The CFPB has warned that it will run out of funds by early 2026 after officials ruled its Federal Reserve funding mechanism unlawful, leaving its future uncertain.
This development unfolded as the Donald Trump administration has intensified efforts to reduce the agency’s operations, including layoffs and budget reductions through 2025. According to the WashingtonExaminer, in a letter filed with the court in the context of a lawsuit brought by the National Treasury Employees Union (NTEU) against the CFPB’s acting director, legal counsel for the administration stated that the bureau ‘anticipates exhausting its currently available funds in early 2026’ and that ‘the Federal Reserve currently lacks combined earnings from which the CFPB can draw.’
Legal basis and implications for operations
The case centres on the interpretation of the funding mechanism created under the Dodd‑Frank Wall Street Reform and Consumer Protection Act, which allows the CFPB to draw from the combined earnings of the Federal Reserve System. Legal advisers from the United States Department of Justice’s Office of Legal Counsel (OLC) have taken the view that ‘combined earnings’ should be read as profits of the Fed, and because the Fed has operated without net earnings since 2022, the OLC concludes that the statutory fund source is unavailable.
Those advisers argue that unless Congress directly appropriates funds, the bureau cannot lawfully draw any further money from the Fed. According to Reuters, the CFPB has announced that it expects to have sufficient resources only until at least 31 December 2025, after which its ability to carry out mandated functions could be jeopardised unless alternative funding arrangements are secured.
The agency faces uncertainty given that Congress, currently controlled by the same party as the administration, has shown resistance to fully funding the bureau. In the interim, the CFPB’s ability to supervise financial firms, enforce consumer-protection laws, or maintain its complaint-handling system could be affected.
From a regulatory-services perspective, this issue raises some questions about the sustainability of a self-funded agency model and the future of consumer-finance oversight. The bureau was established following a global financial crisis to oversee banks, other financial institutions and consumer-finance firms. If the CFPB were to lose its funding stream and cease operations, there could be material implications for the US credit-market ecosystem, including credit cards, auto loans and student loans.
