GAO Details CFPB Reorganization, Funding Cuts, And Litigation

GAO’s initial report paints a picture of a deliberately downsized, reorganized CFPB operating under a sharply lower funding cap and amid intensifying litigation over how those changes have been implemented.

Scope and posture of the GAO report

• GAO’s January 27, 2026 report, “Consumer Financial Protection Bureau: Status of Reorganization Efforts” (GAO‑26‑108448), is descriptive: it lays out timelines, data, and actions from roughly February–August 2025, but defers impact analysis to a future report.

• GAO relied heavily on public sources (court dockets, Federal Register notices, statutes, OPM/OMB memos) plus some nonpublic CFPB documents, and notes that it repeatedly sought more information from CFPB but the Bureau declined to provide substantive responses, citing ongoing litigation.

Reorganization and downsizing

• The report details a significant reorganization and downsizing push beginning early 2025, framed by CFPB’s chief legal officer as an effort to carry out Dodd‑Frank duties “as a smaller, more efficient operation” in response to President Trump’s executive orders on shrinking government.​

• Actions between February and August 2025 included stop‑work orders, closure or curtailment of supervisory exams, workforce reductions and planned reductions in force (RIFs), contract terminations, and shifts in enforcement posture.

• GAO highlights a planned RIF of roughly 88% of the CFPB workforce, including about 90% of the Supervision Division and 80% of the Enforcement Division, with some divisions retaining only a fraction of then‑onboard staff; these figures come from litigation declarations and GAO cautions they are “planned” and subject to ongoing litigation.

• The report also notes temporary closure of CFPB headquarters and termination of all regional office leases during the period covered.​

Funding cuts and budget constraints

• Separately from internal reorganization, Congress reduced CFPB’s funding cap via the July 4, 2025 reconciliation bill, informally dubbed the “One Big Beautiful Bill Act.”

• That law lowered the statutory cap on CFPB funding from 12% to 6.5% of the Federal Reserve’s 2009 operating expenses (adjusted for labor costs), effectively cutting in half the maximum independent funding the Bureau can draw from the Fed.

• GAO and industry commentators emphasize that this is a durable structural constraint likely to shape the Bureau’s staffing, supervision, and enforcement portfolios over time, regardless of how reorganization‑related litigation is resolved.

Enforcement, guidance, and litigation

• GAO reports that, of 34 enforcement actions ongoing as of January 30, 2025, 16 were dismissed with prejudice and one without prejudice during the review period.​

• The Bureau has moved to dismiss or resolve some enforcement actions and petitions to enforce CIDs, and has sought to vacate or terminate a number of existing consent orders.​

• On the policy side, CFPB has rescinded or withdrawn approximately 70 guidance documents and proposed rules, including multiple guidance documents, interpretive rules, policy statements, advisory opinions, and some rules of agency organization from the prior administration.

• GAO notes instances where CFPB has told courts that a prior final rule exceeded the agency’s authority and has requested stays of litigation while it pursues new rulemaking.​

• The report devotes substantial attention to litigation challenging terminations, RIF plans, and other downsizing actions; these cases across multiple circuits form an important backdrop to the reorganization.

CFPB–GAO dispute and implications going forward

• CFPB’s written response, reproduced with the GAO report, criticizes GAO’s work as inaccurate, biased, and incomplete, asserting that ongoing litigation constrained its ability to correct the record and that GAO’s information‑request timelines were “limited and arbitrary.”

• GAO in turn cites its audit authority under 31 U.S.C. § 716, stating that litigation does not limit its right to obtain information or the CFPB’s obligation to provide it, and emphasizes that the report is grounded in publicly verifiable sources.​

• GAO explicitly disclaims taking a position on the policy merits or on the “right” size of the Bureau, but concludes that CFPB is undergoing a deliberate and significant downsizing and restructuring, not an abandonment of its statutory consumer protection mandate.​

• Near‑term, observers expect a smaller CFPB to continue exercising its authorities but to concentrate limited supervision and litigation resources on select products, practices, or institutions consistent with current leadership priorities, while de‑emphasizing other areas.

• GAO’s next report will move from describing actions to assessing impacts on CFPB’s ability to perform its statutory functions, which will likely feed congressional oversight, potential future legislation, and ongoing debates over CFPB’s structure and role.