Consumer Financial Protection Bureau faces existential crisis amid funding cuts and leadership changes

The Consumer Financial Protection Bureau, a federal watchdog created to protect Americans from predatory financial practices, has been systematically dismantled during the first year of Donald Trump's second presidential term. What began with a February 2025 order directing employees to stop work has evolved into a multi-front battle over funding, staffing, and the agency's very existence, leaving consumer protections hanging by a thread.

The turmoil reached a critical point when a District Court judge in December characterized the administration's actions as "actively and unabashedly trying to shut the agency down." Since February, the CFPB has operated in a diminished capacity while consumer complaints have surged 89% compared to the previous year, according to the agency's own data.

Background and Context

Congress established the CFPB in 2010 in response to the 2008 financial crisis, consolidating consumer protection duties previously scattered across multiple federal agencies. The brainchild of Senator Elizabeth Warren, the bureau was designed with independent funding from the Federal Reserve to insulate it from political pressure. Throughout its existence, the agency reports having returned $19.7 billion to consumers through enforcement actions and oversight.

Conservative critics have long argued that the CFPB exceeds its statutory authority, punishing small lenders and imposing burdensome regulations on businesses. This criticism formed part of the ideological framework for Project 2025, a conservative policy blueprint that explicitly called for Congress to abolish the agency.

Key Figures and Entities

Russell Vought, simultaneously serving as Director of the Office of Management and Budget, was appointed as acting CFPB director in February 2025. Vought, an architect of Project 2025, had previously criticized the agency on The Charlie Kirk Show, accusing staffers of seeking to "weaponize the tools of financial law against basically small mom-and-pop lenders."

Shortly after his appointment, Vought emailed CFPB employees instructing them to halt work. Lisa Rosenthal, a 13-year CFPB attorney who specialized in predatory lending cases, resigned rather than comply. "This work that I had carried out for these decades and that I cared so deeply about — this was no longer that work," she told reporters.

In April, approximately 1,400 employees received layoff notices that would have reduced the workforce to roughly 200 people. The National Treasury Employees Union, representing CFPB staff, filed suit to block the terminations, successfully obtaining a temporary injunction while the legal proceedings continue.

Legal and Financial Mechanisms

The administration has pursued a dual strategy of personnel reduction and financial starvation. In July, Congress slashed the CFPB's budget nearly in half through the One Big Beautiful Bill Act. Separately, administration officials argued that because the Federal Reserve operates at a loss, no funds are available for allocation to the CFPB despite its statutory entitlement to Fed funding.

A coalition of state attorneys general challenged this interpretation in court. In December, the District Court judge rejected the administration's position and ordered Vought to request the legally mandated funds. The judge noted that the administration had shifted from layoffs to funding cuts as its method of "trying to shut the agency down."

The agency's current leadership has characterized previous enforcement actions as inappropriate overreach. In a recent performance report to Congress, they described the Biden administration's approach as "punishment of disfavored industries" through "burdensome regulations and guidance" and "crushing penalties unrelated to actual harm."

International Implications and Policy Response

The CFPB's diminished capacity has created significant gaps in consumer financial protection. While some functions like Helen Shaw's oversight of interstate land sales continue relatively unchanged, other critical oversight activities have been curtailed. The agency has withdrawn regulations, terminated consent orders, and dismissed cases that leadership deemed improper.

State officials have attempted to fill the void. New York Attorney General Letitia James recently secured a $425 million settlement from Capital One over alleged misleading practices regarding interest rates. Former CFPB Director Rohit Chopra, fired at the start of Trump's term, notes that other state attorneys general are "cracking down on crime and standing up for consumers" but acknowledges they are "no substitute for a full-fledged federal agency."

The irony of the CFPB's weakening amid Trump's stated focus on affordability has not escaped observers. In 2024, the bureau closed a loophole on overdraft fees that would have saved Americans approximately $5 billion annually, but Congress repealed that rule in September. Similarly, a CFPB rule extending credit card-style protections to buy-now, pay-later loans is no longer being prioritized for enforcement.

"At the same time now where we see Donald Trump pledging that he's solving an affordability crisis, he's also jacking up costs by obliterating rules that the CFPB had put in place," said Julie Margetta Morgan, former CFPB associate director during the Biden administration.

Sources

This report draws on NPR reporting, court filings from the District Court proceedings, CFPB performance reports to Congress, and public statements from officials including former CFPB Director Rohit Chopra and New York Attorney General Letitia James. Additional context comes from the agency's public complaint database and congressional records regarding the One Big Beautiful Bill Act.