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Opponents of the US Consumer Financial Protection Bureau (CFPB) have experienced twin triumphs, as an injunction halting the agency's restructuring has been lifted and the federal budget bill has almost halved its funding.
The CFPB’s retreat from hands-on regulation now looks set to continue as a key obstacle to its reorganisation was swept away by the Supreme Court.
In an opinion delivered on July 8, 2025, the Supreme Court lifted a lower court’s block on mass redundancies of federal employees, allowing the Trump administration to resume its efforts to restructure the CFPB and slash its workforce.
Unions and NGOs had challenged the restructuring plans, arguing that they were unlawful, and successfully obtained a district court injunction halting them.
But the Supreme Court said that it was likely that the Trump administration would be successful in arguing that its policy was lawfully executed.
“Because the government is likely to succeed on its argument that the executive order and memorandum are lawful - and because the other factors bearing on whether to grant a stay are satisfied - we grant the application.”
The court added, "We express no view on the legality of any agency [reduction-in-force] and reorganization plan produced or approved pursuant to the executive order and memorandum. The district court enjoined further implementation or approval of the plans based on its view about the illegality of the executive order and memorandum, not on any assessment of the plans themselves. Those plans are not before this court."
Budget cuts criticised
The CFPB was already facing the news that, under the Budget Bill passed on July 4, the funding it can receive had been cut from 12 percent of the Federal Reserve's total operating expenses for 2009, adjusted annually for inflation, to 6.5 percent – a reduction of almost 50 percent.
The move was strongly criticised by Senator Elizabeth Warren (D-Mass), who helped establish the regulator following the passage of the Dodd-Frank Act in 2010.
“The Consumer Financial Protection Bureau is the financial watchdog to keep people from getting cheated on credit cards, mortgages, Venmo, payday loans, and a zillion other transactions,” Warren said.
“When this financial cop can’t do its job, there is no one else in the federal government to pick up the slack.”
Established in the wake of the 2008 financial crisis, the CFPB played a key role in overseeing financial institutions, fintech firms, and payment processors, ensuring fee transparency, addressing consumer complaints about electronic payments and digital wallets, and enforcing rules against unfair market practices.
But under the Trump administration, the agency has undergone a dramatic change in course, with significant disruption to US payments regulation that appears likely to result in weakened consumer protections.
This year has seen the suspension of a series of CFPB enforcement actions, with legal cases against household names, including Capital One, Bank of America, Wells Fargo, Walmart and JP Morgan Chase, being paused.
Regulatory gaps
Under a much reduced CFPB, the absence of enforcement actions and withdrawal of guidance documents is set to continue, leading to regulatory gaps that may be exploited, and to the erosion of consumer protections.
In addition, the agency’s role in policymaking is also likely to be hit.
The CFPB had been at the heart of shaping policies for digital payments, real-time payments and cryptocurrency transactions, but its rulemaking role will now be much diminished.
A weakened CFPB is likely to set the stage for state regulators to step into the breach, particularly in states such as New York and California whose financial watchdogs have a reputation for aggressively defending consumer rights.
This would mean a patchwork of state financial regulations and enforcement policies, leading to compliance challenges for businesses.
It could also pave the way for an uptick in private litigation from consumers and pressure groups as they take the initiative in holding the financial services and payments industries to account.
