The U.S. Department of Justice (DOJ) has ruled that the Consumer Financial Protection Bureau’s (CFPB) current funding mechanism is unlawful, casting doubt on the agency’s future.
On Tuesday, the CFPB notified the court overseeing NTEU v. Vought that the DOJ’s Office of Legal Counsel (OLC) concluded the Bureau cannot legally request funds from the Federal Reserve at this time. The OLC determined that the Federal Reserve currently has no “combined earnings” from which the CFPB can draw funds, as required under the Dodd-Frank Act. Because OLC opinions are binding on Executive Branch agencies, the CFPB must comply.
While the Bureau could seek an appropriation from Congress to continue operations, such a funding request appears unlikely amid recent efforts by the Trump administration to administratively wind down the agency’s activities.
The U.S. Supreme Court in May 2024 ruled the funding for the CFPB was constitutionally valid. After hearing a challenge from the U.S. Fifth Circuit Court of Appeals to the funding of the agency, the court handed down a 7-2 decision to affirm its constitutionality.
In the majority opinion of the court, Justice Clearance Thomas wrote the “funding mechanism” complied with the Appropriations Clause.
“The statute that authorizes the Bureau to draw money from the combined earnings of the Federal Reserve System to carry out its duties satisfies the Appropriations Clause. Accordingly, we reverse the judgment of the Court of Appeals and remand the case for further proceedings consistent with this opinion,” Thomas wrote.
The Dodd-Frank Act Wall Street Reform and Consumer Protection Act passed by Congress in 2010 created the CFPB. It was in reaction to the 2008 financial crisis.
“Congress charged the Bureau with enforcing consumer financial protection laws to ensure ‘that all consumers have access to markets for consumer financial products and services and that markets for consumer financial products and services are fair, transparent, and competitive,’” Thomas wrote.
The CFPB officially rescinded its Non-Bank Registration Rule (NBR Rule), which had tracked non-bank lenders accused of violating consumer financial protection laws. Finalized in July 2024 and implemented that September, the rule was introduced under the Biden administration to enhance the Bureau’s market monitoring and nonbank supervision functions by collecting and publishing information about enforcement orders and compliance efforts. In announcing the repeal, the CFPB cited the rule’s high costs and limited benefits, noting significant overlap with existing state-level frameworks. The decision marks the latest in a series of deregulatory measures undertaken since the start of the Trump administration. The CFPB initially proposed rescinding the rule back in May.
