New proposals introduced last week in both the House and Senate are aiming to cut off the Consumer Financial Protection Bureau’s (CFPB) funding from the Federal Reserve, while reinstating congressional oversight of the agency.
In the Senate, U.S. Sen. Ted Cruz, R-Texas, introduced the Defund the CFPB Act, which would eliminate the transfer of funds from the Federal Reserve to the CFPB. This bill seeks to stop the CFPB from receiving its funding outside of the traditional congressional appropriations process.
In the House, U.S. Rep. Keith Self, R-Texas, introduced companion legislation to slash the CFPB’s funding cap to zero, effectively cutting off its financial resources. This move is part of an ongoing effort to limit the CFPB’s power and reassert regulatory oversight.
Funding
Under the current system, the CFPB receives funding from the Federal Reserve, unlike other federal regulatory agencies, which are funded by Congress. The Dodd-Frank Act created this system, specifying that the CFPB would receive quarterly transfers from the Federal Reserve based on its funding requests, bypassing the usual congressional appropriations process.
Last year, the U.S. Supreme Court ruled in Community Financial Services Association of America Ltd. v. CFPB that the bureau’s funding structure does not violate the Constitution’s separation of powers clause. However, critics argue that the current system leaves the CFPB unchecked and unaccountable.
Congressional Push for Change
Sen. Cruz has been a long-time advocate for increased regulatory oversight and previously introduced the Defund the CFPB Act in 2023. He continues to make it a focal point of his efforts in the 119th Congress.
“The CFPB is an unelected, unaccountable bureaucratic agency that has imposed burdensome and harmful regulations on American businesses, banks, and credit unions,” Cruz stated. “It is an unchecked Obama-era executive arm, and the Federal Reserve should not be transferring funds to it. Enacting this legislation would save American taxpayers billions of dollars and I call on the Senate to pass it expeditiously.”
Cruz’s bill is co-sponsored by several Republican senators, including John Barrasso, Rick Scott, Steve Daines, Marsha Blackburn, Mike Rounds, and Mike Lee.
Rep. Self echoed similar concerns in his remarks, saying, “The CFPB has long operated as an unaccountable and burdensome agency that has stifled economic growth through regulatory overreach.” He emphasized that his bill aims to restore power to American citizens and elected representatives by ensuring the agency operates within constitutional checks and balances.
Rep. Self’s bill is designed to align with the Byrd Rule in the Senate, which would allow it to be included in a budget reconciliation package that requires only a simple majority vote to pass.
Additional Reform Efforts
At the same time, U.S. Rep. Andy Barr, R-Ky., has reintroduced another bill aimed at reforming the CFPB. The Taking Account of Bureaucrats’ Spending (TABS) Act would replace the current funding structure, requiring the CFPB to be funded through the traditional congressional appropriations process rather than the Federal Reserve. Barr’s office argues that the current system results in insufficient oversight by Congress.
These legislative efforts reflect growing concerns about the CFPB’s power and its funding structure, with multiple bills aimed at reining in the agency’s reach and increasing transparency.
As lawmakers continue to push for reform, these bills will be closely watched for their potential impact on the CFPB’s future operations.
Sign Up for the Twice Monthly Newsletter
Just enter your email address at the top orange bar at:
Collection Compliance Experts – “The Power of Expertise: Oversight Perfected”
It’s that easy! Twice a month – we provide blog updates and Resources for the Collection and Industry Professional.
Your email is just for this newsletter. We never sell your information. No fee. Opt-out at any time.
Author: Jennifer Evancic
Jennifer.Evancic@ResourceManagement.com
Jennifer Evancic is a third-party auditor valued by creditors and large organizations for her knowledge in call monitoring within the collections industry. With meticulous attention to detail and a firm grasp of regulatory requirements, she ensures compliance with clients’ criteria and state and federal regulations.
Jennifer audits collections calls, ensuring they meet client-specific criteria and comply with regulations, providing valuable insights and maintaining industry standards.
Beyond her auditing responsibilities, Jennifer takes the lead in organizing and facilitating monthly call calibrations. These sessions serve as a collaborative forum where clients and their vendors come together to discuss call monitoring results and address any findings or areas for improvement. Jennifer’s guidance fosters open communication and ensures alignment between clients and vendors, driving continuous improvement in collections practices.
Jennifer stays up-to-date with compliance and industry best practices by participating regularly in peer meetings, regulatory updates and industry webinars. This keeps her informed about emerging issues and ensures she remains a knowledgeable leader in collections compliance.
