Congressional Republicans Put Forth Meaningful CFPB Reforms, But They’re Missing Some Key Opportunities

For years, the Consumer Financial Protection Bureau (CFPB) has been a thorn in the side of free market, limited government advocates. While this may sound like a partisan grudge, the reality is that the agency was created to operate outside of traditional regulatory barriers and oversight. By statute, the CFPB is insulated from congressional appropriations, run by a single director with sweeping discretion over an undefined “abuse” standard, and unburdened by any requirement for cost/benefit analyses. In practice, this has resulted in abuse of authority and wild swings in policy and enforcement. Not only does this volatility make compliance more complicated for CFPB-regulated businesses, it also means consumers may not be immediately aware of new, sweeping changes from one administration to the next.

Fortunately, congressional Republicans have set forth new draft legislation, the CFPB Reform Act of 2026, which takes real steps toward effectively addressing many of these flaws. But the bill leaves a couple of important structural fixes on the table.

Starting with the positives, the bill would implement one of the primary needed reforms, bringing the CFPB under congressional appropriations. Currently, the CFPB does not receive regular appropriations and is instead funded by combined earnings of the Federal Reserve. Previously, the agency could request up to 12 percent of the Fed’s combined earnings to fund its operations, but that was slashed to 6.5 percent under the One Big Beautiful Bill Act, a Republican win at the time. Yet the CFPB is still able to fund its operations without the congressional oversight required by other financial regulators, and unchecked by the normal separation of powers. This bill would make the necessary step of moving the agency into the regular appropriations process, striking its authority to draw funding directly from the Federal Reserve. This is the same fix at the heart of legislation introduced by Rep. Andy Barr (R-Ky.), the Taking Account of Bureaucrats’ Spending (TABS) Act, which was previously supported by R Street. Funding through Congress rather than through a draw on the Fed’s earnings means the Bureau will finally answer to elected representatives on a recurring basis, rather than operating with a blank check shielded from ordinary oversight.

Another positive reform in the bill draws directly from the R Street-supported Rectifying UDAAP Act. Since its inception, the CFPB has operated under the authority of limiting “unfair, deceptive, abusive acts and practices (UDAAP)”. The chief issue is that the agency has spent years stretching “abusive” into whatever a given director needed it to mean—at one point even folding in discrimination claims that have no textual basis in the statute. This bill would tighten the definition of UDAAP to mean “intentionally and materially interfer[ing] with the ability of a consumer to understand a term or condition of a consumer financial product or service; or take unreasonable advantage of [a consumer].” That is a meaningful check on the agency, which has historically abused its UDAAP authority.

Unlike most federal financial regulators, the CFPB has never been required to conduct a rigorous cost-benefit analysis of its rules and is instead only statutorily obligated to “consider” potential costs. This is clearly an egregious standard for any regulator, let alone one with so many other uniquely independent attributes. This bill changes that, mandating that the Bureau identify objectives, examine whether a rule duplicates existing regulation, quantify compliance costs, and publish the data and assumptions behind its rulemaking. This shift protects regulated entities and the public from rules built on thin justification and aids in limiting hasty rulemaking and regulatory whiplash.

Yet the bill is far from perfect. It fails to address one of the most-oft discussed issues with the agency: its sole-director leadership. The CFPB has always operated under concentrated, unchecked authority in a single director, which has allowed the Bureau’s priorities to swing from administration to administration. Thought leaders and members of Congress have long sought a five-person commission, as proposed in the Bureau of Consumer Financial Protection Commission Act, introduced by Rep. Bill Huizenga (R-Mich.). Curiously, congressional Republicans had the opportunity to take up this particular reform and instead eschewed it.

Finally, the reform bill makes no mention of the value CFPB can provide in the ongoing national fight against financial scams, which cost Americans billions of dollars each year. While the agency is no friend to Republican lawmakers, it could still be effectively leveraged on a bipartisan basis to serve as a consumer-facing hub for combating financial scams. In practice, this could make the CFPB a central hub for financial scam reporting, tracking, and restitution efforts—a role that plays to its statutory strengths rather than its worst impulses. Unfortunately, this bill does not touch that opportunity at all.

The bill delivers on funding reform, UDAAP clarity, and cost-benefit requirements—three of the clearest, most overdue fixes available. However, durable reform requires diffusing power, not just constraining its use, and until Congress pairs appropriations reform with a multi-director model, the CFPB will remain one election away from lurching in a new direction. With full reforms, the agency could benefit government, industry, and consumers by shifting functions towards fighting the pervasive and growing nationwide threat of scams. Lawmakers should consider these additional changes ahead of any bill advancement.