The Consumer Financial Protection Bureau (CFPB) is not well-known to many people. It’s a relatively new government organization that’s part of the Federal Reserve. The CFPB was created after the financial crisis of 2008 to protect consumers – hence the name. Before the CFPB was created, the responsibility to protect consumers was divvied up among several government agencies. But consumer protection is the CFPB’s primary focus.
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When the CFPB Was Established
In summer 2010, Congress passed the Dodd-Frank Wall Street Reform and Consumer Protection Act (also known as the Dodd-Frank Act). The creation of the CFPB was part of that bill. Title X of Dodd-Frank established the CFPB as a division of the Federal Reserve.
The CFPB ensures that federal consumer financial laws are enforced consistently. Their goal is to make sure that consumers can access markets for financial products and that these markets are fair, transparent and competitive.
The CFPB took over all of the consumer financial protection responsibilities of other government organizations in July 2011.
How the CFPB Is Run and What It Does
The CFPB has a director who is appointed by the president and confirmed by the Senate. The director – currently former Ohio Attorney General and Ohio State Treasurer Richard Cordray – serves a five-year term. He or she runs the three central units within the bureau. Those three units are research, community affairs and collecting and tracking complaints.
The director is also supposed to have established the following four offices: the Office of Fair Lending and Equal Opportunity, the Office of Financial Education, the Office of Service Member Affairs and the Office of Financial Protection for Older Americans.
The Office of Fair Lending handles oversight and enforcement of federal laws that are intended to ensure that all consumers have access to credit. The Office of Financial Education is there to educate consumers about their financial decisions. The Office of Service Member Affairs will develop and implement initiatives to help members of the military and their families. The Office of Financial Protection for Older Americans is supposed to make sure that Americans over the age of 62 are financially literate.
The Authority of the CFPB
The CFPB was essentially given the authority that other government agencies formerly had to protect consumers. The CFPB can administer, enforce and implement federal consumer financial laws. With that authority comes the power to make rules, issue orders and issue guidance to financial institutions.
However, the Financial Oversight Council (FSOC) can keep the CFPB from implementing their regulations if the FSOC feels that the regulation may put the banking industry or the financial stability of the United States at risk.
The CFPB also has the authority to engage in investigations and take people who violate federal consumer financial laws to court. In addition, the CFPB has exclusive authority to enforce federal consumer laws that pertain to non-depository covered persons. The CFPB also has exclusive consumer protection law authority over insured depository institutions or insured thrifts that are worth more than ten billion dollars.
The Bottom Line
The CFPB may be a relatively new government agency, but for the most part it combines old functions of other government agencies. Its goals are to educate American consumers so that they become financially literate and to make sure that corporations are clear with consumers.
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