Shutting Down CFPB Is Not Like Shutting Down USAID

Elon Musk seems to have CFPB on his hit list after having trashed USAID. Here's the thing: shutting down CFPB is actually very different in effect than shutting down USAID. USAID provides an important set of tools for American diplomacy and funds a lot of good works around the world. But it is not a regulatory agency. It doesn't administer statutes and promulgate regulations. CFPB does. Shutting down USAID harms development aid recipients and diminishes the US's foreign relations toolkit, but it doesn't cause problems with the operation of US law. Shutting down CFPB does.

Shutting down the CFPB does not void the Consumer Financial Protection Act or the enumerated consumer laws the CFPB administers like the Truth in Lending Act and the Electronic Fund Transfer Act. Those authorities can only be changed by an act of Congress, which will require 60 votes in the Senate. Nor would a work shutdown void the regulations the Bureau has promulgated under those laws. Those can only be repealed through notice and comment rulemaking. But it does mean that there would be no one with authority to update and adjust those regulations, which can all be enforced by state attorneys general, who are likely to pick up some of the slack from a non-functioning CFPB. (Remember that a violation of an enumerated consumer law is a violation of the Consumer Financial Protection Act, triggering CFPA remedies, not just the enumerated consumer law's remedies.) 

This might not matter to Musk in his move fast and break things mode, but a non-functional CFPB is going to cause real problems for regulated financial institutions.  Let's start small:  the Truth in Lending Act has exemptions for smaller transactions. The exemptions get inflation adjusted, but that requires a functional CFPB to promulgate the adjustments through rulemakings. Or suppose a firm wants to get a no-action letter. That's not going to be possible without the CFPB functioning. Or suppose there is another pandemic-like crisis that requires temporary suspension of certain rules. Not possible if the agency isn't up and running. Bottom line: there are real problems that will arise from having a zombie agency responsible for over a dozen major federal laws.  

Feb. 8. 2025 update:  Both USAID and CFPB have statutory duties to Congress. Like USAID, the Bureau is required to submit various annual or semi-annual reports to various Congressional committees (see e.g. or here or here or here or the last section here). These reports are a critical part of Congressional oversight over the Bureau. A Bureau that isn't operating can't exactly do that, which might be grounds for members of Congress to bring litigation against the administration. Whether a report that simply says "We didn't do anything because we didn't feel like it, nyah, nyah," makes muster is an open question—is there a good faith requirement implied? I could see courts saying, "It's up to Congress to discipline an insubordinate agency or a President who fails to take care that the laws are faithfully executed." But the reporting requirement might give members of Congress a hook for litigation over deactivating the agencies based on a concern that the agency will not report and that it will be impossible for Congress to undertake timely action. After all, there is a new Congress every two years, basically pressing a restart button, such that failure to transmit an annual report for 2025 would not even be on Congress's radar until 2026 and Congress might not have time to act before a new Congress is in place. Put another way, courts might need to take judicial notice of Congress's limited temporal bandwidth for governing a federal government that is vastly more complex than anything the Framers imagined.