The Problem with the CFPB Is the Law, Not the Lease

In the United States, the Trump Administration has terminated the Consumer Financial Protection Bureau’s (CFPB’s) lease and plans to reduce the bureau’s staff to around 550 workers, although it has failed to defund the agency. The plan reflects the administration’s view that the CFPB is a “woke, weaponized arm of the bureaucracy” that burdens the economy.

There has been much outcry, but little progress, however, toward the administration’s goal of eliminating overregulation in general or of reining in the CFPB in particular. The president alone can’t scale back or eliminate the CFPB. Congress created this overpowered agency, and only lawmakers can fix it. Curbing the bureau’s frequent abuse of its subpoena power is one good place for them to start.

The CFPB issues subpoenas, known as civil investigative demands (CIDs), that require recipients to turn over documents, testimony and other evidence. The bureau has used CIDs with little justification, even when it has no reason to suspect a violation of the law. Not only does the bureau’s CID overreach violate Americans’ privacy rights, but it also makes financial services more expensive for everyone. The burden falls heaviest on small and mid-size firms, limiting growth and competition.

Problems with the bureau’s CIDs are well documented. The bureau has targeted disfavored businesses or used CIDs for market research. Investigations drag on for months without the bureau ever explaining what the target has done wrong. Responding to a CID can cost a small business thousands of hours of employee time and tens of thousands of dollars, and larger firms may bear more than a million dollars in costs. Too often, these burdens are way out of proportion to any benefit to consumers.

One small-dollar lender in Arizona, for example, endured a series of CFPB subpoenas over almost three years, ultimately closing about a third of its locations and letting workers go. The firm reported receiving few complaints from customers or state regulators, and the investigation found no violations. The company’s chief executive officer, it should be noted, had previously criticized a CFPB regulatory proposal.

The bureau’s defenders argue that complaints about the bureau’s CIDs should be discounted because people are bound to complain about being investigated. But it is more likely that the complaints are understated because regulated firms are reluctant to antagonize their regulator.

What encourages the bureau’s overreach? Lawmakers gave in to the tempting idea that an agency could be insulated from lobbyists’ influence and regulatory skepticism without losing accountability. The CFPB’s designers funded it from the Federal Reserve’s (the Fed’s) earnings instead of congressional appropriations, seeking to limit financial firms’ influence over the bureau. And the bureau is headed by a sole director rather than by a commission, meaning that the CFPB acts with less deliberation. The commission structure was rejected because it presumably might often “produce a majority that is consistently skeptical about regulation”.

The bureau’s subpoena powers also allow CID targets to petition the bureau for relief from a CID, but the petitions are decided by the bureau’s director, not a neutral third party. The CFPB’s governing statute lacks clear language limiting investigators’ discretion, so judges too often defer to the bureau in court.

Lawmakers have noticed the bureau’s dysfunction. In 2024 and again in 2025, legislators offered a bill, the Civil Investigative Demand Reform Act (CIDRA), to address these problems. The bill would require the bureau to set out the specific facts that justify issuing a subpoena. It would also give subpoena targets the right to petition for relief from burdensome or duplicative subpoenas.

The CIDRA enjoys bipartisan support: After all, that agencies can treat some Americans unfairly is out of step with our constitutional republic. And it could serve as a model for curbing investigative overreach by other agencies, such as the Federal Trade Commission (FTC), which has begun to use its broad CID authority to punish free speech.

Making agencies accountable for misusing their investigative powers is a crucial aspect of deregulation. For this, legal changes are essential. Can executive-branch measures, such as firing staff or reducing an agency’s physical footprint, help? Some reformers posit that an understaffed agency will focus on targeting real violations and concrete harm, reducing the agency’s effects on legitimate firms’ productive activities. Yet, there are no rewards in the public sector for precision. Overworked staff might also rebel, perhaps by cutting corners and focusing on easy wins, targeting smaller firms that cannot afford to fight back. And the president’s progress in cutting staff and budgets can easily be reversed by his successor.

The bureau’s abuse of its subpoena powers is real. Ironically, the agency that was created to ensure that banks and other financial services treat consumers fairly has abandoned fairness in its own investigations. And attempts to cut the CFPB down to size by slashing its budget and staff are probably futile, if not counterproductive, in the long run.

Evicting CFPB from its headquarters is a great headline grabber, but it’s not going to end the agency’s overreach. If elected officials are serious about that task, they should take a look at their own handiwork. They created the agency. They’ll have to tame it, too.