Headline: Who is the CFPB?

Date: 7/23/2022

Body:  Have you ever tried talking with your dog?  You can really vent your feelings, and after that, they lick your face, and things start going towards the right track.  Well, the CPFB won’t lick your face, but they do have some things in common with your steadfast canine companion: They will listen, many bad actors are afraid of them, and they also have teeth.  (Bet you never thought that would make sense, did you?)  Let’s meet them.

The Consumer Financial Protection Bureau(CFPB) advocates for consumers and fights against companies that are trying to fleece the American public.    Despite this noble goal and mission, many Americans don’t know about this agency which was formed just after the 2009 Great Recession as part of the Dodd-Frank Act.   The first director was Ohio Attorney General Richard Cordray, and the crux of the idea was conceived in a 2007 journal article by Senator Elizabeth Warren.

If you think you’ve been a victim of a financial scam, you can reach out and file a formal complaint with the CFPB. In response to illegal actions, the CFPB has generated $12.4 billion in relief for more than 31 million consumers.

What is the CFPB

The CFPB is a new government agency.   The individual missions of the CFPB have long been pursued by many various government agencies.  Now, all of these functions are brought together into one agency.  Further, as it involves consumer advocacy, it has been given powers denied the FTC and other agencies.  This is why the agency could be so incredibly effective and why some fight so hard against it.  It is not a large agency, having only about 1,500 employees.  Their mission seems to center around education of consumers, and enforcement of regulations when there is a complaint.   One goal is to enforce transparency within the financial services marketplace.  The other goal is to enforce the regulations that exist already.  They approach both of these goals with the mindset of interventions being data-driven.

The most important feature (or the most hated feature) is the independence of this agency.   They do not get money from the normal appropriations process.   They request their budget from the Federal Reserve.   Further, when the CFPB does obtain a settlement, they are to use this money to support their financial education goals.  As it regards leadership, the agency is also pretty unusual.  The agency is subject to the oversight of the Financial Stability Oversight Council (FSOC), which can overturn a CFPB rule with the consent of two-thirds of its members. The Federal Reserve’s chairman is a member of the FSOC.   (This is why I lump together the subjects of governance and funding.)  Critics of this agency won a Supreme Court decision against the agency, and the outfall is that the President can fire the Director at any time.

How the CFPB Works

The CFPB is divided into six divisions, which each carry out distinct functions:

Division	Function of that Division
Consumer Engagement and Education	Creates resources to educate underserved populations on financial matters that affect them.
Supervision, Fair Lending and Enforcement	When a company does step out of line with regulation, these are the people who educate and change the behavior of that company.  They take the company to court, if necessary.
Research, Markets and Regulations	They do research on the consumer markets in an effort to help draft better-informed projects and programs.
Office of General Counsel	They make sure that the CFPB is following the Law that they are enforcing within the community.
External Affairs	They speak with Banks, other agencies and the media to fulfill a variety of purposes.
Chief Operating Officer	This division provides all types of support to the other functions.

 

How do I submit a complaint to the CFPB?

Part of the CFPB’s mission to protect consumers includes a complaint system available to the public. These are the steps consumers can take.

1.  File a complaint thru the CFPB.  (You can do this online, it’s pretty straightforward.)
2. The CFPB drafts a letter to the company based upon the contents of your complaint.  So, write this carefully.
3. The company has 15 days to draft a response to your complaint.  In that response, they should have plans to remediate the situation so that something similar doesn’t happen again, and there should be some attempt to make you whole.
4. The CFPB publishes your complaint in an online resource called the Consumer Complaint Database, and appends a summary of what happened subsequent to the complaint.   This is really important as another citizen might have had the same problem with the same company.  It also serves as a valuable source of data.
5. When the company does respond, the CFPB will notify you, and you have 60 days to give them feedback.

This all sounds great.  Why are there so many critics?

Money, duh!!  Ahem, sorry, good question.

1.  The financial services lobby is VERY powerful and has a lot of money.
2.  There are some who genuinely believe that the CFPB is too powerful and should be reined in.  Even a gentleman who had previously worked there made note of how powerful the agency is.    In an interview, “The Consumer Financial Protection Bureau bestows a lot of unchecked power on the Director of the CFPB…”  In fact, the language that sets up the CFPB allows them to go after UDAAP (all kinds of consumer-based financial malfeasance) and the FTC was never given a similar explicit power.
3. There are some who genuinely believe that the  CFPB does not apply transparency demanded of others when considering itself.  For instance, a key resource they follow is “Enforcement Policies and Procedures Manual and Examinations Playbook.”   This was a tightly held resource until there was a FOIA request to make it public.

The Verdict

For so many years, the hucksters (and there are a lot of them) within the financial services industries had little to rein them in or worry about.   Even in the depths of 2009, they had very little to worry about because the government was convinced that only the people who got us into the mess could get us out of it.  When the CFPB came online, all of that changed, quickly.   No longer would a consumer have to search for an advocate, one could easily be found using a simple Google Search.  This certainly did a lot to even the playing field with the hucksters mentioned before, but it is an open question whether it might have gone too far.   For my part, I think the jury is still out.  Any subject related to the law takes decades of litigation to fine-tune into society, and this is probably no different.

 REFERENCES

What is the CFPB?

https://www.investopedia.com/terms/c/consumer-financial-protection-bureau-cfpb.asp

https://www.thebalance.com/what-is-the-consumer-financial-protection-bureau-5191659

https://www.venable.com/insights/publications/2021/07/the-cfpb-at-10-the-past-is-prologue

Editor’s Note: Please note that the information contained herein is meant only for general education: This should not be construed as Tax Advice.   Personal attributes could make a material difference in the advice given, so, before taking action, please consult your tax advisor or CPA.