draw from the combined earnings from the Federal Reserve System, rather than through congressional appropriations. The clever drafters of Dodd-Frank likely did not anticipate that the Federal Reserve System would have no earnings to draw from. Yet that is precisely what occurred.

The Fed has been operating at a loss since September 2022, and the losses have only gotten worse since then. Without earnings, the Fed cannot provide the Treasury with surplus funds and, therefore, the amount of funds the CFPB can legally obtain through the Federal Reserve is exactly $0. According to Hal Scott, an emeritus professor at Harvard Law School and director of the Committee on Capital Markets Regulation, “the CFPB would seem to have no valid claim now to any money from the Fed.” In their hubris, the founders of the CFPB sowed the seeds of its defunding by trying to insulate the bureau from Congress’s power of the purse. 

It is not just its lawlessness that makes the CFPB unique: Its operations are entirely duplicative. As Norbert Michel, an expert in financial markets at the Cato Institute, points out, federal consumer protection laws long predated the CFPB and, when the agency was created, Congress transferred already existing enforcement authorities to the bureau. Michel also demonstrates that the “United States has twelve separate federal financial regulators and state regulators for securities, banking, insurance companies.” The palpable needlessness of the bureau confirms that the Trump administration should dismantle the CFPB.

The Trump administration admirably ordered the CFPB to halt its work as it seeks to streamline the agency. Russ Vought, the acting director of the CFPB, rightly submitted a funding request for the CFPB to the Federal Reserve for $0. Vought justified the action by stating that the bureau’s current balance of over $700 million is excessive in the current fiscal environment. While I commend Vought’s decision, his statement suggests he could request funds even when there are no funds to draw from. I sent a letter to Acting Director Vought arguing that the CFPB should not be funded because there are no funds legally available for the bureau.

There is more than a touch of Madisonian justice that the CFPB has no valid claim to new funding precisely because its drafters thought they guaranteed money for the bureau in a way that shielded the agency from accountability to the people’s representatives. The law finally demands that the CFPB, after over a decade in existence as an exception to the Constitution, be defunded.