The U.S. House of Representatives has passed an extensive budget reconciliation bill that would reduce the CFPB budget by 70 percent. In a 215-214 vote along party lines, the budget cut first approved by the House Committee on Financial Services, as previously reported by Holland & Knight, will now move to the U.S. Senate for further consideration.
The CFPB is funded by the combined earnings of the Federal Reserve System. The CFPB provision within the budget bill would reduce the agency's funding from 12 percent of the Federal Reserve's operating expenses to a mere 5 percent. In a meeting before the House Financial Services Committee, Chair French Hill (R-Ark.) highlighted that a "firm cap" was placed on the CFPB's budget, "setting its funding at no more than $249 million" for 2025, with an annual adjustment for inflation going forward. Chair Hill also noted that the CFPB's Civil Penalty Fund, a fund designed to compensate consumers harmed by corporations' violations of consumer financial protection laws, will "be transferred to the Treasury general fund" after direct victims are compensated.
In 2024, the CFPB's annual obligations amounted to $755.1 million, with $480 million spent on employee compensation. With a more than $500 million decrease in funding, it is unclear how the CFPB's operations, staffing and enforcement capabilities will be impacted, but this would certainly impose significant changes and limitations. Though the 2010 Dodd-Frank Act, the law establishing the CFPB, does not set a statutory minimum for CFPB funding, it does delineate the agency's statutorily required functions and duties. Accordingly, the agency must be afforded the resources to maintain operations to the extent that the statutorily required functions and duties are met, assuming Congress makes no changes to these statutory obligations.
As Holland & Knight has previously reported, the question of whether the Trump Administration's goal of vastly reducing the agency is statutorily and otherwise legally sound has been raised by federal courts and members of Congress. Both Senate Democrats and U.S. District Court Judge Amy Berman Jackson have concluded that the CFPB's continued reductions-in-force (RIF) would leave the agency without the minimum number of employees required to support its statutory functions – a violation of the Dodd-Frank Act. As the CFPB waits for a ruling from the U.S. Court of Appeals for the District of Columbia Circuit on whether the agency may proceed with its proposed extensive staff reductions, it is likely that this drastic decrease in funding, if it goes forward, would substantially impact the number of employees the agency can financially afford to keep on staff.
Although the House has passed the budget bill, it still needs approval from the Senate before proceeding to President Donald Trump to be signed into law. The Senate began its review of the budget bill on June 2, 2025, and will continue analyzing the proposals in the coming weeks. As Senate Democrats have been vocal about their opposition to the Trump Administration's efforts to scale back the CFPB to such an extent that the agency would no longer be in a position to carry out its statutory functions, there will almost certainly be concerns over the sweeping reduction to the CFPB's budget. However, among the numerous other debates surrounding the upcoming budget, it is unclear whether the cuts to CFPB funding will be overshadowed by other pressing concerns.
