The Trump administration has escalated its campaign to defund the Consumer Financial Protection Bureau - setting in motion what could be its effective closure within a year. In a court filing (PDF File) this week, the administration said the CFPB cannot seek additional money from the Federal Reserve - its usual source of operating funds. The bureau said it has enough reserves to continue through December but “anticipates exhausting its currently available funds in early 2026.” Without congressional action, that timeline would mark the end of the CFPB’s ability to function. The Justice Department’s Office of Legal Counsel (OLC) issued the legal opinion underpinning the decision. The OLC argued that under the Dodd-Frank Act , the CFPB can only receive funds from the “combined earnings of the Federal Reserve System.” Because the Fed has posted losses since 2022 (about $77.6 billion last year) the administration contends there are no “earnings” to transfer. “The Federal Reserve currently lacks combined earnings from which the CFPB can draw,” the opinion stated. If the Federal Reserve has no profits, it cannot transfer money to the CFPB. That interpretation redefines “combined earnings” to mean net profits rather than total income, a reading that may be up to interpretation. The Supreme Court upheld the CFPB’s funding structure as constitutional in 2024, without adopting that definition. What happens next is yet to be seen.
