New Law Creates Dedicated Watchdog for Consumer Financial Protection Bureau, Mandates 2% Budget Cut for Oversight

The new Bureau of Consumer Financial Protection-Inspector General Reform Act of 2025 (CFPBIG Reform Act) is all about accountability, specifically for the Bureau of Consumer Financial Protection (BCFP)—the agency that sets the rules for mortgages, credit cards, and student loans. Simply put, this bill creates a new, dedicated, and powerful internal watchdog for the BCFP.

The Watchdog Gets Its Own Leash

Right now, the BCFP shares an Inspector General (IG) with the Federal Reserve Board. That IG is appointed by the Fed’s Chairman. This bill changes that completely. Under the new law, the BCFP gets its own dedicated IG, who will be appointed by the President and confirmed by the Senate, just like other major agency heads. This shifts the oversight structure from being an internal Fed arrangement to a standard Presidential appointment, which usually means more political scrutiny and independence. The bill specifically removes the BCFP from the Fed Chairman’s appointment authority (Sec. 2).

Where the Money Goes: Dedicated Funding and Congressional Check-ins

If you’re wondering how this new IG office will pay for itself, the bill has a very specific answer: dedicated funding. Every year, the BCFP must set aside 2 percent of the funds it receives specifically for the new Office of the Inspector General (Sec. 3). For an agency with a large budget, that’s a significant, guaranteed resource for oversight. This means the IG won't have to beg the BCFP Director for operating cash, ensuring greater independence.

In addition to the funding, the new IG is required to testify before key Congressional committees—House Financial Services and Senate Banking—at least twice a year (Sec. 3). This is a big deal for transparency. It forces the IG to regularly report on the BCFP’s activities, making it much harder for the agency to let problems fester out of the public eye. For the average person, this means Congress will have a much clearer, mandated line of sight into how the agency handling their financial complaints is actually run.

The Real-World Impact: More Scrutiny, More Delays?

This reform is all about tightening the reins on the BCFP. While increased accountability is generally a good thing for consumers—it means the agency handling your mortgage disclosure rules is being watched closely—it could introduce friction. The BCFP Director and staff will now face intense, dedicated scrutiny from an IG with guaranteed funding and mandatory reporting requirements. This could slow down the agency’s ability to issue new rules or take enforcement actions, as every decision will be under a microscope.

The entire law’s effect is contingent on one thing: Senate confirmation. The changes only officially kick in the day the Senate confirms the very first dedicated BCFP Inspector General (Sec. 4). Until then, the current joint IG stays in place. Once the new IG is confirmed, the existing IG becomes solely the Inspector General for the Federal Reserve Board, completing the separation of these two massive financial regulators.