The Consumer Financial Protection Bureau (CFPB) is a creation of the Dodd-Frank Wall Street Reform and Consumer Protection Act, passed by Congress on July 21, 2010. Pub. L. No. 111-203, 124 Stat. 1376 (2010) (Dodd-Frank). Title X of Dodd-Frank, titled the Consumer Financial Protection Act of 2010 (the “Act”), established the CFPB as an independent agency under the Federal Reserve System with a mandate to protect consumers and increase transparency with respect to financial transactions.
The Act gives the CFPB broad powers to assume regulatory and rulemaking authority under numerous existing federal consumer protection laws, and additionally vests the Bureau with the power to enact new regulations and take enforcement and supervisory actions with respect to consumer financial products and the entities that deal in them. In addition to overseeing certain activities of banks and other financial institutions, the Bureau has authority over entities that are currently unregulated or lightly regulated, such as mortgage companies, payday lenders, and private education lenders.
The CFPB’s purpose is to “seek to implement and, where applicable, enforce federal consumer financial laws consistently for the purpose of ensuring that all consumers have access to markets for consumer financial products and services and that markets for consumer financial products and services are fair, transparent, and competitive.” Further, the CFPB is designed to consolidate consumer financial protection, previously within the purview of seven federal agencies, into one agency.
The CFPB currently has six divisions: Consumer Education and Engagement; Supervision, Enforcement, Fair Lending, and Equal Opportunity; Research, Markets, and Regulations; General Counsel; External Affairs; and Chief Operating Officer. In addition to its home office in Washington, D.C., it has field offices in New York, San Francisco, and Chicago that will primarily employ examiners.
Who Is Regulated by the CFPB?
The CFPB regulates a wide array of bank and nonbank institutions. When it launched operations in July 2011, the CFPB’s initial focus was on depositories with more than $10 billion in assets. The Bureau is the primary rulemaker, supervisor, and enforcer of consumer protection laws and regulations over these entities, but it is required to coordinate examinations and other supervisory activities with these entities’ state and federal prudential regulators and establish procedures to resolve conflicts between the Bureau and such regulators.
The CFPB’s rulemaking authority with respect to consumer protection laws and regulations also applies to depositories with less than $10 billion in assets, though their prudential regulators will retain supervisory and enforcement powers. The CFPB can also participate in examinations of these institutions “on a sampling basis,” can refer enforcement actions against these institutions, and will have access to and can even require reports directly from these institutions.
Aside from these institutions, which have traditionally been subject to federal regulation, Dodd-Frank gives the Bureau the authority to oversee a variety of nondepository-covered persons, such as those who offer or provide the following:
- Origination, brokerage, or servicing of loans secured by real estate
- Loan modification or foreclosure relief services
- Private student loans
- Payday loans
Further, if any of the following entities is engaging in the extension of credit, selling or offering to sell a consumer financial product or service, or otherwise engaging in activities that subject it to a consumer law within the CFPB’s domain, the CFPB will regulate those activities:
- Merchants, retailers, and sellers of nonfinancial goods
- Automobile dealers
- Real estate brokers
- Real estate agents
- Sellers of manufactured mobile homes
- Income tax preparers
What the CFPB Will Regulate
The CFPB will regulate “consumer financial products and services.” A “consumer” is an individual or an agent, trustee, or representative acting on behalf of an individual. As defined in Dodd-Frank, “financial products or services” include a variety of transactions:
- Extending credit and servicing loans, including mortgages
- Extending or brokering leases of personal or real property
- Providing real estate settlement services
- Engaging in deposit-taking activities
- Transmitting or exchanging funds
- Acting as a custodian of funds or any financial instrument for use by or on behalf of a customer
- Selling, providing, or issuing stored value or payment instruments
- Check cashing, check collection, or check guaranty services
- Providing payments or other financial data processing products or services
- Providing financial advisory services
- Collecting, analyzing, maintaining, or providing consumer report information or other account information
- Collecting debt, including foreclosing on property
Companies and organizations that fall within the CFPB’s jurisdiction can expect to see increased examination and enforcement activity, as well as continued developments in the Bureau’s practices and procedures, in the coming years.