The CFPB Is a Failed Experiment In One-Sided Anti-Business Policy

This spring, the Trump Administration cut the Consumer Financial Protection Bureau’s staff by about 80 percent, and Congress halved the agency’s budget cap.  Last week, Democratic lawmakers urged the D.C. Circuit Court to take up a case challenging the firings, and the Republican Congress has hosted several hearings on CFPB reform.

Whatever the ultimate resolution of this case, onlookers are watching uneasily as polarized chaos in Washington D.C. seems to be reshaping the Bureau. But the Bureau is a failed experiment in one-sided anti-business federal policy.

Defenders of the CFPB claim that Republicans are currying favor with predatory businesses and will leave consumers defenseless. But the legislation that created the Bureau yielded a duplicative and unaccountable agency designed to ignore the costs of overregulation. Ultimately, the Bureau has harmed consumers more than it has protected them.

The creators of the CFPB intended for its interests to be aligned with those of consumers and againstbusinesses — that is, the agency was not supposed to be a neutral enforcer. The Bureau’s advocates call it a “watchdog” or the “cop on the beat” — a metaphor implying that lenders are little more than burglars. The CFPB’s creators funded the agency from the earnings of the Federal Reserve rather than Congressional appropriations, seeking to insulate the Bureau from the influence of powerful financial firms acting through legislators. Economists call this type of influence by special interests “capture.”

Trying to capture-proof an agency sounds appealing at first. But it is a recipe for regulatory overreach and political backlash.

Back in the 1960s and 1970s, similar attempts were made to “capture-proof” agencies. For example, the Occupational Safety and Health Administration (OSHA) was tasked with eliminating safety hazards in the workplace without regard to cost. Inspectors were expected to report every violation: every report could result in a penalty.

But most employers are ordinary people, not the villainous Mr. Burns from the Simpsons. Employers, especially those with good safety records, resented being treated like criminals. OSHA’s behavior often violated basic ideas of fairness. The agency’s intervention yielded little or no discernable improvement for workers at considerable cost. Ultimately, political push-back made OSHA more moderate.

Like OSHA in the 1970s, the CFPB has violated basic ideas of fairness. Consider the Bureau’s use of civil investigative demands (CIDs), a type of subpoena. Agencies may use CIDs to require anyone to produce documents and other evidence relevant to a violation of the law. The Bureau has used its CID authority to initiate long fishing expeditions that drive businesses run by ordinary people to the verge of bankruptcy and beyond. Sometimes, the Bureau has failed to articulate any reason to think its target has broken the law.

The Bureau’s narrow focus on financial services does not help. Specialized agencies are more easily influenced by special interests. Explaining the forces acting on government, James Madison explains that “the fewer the distinct parties and interests, the more frequently will a majority be found of the same party; and the smaller the number of individuals composing a majority, and the smaller the compass within which they are placed, the more easily will they concert and execute their plans of oppression.”

The CFPB may have avoided capture by banks or fintechs, only to fall under the influence of trial lawyers and well-meaning activists. (Neither of those groups pays the costs of overregulation.) By contrast, a general regulator like the FTC hears from many diverse organizations with varied interests. The FTC has had its issues, but it would be much harder to capture.

As the CFPB’s design flaws limit its accountability, the Bureau has ignored the settled meaning of the laws it enforces. One court rejected as unlawful the Bureau’s attempt to regulate digital wallets, calling it an attempt to “solve an imaginary problem with no real evaluation of what the ‘solution’ would cost digital wallet providers or customers.”  In 2025 alone, district courts have found that CFPB rules violated both the CARD Act and the Fair Credit Reporting Act. Pushing the outer bounds of the law is inappropriate for an agency: new policy ventures should come from Congress.

Economic history is clear: experiments in one-sided business-is-bad regulation yield unaccountable agencies that ignore the costs of overregulation. This ultimately harms growth, competition, and consumers.

The CFPB has even more power than OSHA. This makes the Bureau’s departures from balance more concerning. The best option is to repeal the statutes that created the Bureau, returning its enforcement authority to generalized agencies such as the FTC or to the states. Protecting consumers from fraud is important. This task should go to enforcers with a track record of balance and a design that supports accountability to Congress.