As the current White House administration continues its attempts to enact policies that reduce federal regulation of the financial industry, the Consumer Financial Protection Bureau (CFPB) is one of several agencies coming under increased scrutiny. But what, exactly, is the CFPB and how does it affect you?
Following the economic recession in 2008, the Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank Act) was passed by Congress. As part of the regulatory reforms to the financial industry established by this law, the CFPB was created to protect U.S. consumers from the kinds of predatory and deceptive business practices that led to the collapse of the global economy.
Prior to the CFPB’s existence, financial industry regulatory and enforcement authority was spread among numerous government agencies, and consumer protection was more of an afterthought. The establishment of the CFPB represented the centralization of authority over the consumer financial products and services industry. It also meant consumers now had a single agency where they could lodge complaints against financial businesses and find educational resources to help them navigate complex financial products and services.
If you have a bank account, debit card, credit card, car loan, mortgage, or one of the other myriad of personal financial products, the CFPB establishes and enforces federal financial laws protecting you and your money. According to the CFPB, since it began operations on July 21, 2011, the agency has recouped $11.8 billion in relief to consumers as a result of their enforcement actions.
In addition to regulating traditional financial institutions such as banks and credit unions, the CFPB also oversees non-bank institutions like debt collectors, student loan companies, payday lenders, and credit reporting agencies. Recently, the CFPB fined all three major credit reporting companies a combined $8 million for deceptive practices, and TransUnion and Equifax were ordered to pay an additional $17.6 million in restitution to affected consumers.
Despite the CFPB’s success in obtaining restitution for consumers and empowering individuals to make well-informed choices in their personal financial lives, the House recently approved a bill that aims to severely limit the agency’s ability to protect consumers. If approved by the Senate, The Financial Choice Act would, among other things:
Revoke the CFPB’s authority to ban financial products or services it deems abusive
Revoke the CFPB’s authority to enact or enforce rules for payday and auto title lenders
Eliminate CFPB offices, including the offices of fair lending, consumer education, and research
Eliminate the CFPB’s ability to monitor markets in order to identify risks to consumers
Discourage the CFPB from educating seniors on unfair, deceptive, and abusive practices
Make the CFPB’s structure, funding, and exercise of enforcement actions more susceptible to politicization and pressure from special interest groups
At best, passage of the Financial Choice Act would result in fewer protections for consumers. At worst, it could be a step towards creating conditions similar to those that lead to the economic crash of 2008. Regardless of the outcome, consumers will continue to rely on the expertise of professionals in the financial industry to assist them in making life’s big financial decisions. This is why it’s important that organizations like the CFPB, and the BBB, continue to work on promoting trust in the marketplace no matter what is happening in Washington.
To find a finance professional you can trust, search the BBB Accredited Business Directory.
For more information on the CFPB and what it does, visit www.consumerfinance.gov.
By Rory Kilcullen
Disclaimer: Views expressed on this Blog are those of the individual author and do not necessarily reflect the views of BBB Serving Northeast California.