WASHINGTON (Legal Newsline) - A federal agency's unique funding system will have it receiving no money this year, as the new director says it already has enough.
The Consumer Financial Protection Bureau, created in 2011 as a response to a financial crisis years earlier, gets its money from the Federal Reserve - not Congress. It was created that way to avoid shifts in funding as political power in Washington changes from year to year.
Russ Vought, President Trump's new director of both the CFPB and the Office of Management and Budget, announced Feb. 8 on X that he told the Federal Reserve the CFPB will not be taking its next round of funding because it is not "reasonably necessary."
"The Bureau's current balance of $711.6 million is in fact excessive in the current fiscal environment," he said.
"This spigot, long contributing to CFPB's unaccountability, is now being turned off."
The CFPB projected its budget for fiscal year 2025 at $810.6 million. It draws its money each quarter from the Federal Reserve.
The system has long been a point of contention for critics of the agency, including those targeted by it in courts. Defendants have claimed through the years that its actions are unconstitutional because of the funding mechanism.
Last year, the U.S. Supreme Court found in a 7-2 decision that it didn't violate the appropriations clause. The ruling overturned a a federal appeals court's determination that it did.
The CFPB has been a lightning rod since its inception, and under President Biden's director Rohit Chopra issued orders that imposed new federal policy without the need for approval from Congress.
One such rule capped late charges on credit card payments at $8, leading to a court injunction against it. Another formed a public "name-and-shame" registry for companies that had entered into settlements involving financial products in the previous 10 years.
House Financial Services Committee chair Andy Barr said last year the CFPB has gone "rogue," and the American Financial Services Association has warned that rules targeting "risky" loans do not include a description of what those would be.
A 2023 policy statement on abusive acts or practices is "so vague and unwieldy, it is impossible to implement," AFSA wrote.
AFSA has already asked new CFPB leadership to overhaul the agency, especially the way in which it issues rules.
"Consumers need credit, not confusion," AFSA wrote. "Credit terms should be easy to understand, and the CFPB's rules should be, too.
"Unfortunately, the CFPB's policies are so confusing and unclear that they risk hindering millions of consumers' access to credit in a time when most Americans face more than a $700 increase in their monthly bills for such basic goods and services as gas and groceries."
Sometimes the CFPB skirts rulemaking requirements by posting policy changes on its blog. That needs to stop, AFSA said.
And the CFPB shouldn't allow states to enforce the federal Consumer Financial Protection Act. In Philadelphia, Mariner Finance faces a CFPA lawsuit from a group of state attorneys general over allegedly illegal add-on products.
The judge in that case will determine if state officials can sue under a law intended for use by a federal agency. The CFPB should step in and say no, AFSA says.
NBC News reported Feb. 8 the new CFPB head Vought issued a group of mandates to employees that puts a hold on much of its work.
Included was a hiatus of new rules and a suspension of the effective dates of all rules that have been issued but not become official. Elon Musk, the head of the new Department of Government Efficiency, posted to X "CFPB RIP," with a tombstone emoji.
"They did above zero good things, but still need to go," he added.