Recent controversies surrounding the Consumer Financial Protection
Bureau (CFPB) have revolved around its perceived lack of accountability to
Congress and the administration. Notable critics of the CFPB, such as the
Chairman of the House Financial Services Committee Representative Jeb
Hensarling, have characterized the CFPB as a rogue agency. A key legislation
sponsored by Rep. Hensarling is the Financial CHOICE Act, which contained
such reforms to the CFPB as subjecting its entire budget to the appropriations
process. The CHOICE Act has recently passed the House.
Though reform of the CFPB is necessary, subjecting its entire budget to
the congressional appropriation process risks undermining its effectiveness and
independence as a dedicated federal regulator for consumer financial protection.
In this paper, I propose an alternative funding solution to reform the CFPB
without substantively changing its powers and structure: the hybrid funding
model, with part of the CFPB’s budget self-funded and the balance appropriated
by Congress.

The hybrid funding model is a pragmatic compromise that allows the
CFPB’s valuable mission to be preserved while enhancing its perceived
accountability. Under this model, the CFPB will have two types of budget, with
each earmarked to providing funding for certain functions of the CFPB. The selffunded
budget (the size of which is determined by the CFPB) supports its
administrative, operational, and other back-office functions of the CFPB. The
congressional appropriations budget (the size of which is determined by
Congress) covers costs related to the more politically sensitive activities of the
CFPB, including its research, regulatory, supervisory, monitoring, and
enforcement activities. The hybrid funding solution aims to provide the CFPB
with both agency autonomy and congressional accountability while ensuring that
the CFPB has a baseline amount of budgetary resources sufficient for it to
maintain its basic operational needs.