What is the Consumer Financial Protection Bureau?
Why should the average American consumer care who leads the Consumer Financial Protection Bureau? We explain.
USA TODAY
The Supreme Court’s decision to consider the constitutionality of the way the Consumer Financial Protection Bureau is funded could significantly impact the independence of the bureau and it’s ability to protect consumers, consumer advocates said.
The National Association of Consumer Advocates argues that changing the agency’s funding source unnecessarily “would upend the markets and create dire confusion for regulators and regulated entities alike.”
“American families need a strong, stable, and independent CFPB to protect them in the vast financial marketplace, and the CFPB needs the U.S. Supreme Court to confirm the agency’s funding structure and safeguard the U.S. economy,” said Christine Hines, legislative director at the National Association of Consumer Advocates.
Here are answers to important questions about the consumer bureau:
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When was the CFPB created and why?
Sen. Elizabeth Warren, D-Mass., who was at the time a Harvard Law School professor, came up with the idea for the CFBP. The agency was created under the Dodd-Frank Wall Street reform act in the aftermath of the 2008 national financial crisis.
At the time, consumer protection was handled by seven different federal agencies. The rationale was to create a federal watchdog that would prioritize consumer interests and protect Americans from misleading or improper financial services practices that contributed to the financial crisis.
What is the structure of the CFPB?
The CFPB is lead by a single director, rather than a chairman and commissioners, like those at the Federal Trade Commission or the Securities and Exchange Commission. The bureau’s director is appointed by the president, subject to confirmation by the Senate, and the director is only removable by the president for good cause.
What has the watchdog done for consumers?
The consumer bureau said in 2017 that it had returned nearly $12 billion to more than 30 million consumers who had been cheated or mistreated by banks or other financial services companies and providers. The bureau has created new safeguards for mortgages, imposed new regulations on payday lenders, sued a major student loan provider and servicer it says failed borrowers, and created a public database of complaints that consumers filed against financial companies.
What are some criticisms of the CFPB?
Congressional Republicans and other critics say the consumer bureau’s structure is unconstitutional.
Critics of the agency also contend it has overstepped its authority. In October, 2017, then-President Donald Trump signed a congressional measure that overturned a regulation that would have allowed consumers to challenge financial service providers in class-action lawsuits, rather than in individual arbitration proceedings.
Consumer groups concerned for CFPB future
The Consumer Financial Protection Bureau is at the center of a tug-of-war over who will lead it. Both the departing director and President Trump have named interim leaders throwing control of the independent watchdog agency into question. (Nov. 27)
AP
Why are consumer advocates concerned about the CFPB’s future?
If the constitutional challenge of the agency’s structure is upheld, Congress could get authority over the consumer watchdog’s budget, and use that power to rein in the bureau’s operations, consumer advocates worry.
Why are financial services providers concerned about the watchdog’s future?
They say the consumer bureau has imposed unnecessary regulations that hurt business while failing to protect consumers. One example is the CFPB’s regulatory crackdown on payday lending, loans that cash-strapped consumers take to make ends meet until their next paycheck.
A trade group representing payday lenders sued over a 2017 CFPB regulation that required lenders to ensure borrowers could actually repay loans and prohibited lenders from withdrawing payments from borrowers’ bank accounts after two failed attempts. The extra withdrawal attempts, the agency said, would likely not help lenders recoup any money but would instead saddle borrowers with overdraft fees.
Although the consumer bureau contended that such high-interest loans mired workers in a never-ending borrowing cycle, payday lenders say they provide a service that consumers need and want.
Chamber of Commerce files suit to stop consumers from filing lawsuits
The Chamber of Commerce, the largest lobbying group in Washington by far, has filed a lawsuit against the Consumer Financial Protection Bureau to stop customers from filing class action lawsuits. Jose Sepulveda (@josesepulvedatv) has more.
Buzz60
More: Payday loans face new challenge: Can borrowers afford them?
Consumer Financial Protection Bureau structure ruled unconstitutional
Court agrees to reconsider constitutionality of consumer agency’s structure
Senate overturns new rule allowing class-action suits against banks
Follow USA TODAY reporter Kevin McCoy on Twitter: @kmccoynyc
Amritpal Kaur Sandhu-Longoria contributed to this report.
