The existence of Obama’s Consumer Financial Protection Bureau (CFPB) is in doubt. Funding is set to run out, while President Donald Trump and acting CFPB director Russ Vought have openly stated their intention to shut down the agency. Tech entrepreneurs have explained exactly how the agency has done harm to the very consumers it is supposed to protect.
As 2026 dawns, the bureaucratic behemoth created under the Obama administration faces an unprecedented reckoning. Designed to regulate everything from payday lenders to student loans, the agency quickly became a favorite hammer for progressive regulators looking to expand the federal footprint in every corner of the economy – and has been treated with no small amount of skepticism by the Trump Administration.
The agency relies on Federal Reserve “combined earnings” to survive, but sustained losses at the Fed mean there may be no funds available for the CFPB to draw on in the new year, a fact the agency itself acknowledged in November. Without a lifeline from Congress or a court order to compel funding, the bureau could grind to a halt early in January, a fate its treatment of tech entrepreneurs could hasten.
Trump allies in government have made no secret of their desire to dismantle the CFPB outright. Acting Director Russ Vought, installed by the president after firing his predecessor, has slashed staff, halted enforcement actions, and repositioned the agency to essentially neuter its regulatory bite. In public statements and administrative actions, Vought and the White House have signaled that the CFPB’s continued existence is negotiable at best and dispensable at worst.
Adding to the pressure is longstanding complaints from tech entrepreneurs that, far from protecting consumers, the agency protects entrenched industries and interests. Chief among them is Lambda School, an education-tech startup that sought to disrupt higher education, and was subject to a painful, multi-year CFPB investigation that bankrupted the company.
Lambda School emerged in 2017 as a Silicon Valley disruptor. Its founder, Austen Allred, pitched a simple idea: eliminate the barrier of upfront tuition for aspiring coders by adopting an income share agreement (ISA) model. Students would owe nothing unless they landed a job earning above a certain threshold, after which they would pay a percentage of their income — capped and with no interest — back to the school. In theory, the incentives aligned: the school only succeeded if students did.
The model garnered admiration from right and left alike. Conservatives saw it as an entrepreneurial way to bust up a broken student-loan system, and Betsy DeVos, the Secretary of Education in the first Trump administration, signaled support.
According to analysis in the Spectator, the endorsement by the Trump Administration triggered a flurry of attacks from Democrats, the media, and finally an investigation by the CFPB:
The Consumer Financial Protection Bureau (CFBP) joined the critics, determined to prove that if something looked like a loan, it must be one. It launched investigations into every company using ISAs, “bankrupting everyone but us,” as Allred later put it. Lambda asked for clarity. Tell us how to comply, it said. We don’t care how you regulate the ISA, just regulate it. The Bureau refused. Instead, it came up with a theory: because Lambda offered two options – those who could pay were charged $20,000 upfront; those who couldn’t were offered the $30,000 income share – so the $10,000 difference must be “interest.” It made no sense. That difference is far closer to a “finance charge” – you promise to pay a flat fee for deferring repayment. The mark-up compensated Lambda for taking on the risk in case students couldn’t repay the tutoring charges. Income shares don’t tick up each month by a certain percentage of the principal, so clearly this wasn’t interest. But reason rarely survives contact with regulation.
Ultimately, Lamba School was forced to offer student loans instead of ISAs – the very business model that the company was set up to disrupt. For the company’s founder, Austin Allred, it was a hard lesson in the partisan weaponization of government agencies.
“I wasn’t right-wing at the time,” explained Allred. “I thought the people I was dealing with had good intentions and wanted to do the right thing. It took me way too long to realize that wasn’t the case. It was my team versus yours.”
The legal fight over funding has already spilled into the courts. A Democrat-led coalition of 21 states and the District of Columbia has filed suit to force the administration to continue funding the CFPB. The Trump Administration is holding firm, with Vought informing the courts that the agency will run out of money as scheduled unless Congress chooses to intervene.
Lucas Nolan is a reporter for Breitbart News covering issues of free speech and online censorship.
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