The Consumer Financial Protection Bureau (CFPB) is one of the newest agencies created by the Obama administration aimed at helping consumers navigate their way through the continuing financial crisis. This article introduces you to the CFPB, its mission, functions and structure. It also describes what you, as consumers and professionals, can do interactively through the bureau's website. Finally, we discuss recent initiatives by the CFPB to tackle lingering issues in mortgage servicing, debt collection and credit reporting.
History and Mission of the CFPB
In July 2010, the Dodd-Frank Wall Street Reform and Consumer Protection Act officially created the CFPB. The bureau seeks to eliminate the deceptive, illegal practices that led the recent United States financial crisis, and create an environment where consumers understand financial risks, credit costs and product availability and where companies' business models are built on fairness, honesty, and transparency. Its mission is "to make markets for consumer financial products and services work for Americans."
The CFPB performs its mission through:
- Education - Helps consumers understand laws and regulations that govern credit card, student loan and mortgage lenders.
- Enforcement - Enforces laws and regulations, and supervises financial services companies to ensure compliance.
- Research - Gathers information and issues reports that help consumers and businesses understand consumer behavior, how financial markets work and how they can work better.
The bureau is an independent arm of the Federal Reserve System, operating as an umbrella to enforce close to 20 rules and regulations previously spread over seven different agencies. Some existing laws it will now enforce include the Fair Debt Collection Practices Act, Fair Credit Reporting Act, Truth in Lending Act, Real Estate Settlement Procedures Act (RESPA), Electronic Funds Transfers Act and the Privacy of Consumer Financial Information Act, among others. It is working to create additional regulations covering international money transfers, more extensive supervision over non-bank financial service companies, extended requirements for lenders to consolidate mortgage disclosures and examine borrowers' ability to repay loans.
Structure and Leadership
Richard Cordray, former Ohio Treasurer and Attorney General, leads the CFPB. The leadership team includes former leaders and experts from the Federal Reserve, Fannie Mae, the White House, various state and federal regulatory agencies and private firms in the financial services industry. They bring expertise in technology, compliance management, consumer affairs and market analysis to the bureau.
Associate directors will oversee core-operating areas including:
- Consumer education and engagement;
- Research, markets and regulation;
- Supervision, fair lending and equal opportunity enforcement and
- External affairs - including consumer advisory boards, bank and credit union participation and coordination, legislative and government affairs.
While the bureau operates through its location in Washington D.C., a consumer help center in Iowa City and through field initiatives in key areas across the country, the website is the primary portal where consumers can interact and get help.
What You Can Do through the CFPB
On the interactive CFPB website, consumers can make inquiries and complaints, and industry professionals can work with the bureau to stop fraud and deceptive practices through the bureau's Whistleblower program.
Know Before You Owe is a program that helps consumers understand credit card disclosures and costs, how to read and understand your real estate settlement statement (HUD-1) and how to shop for student loans and financial aid before you sign the papers. Consumers who already have loans and credit cards can learn more about what disclosures and information they should get from their lenders.
Consumers can read and comment on the notices on proposed rules, forming advisory boards and provide additional information to support CFPB research and analysis.
You can tell about your experiences, good or bad, as a consumer. On the tell your story page, you can anonymously discuss details that will help the bureau research and understand what happens to consumers and how the bureau can help.
You can make an official complaint against mortgage lenders and servicers, auto lenders, credit card companies, consumer loans (i.e., payday lenders), student loan lenders and servicers, banks and credit union account and loan services. You will need to create a login and password and then you can describe what happened, what products and services you used, identify the parties involved and discuss how you want your complaint or issue to be resolved.
Current and former industry professionals can send information and tips directly to the bureau via email, firstname.lastname@example.org, or by calling the hotline at 855-695-7974. You can remain anonymous, but if you choose to identify yourself you are protected by the U.S. Department of Labor Whistleblower Protection Program.
Recent Initiatives for Consumers
The CFPB is focused on mortgage servicing settlements with consumer input as a primary source of information and ideas, and supervision of debt collection and credit reporting.
In light of the $25 billion settlement with the five big mortgage servicers, the bureau will bring greater transparency and accountability to the entire mortgage servicing market. The bureau's goal is to help consumers avoid unnecessary and unfair foreclosure practices. It will also monitor and enforce specific protections for military service members under the settlement. The bureau believes that a consistent format for monthly mortgage statements will help consumers understand and manage ongoing costs and fees incurred in their mortgages. To that end, it is proposing a prototype of monthly statements that all mortgage servicers should adopt. The bureau seeks consumer input on the statement to help them create a mortgage statement that better meets the consumers' needs.
It will supervise the largest debt collection companies whose annual earnings exceed $10 million and account for more than 60% of the total debt collection market. This includes companies that collect debts owned by other companies that buy accounts at discount from the original creditor and collect full balances later, and attorneys that use litigation as the main collection activity.
The bureau will supervise the largest operators in the credit reporting market to ensure that lenders get the right information to make credit granting decisions in the best interest of the consumer, and consumers get credit scores that match or more accurately reflect what lenders receive. The bureau will focus on 30 companies that account for 94% of annual earnings in the consumer reporting industry.
The Bottom Line
The CFPB is good for consumers. Because of the widespread authority granted to the bureau, using the consumer complaint portal can give you a greater opportunity to resolve conflicts when used along with your state attorney general and local Better Business Bureau. It is also good for business. Whistleblowers help the CFPB know where regulation and enforcement is needed most, and can help fuel the environment for legislative reform and set the stage for creating more powerful consumer and industry advisory boards or committees.
Can it improve conditions? Previously, debt collectors and consumer reporting agencies were not subject to federal oversight. Credit reporting agencies make 36 billion updates to consumers' credit reports each year. CFPB regulation and enforcement will bring greater consistency and accuracy in credit reporting and credit scoring
Will it survive? The Federal Reserve funds the CFPB. The budget for 2012 is 11% of the Federal Reserve System's expenses, and 12% for 2013. The ongoing budget is capped at 12%, which is adjusted for inflation beyond 2014.
You should get to know the Consumer Financial Protection Bureau. Log on to its website, read the regulations, browse the research reports, tell the agency about your experiences as a consumer and give your insights as an industry insider. You can help with the economic recovery.