In a letter to the Senate Banking Committee, Senate Democrats described measures to defund the Consumer Financial Protection Bureau (CFPB) as making it “easier for bad actors to cheat American families.” At a June 26th hearing of the House Financial Services Committee, the CFPB’s defenders assert that the agency has helped consumers. But these defenders fail to address testimony describing agency overreach and overregulation. The CFPB has harmed many of the consumers it was intended to protect. Five years after the Dodd-Frank Act created the CFPB, the number of banks offering free checking accounts had declined by half. Some small banks had stopped offering mortgages. Low-income consumers struggled more than before to obtain mortgages and car loans. Some consumers lost access to credit cards. Showing that an enforcement agency catches some wrongdoers does not make the harm it does acceptable.
Reform is needed. But what type of reform is best? Proposals range from minor tweaks to agency structure, to changes to the agency’s duties and powers, to eliminating the agency. This blog is the first in a series evaluating options for CFPB reform and will focus on changes to the agency’s structure.
Legislators have offered multiple bills that would alter the CFPB’s structure. The CFPB is headed by a powerful director; some bills would make the CFPB a bipartisan commission instead. The Bureau is funded from the earnings of the Federal Reserve; some bills propose funding the CFPB from congressional appropriations. Both changes would make the CFPB more like similar agencies. Another bill would eliminate the agency. The Senate’s version of the One Big Beautiful Bill Act (OBBA) originally set the CFPB’s funding to zero; after the Senate parliamentarian eliminated this provision, the bill was revised to reduce CFPB funding from 12 percent to 6.5 percent of the Fed’s budget.
The central question is which structural changes to the CFPB will improve outcomes. I assess the options below in light of this question and conclude that the best route forward would be for Congress to repeal the statutes that created the agency and return its functions to other enforcers. Only this stronger measure would catalyze the fundamental change consumers need.
The CFPB’s Unique Structure
The unique structure of the CFPB gives its director extraordinary power and insulates it from congressional control. This structure has been the subject of considerable litigation during the Bureau’s comparatively short life. Chief Justice John Roberts described the CFPB director as wielding “vast rulemaking, enforcement, and adjudicatory authority over a significant portion of the U.S. economy.” Unlike agencies headed by a commission, the CFPB’s director may act unilaterally. Thus, the Supreme Court ruled that the director must be removable by the president, eliminating a statutory requirement that allowed the president to remove the CFPB’s director only for cause. However, this means that the director’s power is now checked only by the president’s rarely exercised removal power. The CFPB director retains extraordinary power over day-to-day events at the Bureau.
The CFPB is also insulated from congressional control through its funding mechanism. CFPB funding comes from the earnings of the Fed, not through the regular appropriations process. The Supreme Court upheld the constitutionality of this arrangement, but it presents unique challenges for congressional oversight of the agency.
As Justice Jackson has noted, the CFPB was designed to be ultra-independent in the hope of stopping special interests acting through legislators from capturing the Bureau. But agencies may also be captured by interests acting directly on the agency. Agency personnel are prone to bias, error, and empire-building independent of capture. No institution that lacks accountability is likely to get good results. Perhaps predictably, then, multiple courts have found that the Bureau has disregarded the laws it is supposed to enforce, among other problems.
Temporary Budget or Staffing Adjustments
Some policymakers propose changes to the agency’s staffing or budget but leave its statutory authority unaffected. The acting CFPB director has issued stop-work orders, withdrawn enforcement actions and guidance documents, and repeatedly tried to fire agency workers; these efforts face legal challenges. Section 50003 of the House version of OBBA reduces the CFPB budget cap to 5 percent of Federal Reserve earnings, down from 12 percent. As noted above, the Senate version of OBBA would reduce the cap to 6.5 percent. The Defund the CFPB Act (S. 303 and H.R. 814) would reduce CFPB’s budget to zero.
These measures undoubtedly would curtail CFPB overreach temporarily. But they could be easily reversed by a future administration or legislature without serious discussion of the Bureau’s problems. After retrenchment, the CFPB would still exist, no more accountable than before.
Another serious flaw of zero-budget measures is that they leave it unclear which agencies would enforce the consumer protection laws that the CFPB has been responsible for enforcing. These laws include bars on outright fraud that would be unlawful even in a free-market regime. Also, this level of uncertainty is incompatible with the rule of law. Such uncertainty may lead private-sector actors to become more skeptical of regulation, but cultivating uncertainty on purpose seems unwise. One wonders if this bait is worth the click.
Making the CFPB More Like Other Agencies with Broad Powers
Other powerful federal agencies authorized to perform a combination of legislative, executive, and judicial functions—the Federal Trade Commission, for example—are headed by bipartisan commissions funded from appropriations. Some CFPB reform proposals aim to make the CFPB more like these other agencies.
In an agency headed by a commission, no member may act alone. A minority commissioner’s dissent can play an important role in judicial review. By contrast, a single director cannot even benefit from dialogue with peers with varying perspectives. Furthermore, so long as most commission members stay to the end of their terms, a commission comprised of members appointed to staggered terms will maintain some continuity between administrations. An agency headed by a single director may change course abruptly when that director leaves.
Thus, H.R. 3445, the Bureau of Consumer Financial Protection Commission Act, proposes that the CFPB be headed by a bipartisan commission like those that govern other agencies.
The CFPB is unique in another way: unlike similar agencies, the CFPB obtains funds through receipt of a share of Fed earnings, not through the regular appropriations process. H.R. 2798, the Taking Account of Bureaucrats’ Spending (TABS) Act of 2025, would fund the CFPB from appropriations.
In recent years, the Fed has had no net earnings. Some question whether the CFPB can legally receive any funds at all, though so far the argument has not prospered in court. If the CFPB gets nothing when the Fed’s earnings are negative, declining to fund the CFPB from appropriations might strike some as a back-door route to deregulation. But the result would again be confusion as to which agencies would enforce anti-deception statutes. Also, if the Fed’s earnings turn positive, no accountability reform will have been accomplished. Funding the CFPB from appropriations is a better idea.
The hope is that making the CFPB more like similar agencies with broad powers would produce better outcomes. What evidence is there for this view? Commissions, too, have done more harm than good. The saga of net neutrality rules at the FCC—imposed, removed, and reimposed—shows that a commission is no guarantor of certainty.
Furthermore, one may no longer assume that commission members will remain in office across administrations. The Supreme Court might overrule Humphrey’s Executor, giving presidents the power to dismiss commission members at will. We might see as much abrupt change under a commission-led regime as with a director-led regime.
Thus, making the CFPB into a commission funded by appropriations is not sure to bring about fundamental change. However, requiring Bureau actions to be approved by a majority of commissioners might block some questionable decisions. As I discuss further below, making the CFPB a bipartisan commission is a reasonable measure if the Bureau cannot be eliminated. Likewise, if the CFPB cannot be eliminated, then the agency should be made accountable to legislators through the budget process.
Eliminating the CFPB
The Repeal CFPB Act, H.R.1603, would eliminate the CFPB and return its enforcement functions to the agencies that handled them before the CFPB’s creation in 2010. Of all the reform measures, this bill represents the best policy.
No one can claim with certainty that proposals to restructure the CFPB will improve outcomes. Bipartisan commissions funded by appropriations also indulge in regulatory overreach. Commissions may be about to lose their continuity advantage.
Furthermore, structuring the CFPB more like similar agencies cannot address problems at the CFPB beyond its structure. These problems are illuminated by the sheer variety of judicial decisions reversing CFPB actions, non-structural reform bills, and Congressional Review Act resolutions. My later blogs will review non-structural reforms in detail. For now, a partial preview of the problems they address: The CFPB’s failure to conduct cost-benefit analysis according to generally accepted standards; vague language in the statutes the CFPB enforces; insufficient checks on the CFPB’s investigative authority—for example, internal agency rules have permitted the CFPB director to intervene in CFPB enforcement proceedings.
Only eliminating the CFPB will force policymakers to reconsider the flawed assumptions underlying the creation of a special regulator for consumer finance.
Conclusion
The window of opportunity for reform is limited. It is time to focus on policies certain to bring about real change. The CFPB was created in an atmosphere of fear following the financial crisis of 2008. The result was regulatory overkill. A world without the CFPB would not be, as some fear, one where it’s “easier for bad actors to cheat American families.” Rather, the market for consumer financial services and products is competitive and innovative.
Consumers have choices. Other agencies enforced consumer law in finance before and could do so again, as they do for financial institutions with less than $10 billion in assets. If additional measures are needed, policymakers should take a different approach, redesigning consumer protection in finance from the ground up, not handing its regulation to an unaccountable mega-regulator.