What is the Consumer Financial Protection Bureau?
The Consumer Financial Protection Bureau (CFPB) is a federal regulatory agency created in the Dodd-Frank Wall St. Reform and Consumer Protection Act in 2010. Formed under the direction of Elizabeth Warren, it has the primary responsibility of protecting and educating consumers about the different types of financial products and services available to them and it is a place where consumers can file complaints. It is also intended to enforce consumer financial protection laws and to restrict unfair and abusive practices within the financial industry against consumers, including banks and non-banks. While Elizabeth Warren was thought to be a top pick to lead the Bureau, President Obama appointed Richard Cordray out of concern that she couldn’t overcome Republican opposition. The CFPB began operation on July 21st, 2011.
What’s the significance?
Before the CFPB, there were seven different federal agencies charged with protecting consumers. These included the Board of Governors, the Federal Deposit Insurance Company (FDIC), the Federal Trade Commission (FTC), the National Credit Union Administration (NCUA), the Office of Comptroller of the Currency (OCC), the Office of Thrift Supervision (OTS), and the Department of Housing and Urban Development (HUD). However, none of these had enough power to set the rules or focus on the whole market, so they are now consolidated in the hopes of being able to be more efficient and effective. For the first time there will also be federal regulation of non-banks such as payday lenders, private mortgage lenders and servicers, debt collectors, credit reporting agencies, and private student loan companies. It has been found that the unregulated non-bank lenders were some of the largest originators of the sub prime mortgages that led to the wide-scale rate of default during the financial crisis.
The GOP has criticized the CFPB and argues that the new regulations will lead to a hesitancy to lend on the part of banks and non-banks. They also criticize Obama for making Richard Cordray the director through a recess appointment. Nevertheless, the CFPB has been moving forward and since July 2011 it has received about 12,000 complaints from consumers on mortgages and credit cards. It has set up a social media-friendly website for people to become more informed and potentially share their stories.
Who’s talking about it?
Roosevelt Institute Fellow Mike Konczal explains why the Republicans tried to block Cordray...New Deal 2.0 Editor Bryce Covert writes about the millions of unbanked americans who will benefit from the CFPB...A Huffington Post article tallies the number and types of complaints received by the CFPB so far...Think Progress outlines the ways in which the CFPB has already been successful...The Economist discusses the CFPB’s new powers... James Surowiecki from The New Yorker delves into Elizabeth Warren’s intentions and why the republicans don’t like her ideas...George Zornick from The Nation shows how Republicans tried to block Cordray from being appointed and how Cordray succeeded.