Recent headlines about the leadership chaos at the Consumer Financial Protection Board (CFPB) may have some consumers wondering exactly what the CFPB does and, more importantly, why they should care.
Here’s a primer:
The CFPB was created in 2010 under the Dodd-Frank Wall Street Reform and Consumer Protection Act. It brings under one roof the protection of consumers in financial markets including credit cards, mortgages and bank accounts.
CFPB’s duties fall into three main buckets:
- Educate consumers and ensure people can get the information they need to make sound financial decisions.
- Enforce and administer federal consumer financial protection laws and prevent unfair, deceptive, or abusive acts or practices against consumers.
- Research consumer behavior and monitor financial markets for risks to consumers.
Why was it created?
Prior to the passage of Dodd-Frank, seven disparate federal agencies were tasked with consumer financial protection. Regulators often looked the other way or lacked the power to act while scores of consumers received mortgages they couldn’t afford, and banks and investors repeatedly sold off bad debt while paying out big bonuses on high-risk bets. The disastrous result is, as they say, history.
What has CFPB done for you, the consumer?
While CFPB’s tally of accomplishments is significant, the answer to that question might depend on whom you ask. Supporters of the agency point to over $12 billion returned to 27 million consumers harmed by financial companies, while critics have deemed the agency a “new era in government overreach” in which recently departed CFPB Director Richard Cordray “held back growth and innovation.”
Significant CFPB actions thus far:
- In 2013, CFPB standardized mortgage verification requirements to protect borrowers and prevent predatory lending practices that led to some of the most damaging consequences of the financial crisis.
- In 2014, the agency ordered Bank of America to pay more than $720 million in relief to consumers harmed by deceptive marketing practices regarding credit card add-on products.
- In July 2015, CFPB forced Citibank to offer $700 million in compensation to consumers misled into buying unwanted credit card add-ons.
- In October 2015, the agency redesigned and simplified the disclosure documents that borrowers receive when they take out a loan.
- By its own tally, the agency has returned nearly $12 billion to more than 27 million consumers victimized by the banking and financial-services industries.
Here’s hoping this primer helps weary news-readers navigate the ongoing leadership saga within the CFPB and any future news about the agency.
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