The Consumer Financial Protection Bureau (CFPB) was established by the Dodd-Frank Act of 2010 as part of the federal government’s response to the financial crisis of 2008. Like any economic development, good or bad, the 2008 crisis had more than a single cause, but one commonly accepted precipitating factor was a dangerous combination of irresponsible lenders, unsophisticated borrowers, and weak consumer protection in the financial sector.
The CFPB was created to correct those problems. Its stated goal is simple and quite broad: “watching out for American consumers in the market for consumer financial products and services.”
To that end, federal regulatory responsibilities that had been scattered across multiple agencies were consolidated within the CFPB, and the agency took on both supervisory and enforcement authority over consumer finance, including mortgages, student loans, credit cards and consumer loans.
In its supervisory role, the CFPB is responsible for promulgating regulations and guidelines under a variety of statutes, primarily the Truth in Lending Act (TILA), the Real Estate Settlement Procedures Act (RESPA) and the Equal Credit Opportunity Act (ECOA). Entities involved in consumer lending can look to the CFPB for guidance on questions of compliance. Those same entities are subject to CFPB review and to reporting requirements, and the bureau establishes and publicizes acceptable tolerance levels for each specific regulatory category.
CFPB enforcement actions can arise on two fronts.
First, mandatory reports from supervised entities can give rise to both orders compelling compliance and fines levied for regulatory transgressions. Regions Bank, for example, was recently fined $7.5 million for overdraft violations, ordered to correct illegal practices, and required to refund some $49 million in fees it had collected from its customers.
Second, consumers can complain directly to the CFPB, in which case the bureau will investigate and take such action it deems appropriate. The bureau’s powers to levy fines, order restitution and undo illegal transactions are equally applicable to individual consumer complaints.
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