Created by the Dodd-Frank Act Wall Street Reform and Consumer Protection Act 2010, the Consumer Financial Protection Bureau (CFPB) is a new independent consumer watchdog that is part of the Federal Reserve Board (FRB). The CFPB is authorised to exercise primary supervisory responsibility over large banks and other large non-bank institutions that provide financial products or service, for the purposes of ensuring that consumers get accurate information on financial products, along with protecting them from hidden fees and deceptive or abusive practices.
The CFPB is headed by an independent director that is appointed by the President and confirmed by the Senate. The director serves a five year term. The Bureau has a dedicated budget that is paid by the Federal Reserve and the amount must not exceed a percentage of the Fed’s earning, an up to $200 million in appropriations from 2010-2014.
The Dodd-Frank Act provides the CFPB with the authority to issue and interpret many of the federal consumer protection laws. Further, state attorney generals have been empowered with expanded authority to litigate against national banks and federal thrifts.
One of the main advantages of the CFPB is that it consolidates consumer protection powers within one office. Prior to the Dodd-Frank Act, up to seven agencies had responsibility for the federal protection of consumer finance, resulting in oversights and vast sectors of the market not being regulated at all. Many of these agencies were federal banking agencies that were not centrally focused on consumer protection, but rather on the solidity of financial institutions.
The powers and responsibilities of the CFPB include:
- Rulemaking, supervision and enforcement for Federal consumer financial protection laws - The Bureau has the power to autonomously write rules for consumer protection that governs all financial institutions that offer consumers financial services or products.
- Restriction on unfair, deceptive or abusive acts or practices – The Bureau has the power to prevent a financial institution from engaging in or committing such an act or practice in connection with a transaction for a consumer financial product or service. The Bureau also has the authority to ensure that the information relevant to the purchase of such products is disclosed to consumers in plain language in a manner that ensures that the consumers understand that costs, benefits and/or risks associated with the product or service.
- Taking consumer complaints – The Bureau’s powers consolidate and strengthen the consumer protection responsibilities that were previously powers of the disbanded Office of Thrift Supervision. It has led to the creation of a national consumer complaint hotline so that consumers will have a single toll-free number to report problems with financial products and services.
- Promoting financial education – The Bureau is charged with the creation of a new Office of Financial Literacy.
- Protection of Small Businesses – The Bureau is tasked with ensuring that small businesses are not unintentionally regulated by them, excluding the businesses that meet the standards required for regulation.
- Examination and enforcement – The Bureau has the authority to examine and enforce regulations for banks and credit with assets of over $10 billion and other non-ban large financial companies. The Bureau is charged with enforcing a number of financial laws, including The Truth in Lending Act, The Fair Credit Reporting Act, The Real Estate Settlement Procedures Act and The Equal Credit Opportunity Act. The Bureau also enforces a number of Federal Trade Commission rules, such as the rules regarding cooling-off periods for telemarketing and door-to-door sales.
- Working with Bank Regulators – The Burden must coordinate with regulators when examining banks to prevent undue regulatory burden. It must also coordinate with regulators as well as the SEC and CFTC to promote consistent regulatory rulemaking.
- Creation of a Consumer Advisory Board – The Director of the CFPB must take steps to create a Consumer Protection Board to advise and consult with the Director on a variety of consumer financial issues. The Board will be required to have a minimum of 16 members and must have at least two annual meetings. Nominees to the board must have a background in consumer protection or financial services protection.
To implement these provisions, the CFPB tends to follow a number of approaches including a market-based approach, evidence-based analysis, the facilitation of robust public participation through innovative technologies and transparency and learning from historical approaches and borrowing best-practices from other agencies. These principles are aimed to ensure that the CFOB’s work promotes fair, transparent and competitive markets for consumer financial products and services and empowers consumers to take more control of their financial affairs.
This article looks at the Consumer Financial Protection Bureau (CFPB), a new independent consumer watchdog that is part of the Federal Reserve Board (FRB). The CFPB is authorised to exercise primary supervisory responsibility over large banks and other large non-bank institutions that provide financial products or service, for the purposes of ensuring that consumers get accurate information on financial products, along with protecting them from hidden fees and deceptive or abusive practices.
CIPP Exam Preparation
In preparation for the Certified Information Privacy Professional/United States (CIPP/US) exam, a privacy professional should be comfortable with topics related to this post, including:
- Consumer Financial Protection Bureau (II.C.f.)