The Trump administration has formally ruled that the Consumer Financial Protection Bureau’s (CFPB) current funding structure is unlawful — a major step toward shutting down the controversial agency within the next year, Politico reported Tuesday.
The determination, disclosed late Monday in a federal court filing, marks the administration’s boldest move yet to rein in the CFPB, a regulatory body long criticized by conservatives as unconstitutional and unaccountable.
According to the filing, the administration concluded the CFPB can no longer legally draw funds from the Federal Reserve — its usual source of money — because the Fed has been operating at a loss since 2022.
The Department of Justice’s Office of Legal Counsel said the CFPB is only entitled to use the Fed’s “combined earnings,” which it now interprets to mean profits.
“If the Federal Reserve has no profits, it cannot transfer money to the CFPB,” the DOJ wrote.
The CFPB said it has enough reserves to operate through the end of this year but expects to run out of cash in early 2026 — effectively leaving the agency unable to function without new congressional appropriations. With Republicans widely opposed to the bureau’s existence, new funding appears unlikely.
Acting Director Russ Vought, a longtime critic of the CFPB’s structure and spending, has signaled for months that the administration intended to phase out the agency. The decision could ultimately dismantle the bureau, which was created by Democrats under the 2010 Dodd-Frank Act to oversee consumer financial products after the financial crisis.
Democrats and consumer advocates warn the move could end federal oversight of the $18 trillion consumer debt market, but conservatives argue that shutting down the CFPB would restore constitutional accountability and reduce regulatory burdens on lenders and small businesses, according to the report.
The Justice Department opinion does not yet address whether the billions transferred from the Fed to the CFPB since 2022 were lawful or whether actions taken by the bureau during that period remain valid.
Vought has already frozen much of the CFPB’s activity and is seeking court approval to dismiss most of its workforce. The D.C. Circuit Court of Appeals is weighing whether to uphold a ruling in the administration’s favor, which could accelerate the agency’s wind- down.
The decision represents a sweeping victory for critics who have long said the CFPB operates beyond Congress’s control — and a defining moment in the Trump administration’s effort to dismantle what it views as unconstitutional executive agencies.
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