WASHINGTON—Credit-unions face a potential regulatory vacuum as the Trump Administration formally has determined the CFPB’s current self-funding mechanism unlawful—a move that could put the agency on a path to closure in early 2026 unless Congress steps in.
For credit-union leaders, who rely on the Bureau’s oversight of consumer-finance markets and enforcement of unfair practices, the decision signals a major disruption to the regulatory environment CUs navigate daily.
In a court filing released late Monday, the Administration declared that the CFPB is now legally barred from seeking additional funds from the Federal Reserve System—the agency’s usual funding source under the Dodd‑Frank Wall Street Reform and Consumer Protection Act, POLITICO reported.
That means the Bureau’s remaining resources will likely carry it only through the end of the year, after which it “anticipates exhausting its currently available funds in early 2026.”
CUToday.info has tracked this story, noting in October that the Fifth Circuit had ruled the funding stream was unconstitutional and warning that credit-unions and other financial institutions could be caught in the crossfire. CUToday.info also recently reported that CFPB Acting Director Russell Vought stated the Bureau would shut down next year.
Today’s development is the clearest sign yet that the Administration is moving beyond theory and toward full operational shutdown of the Bureau, analysts are saying.
In its filing, the DOJ’s Office of Legal Counsel argues that under the statute the CFPB can draw funds only from the Reserve’s net profits. Because the Fed has operated at a loss since 2022, the Administration contends there are no “combined earnings” available to transfer to the CFPB. That narrower reading of the term “combined earnings” marks a new front in the legal war over the Bureau’s future, POLITICO explained.
Democrats and consumer-advocacy groups warn that shuttering the CFPB would leave the $18 trillion-plus U.S. consumer-debt market without its primary oversight tool—just as credit-card, auto-loan and student-loan delinquencies remain elevated, POLITICO explained.
For credit-unions, which depend on the CFPB’s complaint-handling system, enforcement transparency and rule-making consistency, the risk is real: regulatory gaps could increase compliance uncertainty, raise member-service costs and shift focus from mission to risk mitigation, experts have stated.
Jason Stverak
CFPB decision highlights years of unchecked overreach — but clarity must come through the courts, not chaos.”
“Today’s determination by the Trump administration that the CFPB’s funding mechanism is unlawful, and the agency could soon run out of money underscores what the Defense Credit Union Council and others have warned for years: the Bureau’s structure, unchecked authority, and lack of accountability were bound to collide with constitutional and fiscal reality,” said DCUC Chief Advocacy Officer Jason Stverak.
This moment is not about politics — it’s about governance, he said.
“For too long, the CFPB has operated without meaningful oversight or transparency, issuing sweeping mandates that often punished community-based credit unions while doing little to address the real sources of consumer harm,” Stverak said. “As we’ve stated in past letters to Congress, the Bureau’s overreach has burdened institutions that already adhere to the highest standards of member service and integrity.”
John McKechnie
Stverak pointed out that it’s important to remember that credit unions are already effectively regulated by the NCUA.
“Duplicative or conflicting CFPB rules have only created compliance confusion and diverted resources that would otherwise go directly to serving members—particularly in defense and veteran communities,” he said. “That said, this situation is far from settled. It is highly likely that the courts will again be called upon to determine both the limits of the Bureau’s authority and the proper interpretation of its funding statute. The legal process will ultimately decide the CFPB’s future — and until then, financial institutions and consumers alike deserve clarity, not chaos.”
Washington credit union advocate John McKechnie said the CFPB is "crying out for a reset."
"The basic proposition of a consumer watchdog should be uncontroversial, but unfortunately it became hyper-politicized in the last few years, to the point that it is now in danger of being defunded," observed McKechnie. "Maybe this episode will finally make it a priority to put CFPB under congressional budgetary oversight, and have a multimember, bipartisan board."
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