The Consumer Financial Protection Bureau (CFPB) has formally been declared by the United States Department of Justice (DOJ) to be operating on an “unlawful” funding mechanism – a move that places the agency on a path to shutdown in early 2026.
The dismantling of the CFPB has been in the works for some time now. Democrats pushed for its creation in the wake of the Great Recession in 2008. It was a pet project of Senator Elizabeth Warren, which means that many Republicans have been at odds with it from the start. Then, in the early days of President Donald J. Trump's second administration, the Department of Government Efficiency (DOGE), led by then-top advisor Elon Musk, began the process for shutting down the CFPB.
For organizations engaged in customer facing financial products – including banks, fintech firms, credit servicers, auto-lenders, and digital payments companies – this isn’t merely a regulatory change. Rather, this represents a potential structural shift in how consumer complaints, enforcement and oversight are handled, with direct implications for customer experience (CX) strategy, consumer protection, and risk management.
The funding trigger
The CFPB’s funding has long been structured differently from many federal agencies: rather than relying solely on annual appropriations by Congress, the agency was authorized under the Dodd-Frank Wall Street Reform and Consumer Protection Act (2010) to draw from what the law describes as the “combined earnings of the Federal Reserve System.”
Now, in a court filing by the DOJ’s Office of Legal Counsel (OLC), the position is that because the Federal Reserve System (Fed) has reportedly operated at a loss since 2022, the “combined earnings” akin to “profits” are effectively zero, meaning there is no legal source for the transfers on which the CFPB relies.
The CFPB itself stated in filings that it expects to exhaust its current available funds in “early 2026” unless Congress steps in with direct funding.
Does the CFPB act as a safety net?
For CX professionals, the CFPB is more than a regulatory body – it serves as a safety net for customers, ensuring fair treatment in financial products and services. Data shows that Americans are increasingly relying on the bureau to resolve disputes. For example, according to the CFPB’s Consumer Response Annual Report (2024):
- The CFPB received 2,703,400 complaints related to credit or consumer reporting in 2024. About 91 percent were sent to companies for review, and companies responded to 99.6 percent of complaints.
- Complaints about incorrect information on credit reports rose 247 percent in 2024 compared to prior averages.
- Overall, complaints about credit reporting increased 182 percent, and consumer report complaints increased 124 percent in 2024.
Evidently, customer complaints are concentrated in areas where trust is vital – credit reporting, debt collection, and consumer loans. Warning against eliminating the independent watchdog agency, Richard Cordray, who first led the CFBP in 2011, said: “We’d be back to the wild, wild west for financial services that affect families all over the country in terms of what their terms would be on their credit cards, on their mortgages, and other products.”
Precedents and legal context
The CFPB’s funding model was upheld by the Supreme Court of the United States in May 2024, which found the structure constitutional under the Appropriations Clause. Yet, even with that decision, the present dispute centers not on constitutionality in full, but on whether the funding source – the Fed’s “combined earnings” – remains valid when the Fed reports net losses.
The federal courts have seen prior attempts by regulated entities to raise challenges to CFPB-funded enforcement actions on the basis of the funding mechanism. Some judges have rejected the “only profits” interpretation.
The CFPB has also been the target of Republican criticism since its inception, with leaders citing its independence and funding as justification for scaling back its power, as previously reported by CX Network. Congressman Bryon Donalds called the CFPB a “leviathan of an agency,” criticizing its direct Federal Reserve funding. Similarly, former Senator Pat Toomey referred to the agency as “arguably the most unaccountable agency in the history of the US federal government,” as quoted in the Wall Street Journal.
The operational impact of the cuts
The CFPB’s acting director, Russ Vought, notified the court that the bureau “anticipates exhausting its available funds in early 2026.” Also, reports suggest significant curtailing of CFPB operations, including hiring freezes and suspension of certain supervisory or rulemaking activities.
The question of who will handle the oversight and consumer complaint functions of the bureau if it shuts down remains open.
Why this matters for CX
The CFPB’s role goes beyond regulatory compliance. For companies operating in consumer finance, the bureau has served as a key part of the oversight architecture that shapes customer expectations, complaint resolution, product design, disclosures, and end-to-end CX. Its potential shutdown or dramatic scaling back raises questions for CX leaders in several areas:
1. Consumer trust and perception
Consumers increasingly expect that financial firms are held to standards that protect their rights and transparency. The CFPB’s presence has been one signal of accountability.
If oversight weakens, consumer perception of “safe” or “fair” financial products may decline. Further, firms might also need to assume more of the burden of trust themselves, amplifying CX and transparency actions to compensate for the external oversight that may diminish.
2. Complaint resolution and escalation paths
The CFPB handles thousands of consumer finance complaints annually and publishes data on types of complaints, resolution times, and outcomes. Its absence, or reduction, means:
- Firms may face increased private litigation or state-based enforcement as alternatives rise.
- A gap may open for CX backwards: if consumers feel they no longer have a “watchdog,” their willingness to trust and remain loyal may decline.
3. Product design and regulatory risk
Many aspects of CX – disclosures, onboarding flows, fee structures, late-payment notifications, and digital channels – are shaped by regulatory guardrails, many of which the CFPB crafts or enforces. With reduced operation:
- Firms may face greater ambiguity around rules (e.g. the bureau’s “open banking” rule on consumer data access).
- The risk of missteps increases: an uncertain regulatory horizon means companies might design customer journeys that accidentally fall outside future norms or face enforcement if the bureau resurges.
4. Oversight vacuum
If the federal regulator’s operational capacity is reduced, consumers may perceive lower protections and greater exposure to unfair practices. The CFPB’s former enforcement director, Eric Halperin, warned:
“Indicators of deep economic pain for workers and consumers are flashing bright red, even as corporate profits are skyrocketing…With no federal enforcement apparatus to ensure corporations are held accountable to the public, it’s only too easy for corporations to fleece customers…”
Internal governance of CX and regulation functions thus become more important:
- Financial firms need to ensure complaint-handling processes remain robust regardless of external guardrails.
- Transparency in customer communications, especially around fees, data usage and disclosures, becomes a competitive advantage, but also a reputational risk if poorly handled.
Looking ahead, toward a post-CFPB landscape, financial services firms that prioritize proactive CX, transparency, and dispute resolution will be better positioned.