Consumer Financial Protection Bureau

The Consumer Financial Protection Bureau (CFPB) is an independent agency under the Federal Reserve System. It was created in 2010 to protect and educate consumers about their dealings with financial services and markets. Its goal is to ensure that federal laws governing financial matters are enforced consistently and that consumers receive fair and competitive access to all financial products.

The CFPB is part of the Dodd-Frank Act that came about as a response to questionable practices in the lending and investment industries in 2008. It was the first federal agency to focus specifically on consumer rights and consumer financial protection.

The agency was given wide-ranging responsibilities to educate consumers, enforce rules and regulations and conduct studies on products and services like credit cards, mortgages, student, payday and auto loans and collection agencies.

The CFPB took over the review, writing and enforcement of regulations that was formerly shared by seven federal agencies: Department of Housing and Urban Development, Federal Deposit Insurance Corporation, Federal Reserve Board, Federal Trade Commission, National Credit Union Administration, Office of the Comptroller of the Currency and Office of Thrift Supervision.

In its first five years of existence, the CFPB helped 17 million customers gain $10.1 billion in relief. Approximately $2.6 billion was in restitution for customers and another $7.5 billion came in the form of principal reductions, cancelled debt and other relief.

Basic Responsibilities of the CFPB

The CFPB writes and enforces laws for financial companies and products. It has investigative and enforcement authority, with the power to issue subpoenas and request testimony in federal court. It has the power to make rules, issue orders and provide guidance on financial matters.

The CFPB also is tasked with reviewing and streamlining regulations. The Dodd-Frank Act requires the CFPB to ensure that consumers have access to information about their financial options. For financial transactions such as loans, customers must be given information about the transaction in plain English before they make a decision. This mandate is a response to long-term consumer frustration with misleading or intentionally obscure language in mortgages, loan contracts and credit card agreements.

Thus, the CFPB’s Division of Consumer Education and Engagement operates programs targeted toward particular populations such as students, members of the armed forces and older Americans. The related Office of Financial Empowerment, launched in June 2012, specifically addresses the needs low-income and other economically vulnerable Americans.

Over the past few years, the CFPB has extended its outreach to consumers and the financial industry. The bureau invites consumers to discuss their experiences with financial products and services via a variety of forums such as town hall meetings, the CFPB website and field hearings. Its Office of Community Affairs also invites local leaders to speak at forums regarding consumer and civil rights.

What Falls Under CFPB Jurisdiction

The Consumer Financial Protection Bureau has authority over a wide-range of financial products, including some areas that might surprise consumers.

The biggest area that the CFPB supervises is depository institution, which is any institution that accepts monetary deposits. That’s a fancy title for what consumers call banks, credit unions or savings and loans. The dealings with banks include financial products like mortgages, credit cards and bank accounts.

Other services under the CFPB jurisdiction include:
  • Consumer loans, including private student and auto loans, credit extensions and other loan services
  • Payday loans and check cashing
  • Debt collection
  • Credit reporting and consumer financial reports
  • Property leases and purchases
  • Prepaid cards

Investigating Consumer Complaints

In July 2011, a year after the CFPB’s founding, the bureau began its consumer response operations to accept and process direct consumer complaints. Consumers can file complaints through its website and by telephone, mail, fax and email. The CFPB first accepted complaints about credit cards but later began allowing complaints about mortgages, bank services, consumer loans and private student loans.

After the bureau screens a consumer complaint and decides to investigate, it then communicates with the respective company. The company must report back to both the consumer and the CFPB within 15 days, detailing how it intends to respond to the complaint. More than 80% of complaints received are sent to companies for review and response.

If a consumer disputes a company’s response or a company fails to provide a response, the bureau may investigate further. In some instances, the bureau may transfer complaints to its Division of Supervision, Enforcement, and Fair Lending and Equal Opportunity.

The bureau launched its Consumer Complaint Database in June 2012, allowing the public to access information on submitted complaints. The database includes all basic information about a complaint, as well as any action taken and how the involved company responded.

The CFPB also maintains a confidential hotline for whistleblowers who wish to report suspected violations of federal consumer financial laws by the companies they work for, have business with, or compete against.

CFPB Enforcement Activity

In 2015, the agency handled 59 cases where companies settled allegations of wrongdoing and 11 more in which lawsuits were filed. That was more than double the number of settlements (23) and the same number of lawsuits from 2014.

Some of the notable settlements from 2015 include:
  • Citibank and Its Subsidiaries – were ordered to pay an estimated $700 million to seven million consumers affected by deceptive marketing, billing, debt protection and credit monitoring products associated with its credit card services. Citibank also had to pay $35 million in civil penalties to the CFPB.
  • GE Capital Retail Bank – (now known as Synchrony Bank) was ordered to pay $225 million in relief to consumers for deceptive and discriminatory marketing practices on credit cards
  • CarHop and Universal Acceptance Corp. – the “buy-here, pay-here” car sales company and its affiliated financing company were ordered to pay a $6.4 million fine for inaccurately reporting information on 84,000 customer accounts
  • General Information Services and e-Background-checks.com – were ordered to pay $12.5 million in fines and relief payments for reporting inaccurate information about job applicants
  • Encore Capital Group – (a debt collection agency) must pay $42 million in consumer refunds and $10 million in penalties, and must stop collection on over $125 million in debts for pressuring consumers with false statements and churning out lawsuits

The agency has been a newsmaker throughout its brief history. It took Congress two years to confirm Richard Cordray as the first Director and since then, the agency’s enforcement and rulemaking divisions have made numerous headlines and caused much controversy.

CFPB and Military Service Members

The CFPB has a special office set up to handle problems affecting members of the military, their families and veterans.

The Office of Servicemember Affairs is there to help with the challenges that deployment and frequent moves bring on military families. The office receives questions and complaints directly from members of the military and pursues action to help those in service work better with financial markets.

The CFPB ordered Security National Automotive Acceptance Company (SNAAC), to pay $3.28 million for illegal debt collection tactics. SNAAC specializes in auto loans to military members to buy used cars. According to the CFPB, the company threatened to contact superior officers when a member of the military defaulted on a loan.

The CFPB also took action against Military Assistance Company for hidden fees in their military allotments. Military Assistance was ordered to repay $3.1 million for not fully disclosing hidden fees to members of the military.

And in the most common example of businesses taking advantage of the military, Cash America International, a payday lender, was ordered to refund $14 million for violating the Military Lending Act by illegally overcharging service members and their families.

Bill Fay

Bill Fay is a journalism veteran with a nearly four-decade career in reporting and writing for daily newspapers, magazines and public officials. His focus at Debt.org is on frugal living, veterans' finances, retirement and tax advice. Bill can be reached at bfay@debt.org.

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