Washington, D.C. – The Federal Reserve’s inspector general is formally investigating attempts by the Trump administration to dismantle the Consumer Financial Protection Bureau (CFPB), according to a letter sent to Congress and reviewed by CNBC.
The inquiry comes in response to requests from Sen. Elizabeth Warren (D-Mass.) and Sen. Andy Kim (D-N.J.), who raised concerns about workforce reductions and canceled contracts under the CFPB’s new leadership. The lawmakers questioned whether these moves undermined the agency’s mission and legality under existing law.
In a June 6 letter, Acting Inspector General Fred Gibson confirmed that his office had already begun reviewing layoffs at the agency and would now expand its scope to include terminated contracts initiated by the Trump-appointed CFPB leadership.
“We had already initiated work to review workforce reductions at the CFPB,” Gibson wrote. “We are expanding that work to include the CFPB’s canceled contracts.”
The review targets actions taken after Russell Vought, former Director of the Office of Management and Budget (OMB), was installed as acting head of the CFPB in February 2025. Under his direction, agency employees were told to stop ongoing work, while he and representatives from the Department of Government Efficiency, led by Elon Musk, pushed to lay off most of the bureau’s staff and terminate contracts with vendors.
The aggressive restructuring prompted immediate backlash. Warren and Kim wrote to both the Federal Reserve inspector general and the Government Accountability Office (GAO) earlier this year, seeking an investigation into whether the Trump administration’s plans were lawful and whether they interfered with the CFPB’s ability to protect consumers.
In April, the GAO confirmed that it had also opened a review into the matter.
“As Trump dismantles vital public services, an independent OIG investigation is essential to understand the damage done by this administration at the CFPB,” Kim said in a statement. “We need to ensure the agency can still fulfill its mandate to protect consumers from scams and fraud.”
The CFPB, established in the wake of the 2008 financial crisis, plays a critical role in regulating financial institutions and enforcing consumer protection laws. Its structure and independence have long been politically contentious, especially among conservative critics who argue the agency wields too much unchecked power.
Oversight Powers and Leadership Changes
The Fed’s Office of Inspector General (OIG) serves as an independent watchdog for both the Federal Reserve and the CFPB, with powers to examine records, issue subpoenas, interview personnel, and refer potential criminal violations to the Department of Justice.
Vought’s restructuring efforts were temporarily blocked by a federal appeals court, which issued a stay on the mass layoffs. The Trump administration has appealed that decision, and a final ruling on the legality of its overhaul plans is still pending.
Adding further weight to the investigation is the recent appointment of Michael Horowitz, the long-time Inspector General of the Justice Department, who is set to become the new watchdog for the Federal Reserve and CFPB at the end of this month. Horowitz, who gained bipartisan credibility during his tenure, was not removed during Trump’s earlier purge of 17 federal inspectors general.
Observers note that Horowitz’s leadership could bring increased scrutiny and independence to ongoing investigations, particularly those involving politically sensitive agencies like the CFPB.
As the appeals court deliberates and the inspector general's inquiry unfolds, the future of the CFPB remains uncertain, with consumer advocates and critics watching closely to see how far the Trump administration's restructuring efforts will ultimately go.
