The CFPB’s budget might be shrinking, but does that even matter?

The decision to nearly halve the CFPB’s budget came after Senate Parliamentarian Elizabeth MacDonough — the nonpartisan “referee” who determines whether legislation meets the chamber’s governing rules — ruled that the Republican majority in the Senate could not pass the budget bill through reconciliation. She said that certain requirements were not being met when it came to the the CFPB’s provision. 

Initially, Sen. Tim Scott (R-S.C.) had sought to zero out the funding that the CFPB receives from the Federal Reserve, its primary budget source as codified in the Dodd-Frank Act. But MacDonough ruled that any provision that would effectively eliminate the bureau’s budget could not be approved through a simple majority vote.

In deference to this, Senate Republicans proposed lowering the amount the CFPB can draw from the Fed’s operating budget to 6.5%, about half of its current 12% level.

While this is not the exact outcome many Republican lawmakers were hoping for, it is the first time that one of their attempts to cut the CFPB’s funding has progressed this far. 

‘Almost no enforcement happening’

The CFPB may be looking at a much smaller budget if the bill passes the House before President Trump’s July 4 deadline. But regardless, enforcement experts don’t believe it will have much of an impact on the level of action — or in this case, inaction — that the housing industry is seeing from the federal regulator. 

“It is kind of dismal right now — there is almost no enforcement happening,” said Christa Bieker, a partner at Mayer Brown. “We aren’t really seeing any new enforcement action initiated and we are seeing existing actions closed or rolled back. We have even seen some folks lobby the CFPB to get their consent order dismissed.” 

Given the CFPB’s current lack of action, enforcement experts doubt that the bureau under its current leadership would even come close to utilizing its full budget. Consequently, the proposed cuts will have little to no impact on the amount of regulatory action the CFPB undertakes. 

“If the CFPB had been drawing out the full amount permitted from the Fed and then it was cut in half, it clearly would have an impact, but I’m not sure the CFPB has ever used its full budget,” said Frances Riley, an attorney at Saul Ewing LLP. 

If things change and the CFPB finds something it wants to investigate or bring action against, Riley said that could be a possible instance where a budget cut would be felt. 

“Salaries are probably one of their largest expenses, so a smaller budget would mean fewer employees, which we have already seen them try to cut, but if they want to do more investigations or more enforcement actions, they would be constrained by bandwidth,” Riley said. 

Under these circumstances, Riley envisions that the CFPB would reallocate staff from other projects to whatever its leaders prioritize.

“They’ll just stop investigating certain initiatives and reshuffle the deck of playing cards they have,” Riley said. 

States expected to step up

Even prior to the proposed budget cuts, many enforcement experts predicted fewer oversight and enforcement actions given the relaxed attitudes by current bureau leaders. As a result, at least in some states, attorneys general, real estate commissions, or departments of insurance or financial services may become more active with their own enforcement actions. 

“I don’t think any state regulator is going to wake up in six months and think that a budget cut is preventing the CFPB from investigating things,” Riley said. “From my view and the discussions I have been having, the state regulators are already reacting to an absence of interest in certain consumer issues from the CFPB.” 

Bieker shared a similar view, adding that while there has yet to be an observed uptick in state enforcement actions, she believes that will eventually occur.

But while state regulators certainly have the ability to bring enforcement actions, enforcement experts say the scope and scale of these actions is no match for what the CFPB can bring. That’s simply due to the size and funding differences between the CFPB and entities like state attorneys general.

And although the bureau may not be very active under the current administration, that does not mean it will stay this way forever.

“Companies still need to make sure they are dotting their ‘i’s’ and crossing their ‘t’s’,” Bieker said. “It is not like the federal REPSA provision or UDAAP have gone away, and states can still enforce those rules too.” 

She added that companies should also consider statutes of limitations, which could be three years from the date of discovery. This means that if a suit is filed in 2029 under a more aggressive bureau, a company could be held liable for things it did in 2026. 

Despite the CFPB’s proposed budget cuts or its current level of enforcement, enforcement experts agree it is not a good idea for companies to push regulatory boundaries. But Bieker also said that firms currently under investigation have a unique opportunity to ask the bureau to reconsider. 

“It is a time companies, if they want, can take a look at their existing consents or obligations, and any pending investigations, and potentially lobby the bureau to kind of back off from those actions,” Bieker said. “If they want to do that, this would be the time.”