S.303 - Defund the CFPB Act (119th Congress)
Summary
S.303, the "Defund the CFPB Act," aims to amend the Consumer Financial Protection Act of 2010 by limiting the Director of the Bureau of Consumer Financial Protection's funding requests to $0. This bill was introduced in the Senate on January 29, 2025, and referred to the Committee on Banking, Housing, and Urban Affairs.
The bill proposes to eliminate the existing funding mechanism for the CFPB and replace it with a provision that allows no funding. This would effectively shut down the CFPB.
The Act specifically targets Section 1017(a) of the Consumer Financial Protection Act, modifying its paragraphs to reflect the zero-funding mandate.
Expected Effects
The primary effect of this bill, if enacted, would be the defunding and likely dismantling of the Consumer Financial Protection Bureau (CFPB). This would eliminate a federal agency tasked with protecting consumers in the financial sector.
Consumers could potentially be more vulnerable to predatory financial practices without the CFPB's oversight and enforcement capabilities. The absence of the CFPB could also lead to reduced enforcement of consumer financial protection laws.
Financial institutions might experience reduced regulatory scrutiny, potentially leading to increased profits but also increased risks for consumers.
Potential Benefits
- Reduced Government Spending: Eliminating the CFPB's funding could lead to a decrease in overall government expenditure.
- Reduced Regulatory Burden: Financial institutions may face fewer regulations, potentially leading to increased efficiency.
- Increased Financial Innovation: Some argue that reduced regulation fosters innovation in the financial sector.
- Potential for Lower Costs: Financial institutions might pass on cost savings from reduced compliance to consumers.
- Increased State Control: States may have more control over consumer financial protection.
Most Benefited Areas:
Potential Disadvantages
- Increased Risk of Predatory Practices: Without CFPB oversight, consumers may be more vulnerable to unfair or deceptive financial practices.
- Reduced Consumer Protection: The absence of the CFPB could weaken consumer protection laws and enforcement.
- Limited Recourse for Consumers: Consumers may have fewer avenues for resolving disputes with financial institutions.
- Potential for Financial Instability: Reduced regulation could increase the risk of financial crises.
- Disproportionate Impact on Vulnerable Populations: Low-income individuals and other vulnerable groups may be particularly affected by reduced consumer protection.
Most Disadvantaged Areas:
Constitutional Alignment
The bill's constitutional alignment is debatable. Congress has the power to control federal spending under Article I, Section 9, Clause 7, which states that "No Money shall be drawn from the Treasury, but in Consequence of Appropriations made by Law." This supports Congress's authority to defund an agency.
However, some may argue that defunding the CFPB undermines the government's responsibility to "promote the general Welfare," as stated in the Preamble of the Constitution, by reducing consumer protections. The necessary and proper clause could also be invoked to argue that the CFPB is necessary to execute congress's enumerated powers.
Ultimately, the constitutionality of the Defund the CFPB Act would likely be determined by the courts, weighing Congress's power of the purse against the potential impact on consumer protection and the general welfare.
Impact Assessment: Things You Care About ⓘ
This action has been evaluated across 19 key areas that matter to you. Scores range from 1 (highly disadvantageous) to 5 (highly beneficial).