The acting director of America's consumer financial watchdog has ordered the agency to cease operations and cut funding, marking a dramatic curtailment of oversight of the US financial sector.

Russell Vought, who was appointed acting head of the Consumer Financial Protection Bureau (CFPB) on Friday, instructed staff to "cease all supervision and examination activity" in a Saturday directive that effectively shutters the agency's operations.

The bureau's Washington headquarters will be closed for the week of 10 February, with staff instructed to work remotely, according to an internal email seen by Reuters.

Vought announced he would halt the agency's next round of Federal Reserve funding, declaring its current reserves of $711.6 million "excessive in the current fiscal environment."

The moves have drawn sharp criticism from consumer advocates and Democratic lawmakers. Dennis Kelleher, head of Better Markets, condemned the action as "another slap in the face for all Americans who depend on basic financial products and services." He accused Trump of throwing his own voters "to the financial wolves."

The developments have also raised concerns about potential conflicts of interest involving the unelected South African billionaire Elon Musk, whose social media platform X is seeking to enter the consumer financial marketplace. Members of Musk's non-governmental "Department of Government Efficiency" have gained administrative-level access to the agency's computer systems, according to sources familiar with the matter.

Legal challenges are already mounting against the administration's actions. The National Treasury Employees Union has filed suit in federal court in Washington, arguing that Vought's moves violate the US Constitution by undercutting Congress's power to set and fund the agency's missions and that the involvement of Musk indicates that the unelected billionaire is effectively attempting to seize control of his own future regulator.

The union has also filed a separate lawsuit to block Musk's team from accessing personnel records. Democracy Forward, a liberal-leaning group, announced it would "swiftly pursue all legal options to defend the CFPB and protect the American people from financial harm," according to its president and chief executive officer Skye Perryman. Since the CFPB is a creation of Congress, experts note that it would require separate congressional action to formally eliminate it, raising questions about the constitutionality of the administration's unilateral moves to suspend its operations.

The CFPB, created by Congress following the 2008 financial crisis, oversees a broad range of financial institutions including banks, mortgage lenders, and cash transfer services. The agency says it has secured nearly $20 billion in financial relief for US consumers since its founding through cancelled debts, compensation, and reduced loans.

Elizabeth Warren, the Democratic senator who originally proposed the agency's creation, said "Vought is giving big banks and giant corporations the green light to scam families."

The suspension of activities follows Trump's dismissal of previous CFPB director Rohit Chopra on 1 February. Under Chopra's leadership, the bureau had pursued initiatives to cap overdraft fees—an initiative it said would add up to $5 billion in annual overdraft fee savings to consumers, or $225 per household that pays overdraft fees— limit additional charges, and proposed restrictions on data brokers selling personal information such as Social Security numbers.

The effective dismantling of the CFPB follows a similar pattern to the administration's recent actions against the US Agency for International Development (USAID), which saw its operations largely suspended and funding frozen while the administration conducts what it calls a "review" of its programmes.

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