CFPB calls GAO funding probe 'political' and 'weaponized'

Bloomberg News

The Consumer Financial Protection Bureau is ramping up its attacks on the Government Accountability Office, claiming the independent congressional watchdog was "politicized" for questioning acting Director Russell Vought's decision to reject funding for the CFPB this year. 

Mark Paoletta, the CFPB's chief legal officer, sent a letter Thursday criticizing GAO for questioning Vought's authority over the CFPB's budget. Vought officially notified the Federal Reserve Board in February that the CFPB would not be requesting funding this year.

In the letter, Paoletta called Congress "reckless and irresponsible," for funding the CFPB through the Federal Reserve System rather than the normal appropriations process, which has been the subject of protracted debate since the bureau was first created in 2010. The letter was first reported by the Daily Caller, and was sent to Speaker of the House Mike Johnson and Senate Majority Leader John Thune. 

Vought "acted well within his legal authorities in declining to request further funds from the Federal Reserve System for FY 2025," Paoletta wrote, alleging GAO had conflated a post on X with a letter Vought sent to Powell the same day officially notifying the Fed that funding "would not be reasonably necessary for the bureau to perform its statutory functions."

The GAO agreed to investigate the CFPB at the request of Senate Democrats who alleged the Trump administration was seeking to illegally fire the majority of the agency's staff.

Vought has sparred with the GAO over the Trump administration's illegal withholding of congressionally appropriated funds. Vought's decision not to request funds for the CFPB, Paoletta wrote, was not an illegal withholding under the Impoundment Control Act.

"We once again take issue with your weaponization of the Impoundment Control Act of 1974 (ICA) for political purposes, which continues to harm GAO's credibility with the Executive Branch and with Congress," Paoletta wrote.

Vought and President Trump claim the Impoundment Control Act of 1974, which allows the president to delay or withhold congressional funding, is an infringement on executive authority. 

Vought, who is also director of the Office of Management and Budget, is locked in a contentious legal battle with the CFPB's union, which sued the agency in February to halt mass firings before they took place. 

On Feb. 8 Vought wrote on X that the CFPB had $711.6 million "in funding on hand," which he said was "excessive in the current fiscal environment." The CFPB would not be "taking its next draw of unappropriated funding because it is not 'reasonably necessary' to carry out its duties." 

"This spigot, long contributing to CFPB's unaccountability, is now being turned off," Vought said in the X post.

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A day after that post, Vought closed the CFPB's headquarters in Washington and told the agency's staff to "stop working and stand down." 

Work at the CFPB has been at a standstill since February when the agency was sued by the National Treasury Employees Union, which alleged Vought planned to issue a mass layoff that would have cut the workforce from 1,750 to roughly 200. The CFPB issued RIFs on April 17 but a federal judge issued an injunction on April 18 halting the layoffs. An appellate court panel is expected to rule any day on whether the injunction can be lifted and RIFs can continue. 

Paoletta claimed in the letter to GAO's general counsel, Edda Emmanuelli Perez, that the watchdog was overly focused on Vought's social media posts rather than the CFPB's funding.  

"As reckless and irresponsible as it may have been, Congress designed CFPB's funding mechanism to insulate the Bureau from accountability to Congress regarding the amount it requests from the Federal Reserve," the letter states. "Any conclusion that the Acting Director lacks the authority to make his agency funding determination cannot be reconciled with statutory text."

Republicans have long sought changes to the CFPB's funding structure, and secured some changes through the recently passed budget bill that President Trump signed into law on July 4. That bill reduces the maximum amount that the CFPB can request from the Federal Reserve by almost half.

"Your boss — Congress — has thus enshrined its agreement with the Acting Director's efforts to right-size the Bureau into law," Paoletta told the GAO.

The CFPB's budget is now capped at 6.5% of the total operating expenses of the Federal Reserve, down from 12%, which was mandated by the Dodd-Frank Act of 2010. Last year, the CFPB's estimated budget was $684.9 million.

"The purpose of removing the Bureau's funding from the annual appropriations process is to allow the Director — in his sole discretion — to determine the amount the Bureau requires to function," Paoletta wrote to the GAO. "To read this unambiguous grant of discretion as a requirement that the Director request the full amount of funds available from the Federal Reserve is untenable and part of a politicized campaign against President Trump's historic efforts to restore fiscal sanity and efficiency to the Federal Government."

The CFPB did not respond to a request for comment.