Consumer Financial Protection Bureau - Explained
What is the Consumer Financial Protection Bureau?
Written by Jason Gordon
Updated at September 26th, 2021
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Table of Contents
Consumer Financial Protection Bureau (CFPB) Definition A Little More on Consumer Financial Protection BoardAcademic Research for Consumer Financial Protection Bureau (CFPB)Back to: LAW, RISK, & TRANSACTIONS
What is the Consumer Financial Protection Bureau?
The Consumer Financial Protection Bureau is a government agency that is tasked with the job of protecting Americans when they make deals with services such as mortgage, credit cards among others. The objective is to educate the people signing the loans and make sure they are signing without tricks or traps. This agency also investigates the financial firms that break the law.
A Little More on Consumer Financial Protection Board
A while ago, numerous individual agencies supervised banks and other financial services providers that were used by consumers, but no agency was tasked with protecting the public from unfair or deceptive practices. The CFPB was then created and then tasked with this mandate. This bureau was established in 2011, one year after the Dodd act was enacted. The best thing about this Dodd-Frank Act is that it gave CFPB independence. It ensured that although the CFPB is part of the Federal Reserve System, it was structured to be almost independent and headed by a director designated by the president and confirmed by the Senate. However, much supervision has been built into the system to make sure that the CFPB manages to work in tandem with other government regulatory agencies. The law allows the financing of the CFPB by the Federal Reserve, and this makes it very difficult for the politicians to interfere or politicize the bureau. This bureau creates educational tools, answers common questions and also provides consumers with tips to help them navigate their financial choices and chose the deal that they see fit. It also takes legal action against the companies and practices that are against the law, and it has repatriated billions of dollars back to harmed customers. It encourages financial education and capability from childhood to retirement and educates the financial companies about their responsibilities. The main reason for forming the CFPB was to provide a single point of accountability for enforcing federal consumer financial laws and protecting consumers in the financial market place. Some of the functions carried out by this bureau include:
- Rooting out unfair, deceptive or abusive practices by creating rules, supervising companies and enforcing the law.
- Enforcing laws that reduce discrimination in consumer finance.
- Taking complaints from consumers
- Enhancing financial education among citizens
- Investigating consumer experience resulting from using financial products
- Monitoring financial markets to scope for new risks to consumers
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Academic Research for Consumer Financial Protection Bureau (CFPB)
- The consumer financial protection bureau: Financial regulation for the twenty-first century, Kennedy, L. J., McCoy, P. A., & Bernstein, E. (2011). Cornell L. Rev., 97, 1141. This article uses four specific case studies to describe the four major principles that have been guiding the bureau as it attempts to fulfill its obligation of making markets for consumer financial products and services work for Americans.
- The consumer financial protection bureau: Savior or menace, Zywicki, T. (2013). Geo. Wash. L. Rev., 81, 856. This paper explains the composition of the CFPB stating that it has a combination of vast power and lack of public accountability. It further says that this agency is an independent agency inside another independent agency and is presided over by a single director who is insulated from removal by the president.
- The consumer financial protection bureau: An introduction, Levitin, A. J. (2012). Rev. Banking & Fin. L., 32, 321. This paper gives a brief overview of the CFPB and covers its history, structure, powers as well as ongoing politics.
- The Financial Services Industry's Misguided Quest to Undermine the Consumer Financial Protection Bureau, Wilmarth Jr, A. E. (2011). Rev. Banking & Fin. L., 31, 881. This paper explains how Congress decided to establish the CFPB after it decided that the federal bank regulators had failed in protecting the consumers during the credit boom that preceded the financial crisis. The congress decided to vest CFPB with the responsibility and clear accountability for protecting the financial services consumers.
- The First Year of the Consumer Financial Protection Bureau: An Overview, Mogilnicki, E. J., & Malpass, M. S. (2012). Bus. Law., 68, 557. This paper discusses the powers and authority of CFPB which start with the ability to issue new regulations under numerous consumer laws.
- The Dodd-Frank Act Establishes the Bureau of Consumer Financial Protection as the Primary Regulatory of Consumer Financial Products and Services, Mierzewski, M. B., DeSimone, B. S., Hochberg, J. W., & Larkin, B. P. (2010). Banking lJ, 127, 722. This article explains how the Consumer Protection Act will cause a massive reorganization in the federal regulation of consumer financial products and services. The CFPB is allowed to police activities that relate to financial products.
- Accountability and the Bureau of Consumer Financial Protection, Block-Lieb, S. (2012). Brook. J. Corp. Fin. & Com. L., 7, 25. This paper presents how various industry and political actors oppose the CFPB citing reasons such as the institutional design enhances its lack of accountability and the fact that it has a single director heading the bureau instead of a bipartisan panel of commissioners.
- Consumer Financial Protection Bureau Law Enforcement: An Empirical Review, Peterson, C. L. (2015). Tul. L. Rev., 90, 1057.
- This paper presents an introduction to the jurisdiction and powers of the CFPB's supervision, enforcement and fair lending division, then it classifies all the publicly announced matters of the CFPB through 2015, and finally, it presents several findings on the public law enforcement program of the CFPB.
- Payday lending, bank overdraft protection, and fair competition at the consumer Financial Protection Bureau, Clarke, R. L., & Zywicki, T. J. (2013). Rev. Banking & Fin. L., 33, 235. This article illustrates how the obligation for fair competition applies to the regulation of payday lending and bank overdraft protection which are products offered by different entities but attract an overlapping customer base while competing directly with each other and raising similar consumer concerns.
- Behavior, paternalism, and policy: Evaluating consumer financial protection, Smith, A. C., & Zywicki, T. (2015). NYUJL & Liberty, 9, 201. This paper investigates as a policy prescription platform, the relationship between behavioral law and economics and its influence on the regulations that emerge from the CFPB.
- Capturing This Watchdog: The Consumer Financial Protection Bureau Keeping the Special Interests out of Its House, Nissim-Sabat, M. C. (2012). W. St. UL Rev., 40, 1. This article analyzes the structure of the CFPB and its ability to be an effective regulator even though there is a threat of regulatory capture lurking in the shadows.