Defunding the CFPB gains a foothold in Congress

The Republican-led House Financial Services Committee has advanced a sweeping reform bill designed to significantly overhaul the legislative structure of the Consumer Financial Protection Bureau (CFPB).

The Consumer Financial Protection Accountability and Reform Act of 2026 proposes to raise asset thresholds for supervised institutions, redesign the bureau’s funding structure and limit state-federal partnerships, among a slew of changes.

Financial Services Committee Chairman French Hill, R-Ark., who co-sponsored the bill with Rep. Andy Barr, R-Ky., said the reforms were necessary for “protecting consumers and promoting competition, innovation and access to affordable financial products and services.”

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Critics, however, say the bill advanced Wednesday represents a legislative pathway to neutralizing the CFPB in a manner that White House budget chief Russell Vought has thus far been unsuccessful in achieving as acting director of the bureau since early 2025.

Rewriting the CFPB’s legislative structure

More than 50 consumer, labor, community development and civil rights organizations signed onto a Sept. 10 letter lambasting the overhaul. They claim it “would complete the attack on the CFPB already underway to devastating effect.”

Tom Feltner, who wrote the 17-page letter and served as a senior policy adviser at the CFPB for almost four years from early 2022 until the end of 2025, told Scotsman Guide in an interview Friday that the intent of the so-called reforms “is to provide a shield for corporate financial interests to reduce their exposure to enforcement actions related to consumer protection violations.”

Vought testified before the Senate Banking Committee in July — his only appearance before Congress in his roughly 18-month tenure — that he would like to see the CFPB fully eliminated.

Not only has the CFPB opened no new enforcement actions since Vought began his campaign to shut down the agency, but the bureau has dismissed numerous enforcement lawsuits against major financial firms, vacated court-ordered agreements and reversed settlements from which harmed consumers expected financial redress.

The CFPB was established through the 2010 Dodd-Frank Act as a consumer financial watchdog and federal nonbank mortgage regulator in response to the 2008 financial crisis. Federal courts have blocked Vought’s most forceful efforts to dismantle the bureau through mass firings and defunding attempts by citing statutory obligations.

But those obligations, which have shielded the CFPB in the eyes of the courts, are now attempting to be rewritten in what critics see as an end run around executed by Vought-aligned lawmakers.

Defunding the CFPB through Congress

“Blocking state enforcement actions and defunding the CFPB is really the major risk,” said Feltner, now associate director of consumer policy at Americans for Financial Reform.

Of all the proposals in the reform bill, those that present the most urgent threats to the bureau’s continued functioning include a plan that would shift CFPB funding away from the Federal Reserve and into the regular congressional appropriations process. Another proposes limits on state attorneys generals’ ability to enforce consumer protections laws.

No other federal financial regulators are subject to congressional appropriations, with the Federal Reserve, Federal Deposit Insurance Corp. and Office of the Comptroller of the Currency all having independent funding sources.

“That independent funding is important because you don’t want the actions that a regulator takes, the enforcement actions that it pursues, the supervision policies that it adopts and the markets that it chooses to research and analyze to be overly influenced by the political process,” said Feltner.

When it comes to the priorities of CFPB detractors, it is indicative that shifting bureau funding from the Fed to Congress is the first section in the bill now moving forward, according to Feltner, as that has always been their primary complaint.

Under the current arrangement, when the CFPB director requests funding from the Federal Reserve, the central bank provides the requested amount, no questions asked. Tying up CFPB funding in congressional appropriations could create a host of pathways to minimally fund the bureau, defund the bureau outright, or else corrupt the bureau’s supervisory and enforcement agenda by attaching funding to political priorities and lobbying interests.

“What moving this to the appropriations process does is just add a lot more politics to the process, politics that is not present in the decisions of other regulators,” Feltner said.