The Consumer Financial Protection Bureau (CFPB) is an independent agency of the United States government responsible for consumer protection in the financial sector. Its jurisdiction includes banks, credit unions, securities firms, payday lenders, mortgage-servicing operations, foreclosure relief services, debt collectors, other financial companies operating in the United States.
The Consumer Financial Protection Bureau (CFPB) is a regulatory agency charged with overseeing financial products and services that are offered to consumers. The CFPB is divided into several units: research, community affairs, consumer complaints, the Office of Fair Lending, and the Office of Financial Opportunity. These units work together to protect and educate consumers about the various types of financial products and services that are available.
The Bureau of Consumer Financial Protection (CFPB) is an independent bureau within the Federal Reserve System that empowers consumers with the information they need to make financial decisions in the best interests of them and their families. The CFPB was created under the Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank Act).
The purpose of the CFPB is to promote fairness and transparency for mortgages, credit cards, and other consumer financial products and services. The CFPB will set and enforce clear, consistent rules that allow banks and other consumer financial services providers to compete on a level playing field and that let consumers see clearly the costs and features of products and services.
The functions of the CFPB to assist people in borrowing money or using other financial services include: implementing and enforcing Federal consumer financial laws; reviewing business practices to ensure that financial services providers are following the law; monitoring the marketplace and taking appropriate action to make sure markets work as transparently as they can for consumers; and establishing a toll-free consumer hotline and website for complaints and questions about consumer financial products and services.
The CFPB’s creation was authorized by the Dodd–Frank Wall Street Reform and Consumer Protection Act, whose passage in 2010 was a legislative response to the financial crisis of 2007–08 and the subsequent Great Recession.
The Consumer Financial Protection Bureau (CFPB) was created by the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010. The CFPB is headed by a chief who is appointed by the President for a five-year term. The bureau is also assisted by a Consumer Advisory Council, which is composed of at least six members who are recommended by regional Federal Reserve presidents.
Specifically, the CFPB helps consumer finance markets work more efficiently by providing rules, enforcing those rules and empowering consumers to take control of their personal financial lives. The CFPB works to educate and inform consumers against abusive financial practices, to supervise banks and other financial institutions, and to study data to better understand consumers and the financial markets they participate in.
The Vision and Goals of the CFPB
The overall aim of the CFPB is to facilitate the development of the consumer finance marketplace. Through this, consumers have access to transparent financial prices and risk and become aware of deceptive and abusive financial practices. The CFPB breaks down this high-level aim into four very specific strategic goals.
The first goal is to prevent financial harm to consumers while promoting good financial practices. The second goal is to empower consumers to live better economic lives. The third goal is to inform the public and policymakers with data-driven analytical insights. The fourth and final goal is to further advance the CFPB’s overall impact by maximizing resource productivity.
How the CFPB Helps Individual Consumers
In addition to these high-level goals, the CFPB also provides financial guidance for private individuals. Student financial guides are provided for parents and students who will have to pay for college. These guides allow people to compare and contrast the various financial aids available in the market.
For those who are far past college, the CFPB also provides informational resources on retirement planning. The organization can help with social security benefitsand provides tips specific to the retirement situation of the individual.
Finally, the CFPB can help private individuals with homeownership. On the CFPB website, it provides consumers with interest rate help, monthly payment worksheets and a loan comparison tool. For those consumers who need mortgagehelp, the CFPB also provides counseling on financial hardship.
Role
According to Director Richard Cordray, the Bureau’s most pressing concerns are mortgages, credit cards and student loans. It was designed to consolidate employees and responsibilities from a number of other federal regulatory bodies, including the Federal Reserve, the Federal Trade Commission, the Federal Deposit Insurance Corporation, the National Credit Union Administration and even the Department of Housing and Urban Development. The bureau is an independent unit located inside and funded by the United States Federal Reserve, with interim affiliation with the U.S. Treasury Department. It writes and enforces rules for financial institutions, examines both bank and non-bank financial institutions, monitors and reports on markets, as well as collects and tracks consumer complaints. Furthermore, as required under Dodd-Frank and outlined in the 2013 CFPB-State Supervisory Coordination Framework, the CFPB works closely with state regulators in coordinating supervision and enforcement activities.
The CFPB opened its website in early February 2011 to accept suggestions from consumers via YouTube, Twitter, and its own website interface. According to the United States Treasury Department, the bureau is tasked with the responsibility to “promote fairness and transparency for mortgages, credit cards, and other consumer financial products and services”. According to its web site, the CFPB’s “central mission…is to make markets for consumer financial products and services work for Americans—whether they are applying for a mortgage, choosing among credit cards, or using any number of other consumer financial products”.
History
In July 2010, Congress passed the Dodd–Frank Wall Street Reform and Consumer Protection Act, during the 111th United States Congress in response to the Late-2000s recession and financial crisis. The agency was originally proposed in 2007 by Harvard Law School professor Elizabeth Warren. The proposed CFPB was actively supported by Americans for Financial Reform, a newly created umbrella organization of some 250 consumer, labor, civil rights and other activist organizations. On September 17, 2010, Obama announced the appointment of Warren as Assistant to the President and Special Advisor to the Secretary of the Treasury on the Consumer Financial Protection Bureau to set up the new agency. The CFPB formally began operation on July 21, 2011, shortly after Obama announced that Warren would be passed over as Director in favor of Richard Cordray, who prior to the nomination had been hired as chief of enforcement for the agency.
Dispute over director
Elizabeth Warren, who proposed and established the CFPB, was removed from consideration for nomination as the bureau’s first formal director after Obama administration officials became convinced Warren “could not overcome strong Republican opposition”. On July 17, Obama nominated former Ohio Attorney General and Ohio State Treasurer Richard Cordray to be the CFPB first formal director. However, his nomination was immediately in jeopardy due to 44 Senate Republicans vowing to derail any nominee in order to encourage a decentralized structure to the organization. Senate Republicans had also shown a pattern of refusing to consider regulatory agency nominees, purportedly as a method of budget cutting. Due to the way the legislation creating the bureau was written, until the first Director was in place, the agency was not able to write new rules or supervise financial institutions other than banks.
On July 21, Senator Richard Shelby wrote an op‑ed for the Wall Street Journal affirming continued opposition to a centralized structure, noting that both the Securities Exchange Commission and Federal Deposit Insurance Corporation had executive boards and that the CFPB should be no different. He noted lessons learned from experiences with Fannie Mae and Freddie Mac as support for his argument. Politico interpreted Shelby’s statements as saying that Cordray’s nomination was “dead on arrival”. Republican threats of a filibuster in the Senate to block the nomination in December 2011 led to Senate inaction.
On January 4, 2012, Barack Obama issued a recess appointment to install Cordray as director through the end of 2013; this was highly controversial move as the Senate was technically in pro-forma session, and the possibility existed that the appointment could be challenged in court.
The constitutionality of Cordray’s recess appointment came into question due to a January 2013 ruling by the United States Court of Appeals for the District of Columbia Circuit that Obama’s appointment of three members to the NLRB (at the same time as Cordray) violated the Constitution.
On July 16, 2013, the Senate confirmed Richard Cordray as director in a 66–34 vote.
Proposed amendments
On July 11, 2013, the CFPB Rural Designation Petition and Correction Act (H.R. 2672; 113th Congress) was introduced into the House of Representatives. The bill would amend the Dodd–Frank Wall Street Reform and Consumer Protection Act to direct the CFPB to establish an application process that would allow a person to get their county designated as “rural” for purposes of a federal consumer financial law. One practical effect of having a county designated “rural” is that people can qualify for some types of mortgages by getting them exempted from the CFPB’s qualified mortgage rule.
On September 26, 2013, the Consumer Financial Protection Safety and Soundness Improvement Act of 2013 (H.R. 3193; 113th Congress) was introduced into the United States House of Representatives. If passed, the bill would modify the CFPB by transforming it into a five-person commission and removing it from the Federal Reserve System. The CFPB would be renamed the “Financial Product Safety Commission”. This bill is also intended to make it easier to override the decisions that the CFPB makes. On February 7, 2014, House Majority Leader Eric Cantor announced that H.R. 3193 would be on the House schedule for February 11 or 12, 2014.