Written by: Internal Analysis & Opinion Writers
Senate Republicans have introduced legislation that would eliminate the Consumer Financial Protection Bureau’s (CFPB) primary funding source, a move that could significantly reshape the agency’s future. The proposal seeks to end the CFPB’s access to funding from the Federal Reserve’s operating budget—cutting it from 12% to zero—and instead subject the bureau to the traditional congressional appropriations process.
Currently, the CFPB draws its annual budget from the Federal Reserve, with the amount capped based on a formula tied to the Fed’s 2009 operating expenses. This arrangement was designed to preserve the agency’s independence and insulate it from political pressure. The new Senate Banking Committee proposal removes that funding mechanism entirely.
The House version of the bill, introduced earlier, aimed to reduce the cap to 5%. But the Senate proposal takes a more aggressive stance, seeking a complete repeal of the CFPB’s independent funding. If passed, this would expose the agency to the same budgetary negotiations and potential partisan gridlock that affect other government departments.
Senator Tim Scott of South Carolina, who chairs the Senate Banking Committee, said the change is part of a broader plan to reduce federal bureaucracy and increase oversight of regulatory bodies. He characterized the measure as a necessary reform to bring accountability and transparency to an agency that he believes operates without sufficient checks.
Democrats strongly oppose the move. Senator Elizabeth Warren of Massachusetts, one of the CFPB’s original architects, condemned the proposal as an effort to gut the agency. She warned that shifting the bureau to the appropriations process would compromise its ability to act independently and protect consumers from financial abuses. Warren described the bill as a politically driven attempt to dismantle critical regulatory safeguards.
The proposal is not just politically divisive—it also raises legal and constitutional questions. Critics argue that removing the CFPB’s Fed-based funding could undermine the separation of powers by allowing Congress to control an executive agency’s budget more directly. Supporters of the bill point to broader efforts to consolidate fiscal oversight under Congress as a necessary corrective to what they view as unchecked regulatory authority.
Additional provisions in the Senate proposal go beyond the CFPB. The bill includes a reduction in Federal Reserve staff salaries, aligning them with Treasury Department compensation levels. It also calls for the closure of the Office of Financial Research and delays implementation of demographic data collection requirements for lenders under the Home Mortgage Disclosure Act until 2034.
Supporters say these measures will reduce redundancy, improve efficiency, and prevent regulatory overreach. Opponents see them as part of a systematic rollback of financial protections established after the 2008 crisis, with consequences for consumer rights, fair lending enforcement, and financial market oversight.
The Senate’s use of the budget reconciliation process to advance the bill has also sparked procedural controversy. If deemed to contain non-budgetary provisions, elements of the legislation—such as the CFPB funding clause—could be subject to removal under the Byrd Rule. Senator Warren has already indicated plans to challenge the bill on these grounds.
If the proposal succeeds, the CFPB would be forced to rely on annual appropriations, potentially weakening its enforcement power and shifting its priorities depending on the political makeup of Congress. If it fails, the agency will retain its current structure and funding stream, which has enabled it to return over \$21 billion in relief to consumers since its inception.
As the legislation moves forward, industry stakeholders, consumer advocates, and lawmakers are preparing for a high-stakes battle. The outcome will not only determine the future structure of the CFPB, but may also set a precedent for how independent regulatory agencies are funded and governed in the years ahead.
