Picture this: a government agency that operates with little accountability, spends taxpayers’ money without congressional oversight, and enforces regulations based on flimsy theories about consumer behavior. That’s the Consumer Financial Protection Bureau (CFPB), an institution so misguided in both mission and execution that it does not deserve mere reform—it should be abolished outright.
Heralded as the savior of consumers after the 2008 financial crisis, the CFPB has instead become a regulatory monster that stifles innovation and drives up costs for the very people it claims to protect.
When the CFPB was created, Congress transferred authority to it for approximately 50 existing rules and orders coming from 20 different statutes. For fiscal year 2024, it has an estimated budget of $762.9 million, a 9.5 percent increase from the previous year. The agency’s funding structure allows it to operate independently of the congressional appropriations process: The bureau’s budget is funded through transfers from the Federal Reserve System.
This funding mechanism has been a point of contention, with critics pointing out that it grants the agency excessive autonomy and insufficient accountability. In October 2022, the Fifth Circuit Court ruled the funding structure unconstitutional, but the U.S. Supreme Court reversed this decision in May 2024.
The CFPB isn’t just unaccountable—it’s practically untouchable. Because it receives its funding directly from the Federal Reserve rather than from Congress, it operates outside the normal checks and balances that keep most government entities in line. The agency isn’t even required to comply with Office of Management and Budget guidelines. Even the agency’s leadership structure was designed to concentrate power: Until the Supreme Court stepped in, it was headed by a single director with sweeping authority and little oversight.
What was the CFPB given all this power to do? In theory, it is to protect and empower consumers, promote fair and competitive markets, and stabilize the financial system. In practice, it has reduced access to credit cards for lower-income consumers and jacked up bank fees and mortgage costs. CFPB bureaucrats also love price controls and excessive regulations, and they despise financial arrangements that they view as unconventional.
At the heart of the CFPB’s misguided decisions is its leaders’ apparent belief that consumers are helpless, irrational beings incapable of making good financial decisions without bureaucratic intervention. Armed with this condescending mindset, the CFPB justifies heavy-handed regulations based on what George Mason University professor Todd Zywicki calls “trendy behavioral-economics theories to ‘nudge’ consumers toward decisions central planners favor.” The CFPB dreams up consumer biases and creates rules to fix problems that often don’t even exist. Instead of relying on empirical evidence of actual harm, the CFPB crafts policies based on theoretical assumptions.
If you’re looking for clarity and consistency in regulation, don’t look to the CFPB. This agency makes policy on the fly, using enforcement actions rather than clear rules. Imagine playing a game where the referee keeps changing the rules mid-play. That’s what financial institutions face, and the costs of this uncertainty inevitably land on consumers in the form of higher fees, reduced access to credit, and fewer financial options.
Take the bureau’s mortgage regulations. Designed to protect borrowers, these rules ended up making it harder to qualify for loans if you are self-employed or have non-traditional sources of income, ultimately pushing these borrowers toward non-qualified mortgage loans and higher rates. Then there’s the agency’s crackdown on credit card fees. Paying less in fees may have sounded good, but it led to higher interest rates and fewer card options for lower-income consumers. And in the payday lending industry, the CFPB’s meddling has pushed vulnerable consumers toward predatory alternatives.
The CFPB isn’t just it’s broken—it’s often redundant. Existing agencies like the Federal Trade Commission and state regulators already police fraud and try to ensure transparency. What does the CFPB’s heavy hand add?
Rather than pouring more resources into this bureaucratic black hole, especially one that duplicates the work of other agencies and programs, officials should cut their losses and abolish the CFPB. Let’s return to a system based on clear disclosure requirements, competitive markets, and the enforcement of fraud laws. Consumers should be empowered, not infantilized.
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