The Consumer Financial Protection Bureau (CFPB), the nation’s first federal agency focused solely on consumer financial protection, celebrated its first year in existence by releasing its second semi-annual report. In the report, the bureau explains its purpose and touts its accomplishments in the areas of consumer involvement, education, regulation, supervision and enforcement. The CFPB, headed by former Ohio Attorney General Richard Cordray, now boasts a staff of 889 that is charged with the following tasks:
- Ensuring that consumers have timely and understandable information to make responsible decisions about financial transactions;
- Protecting consumers from unfair, deceptive or abusive acts and practices, and from discrimination;
- Identifying and addressing outdated, unnecessary or unduly burdensome regulations;
- Promoting fair competition by consistent enforcement of the consumer protection laws in the bureau’s jurisdiction; and
- Ensuring that markets for consumer financial products and services operate transparently and efficiently to facilitate access and innovation.
In an attempt to live up to its Congressional mandate, the bureau has been reaching out to consumers in the market for feedback, both bad and good. The CFPB uses online tools, like the “Tell Your Story” feature on its website, to encourage everyday consumers to share their experiences searching for financial products and services in the market. The bureau also held town hall meetings and roundtable discussions so people could tell their stories in person. All of the complaints have been documented and are available to search on the bureau’s website by zip code, date of complaint or company.
Over the past year, more than 55,000 complaints have been logged. The majority of the complaints — 43 percent — focus on mortgage companies and products; credit card companies register a close second with 34 percent. The remaining complaints range from banking services to student loans, and everything in between. Once complaints are screened for authenticity, they are either turned over to the “offending” companies for review and remediation or sent to bureau investigators, if necessary. By June 2012, 81 percent of the documented complaints had been addressed by the notified companies.
Educating consumers about financing issues is a focus of the CFPB. The bureau is responsible for developing and implementing initiatives to educate consumers so they are able to make better-informed financial decisions. Its goal is to improve financial literacy through web-based informational tools designed to provide clear and meaningful assistance to consumers before they apply for a loan they ultimately can not afford.
The semi-annual report outlines one of the programs rolled out earlier this year entitled “Ask CFPB", an interactive online tool that helps consumers find clear, unbiased answers to their financial questions. “Ask CFPB” purports to contain more than 420 easy-to-read, plain-language entries written by the bureau’s subject-matter experts. Consumers can view entries organized by “most helpful,” “most viewed” or “recently updated.”
The majority of the entries are focused on credit card and mortgage questions, but issues such as the cost of student loans and military benefits are also addressed. The report explains that these resources allow the public to obtain the information they need at a time when they need it, allowing them to make better-informed decisions.
Rules and Regulations
The CFPB is a product of the Dodd-Frank Act. As such, the overarching goal of the bureau is to propose rules and policies that address mortgage disclosure issues, mortgage servicing rules, compensation for loan originators, loan refinancing costs and protections for the consumer. Pursuant to the report, the bureau expects to finalize most of the mortgage rules by January 21, 2013. Additional rules regarding the integration of federal mortgage disclosures are expected to be issued later in 2013. Further, the bureau is also working to implement other Dodd-Frank Act protections, including foreign money transfers, which have been largely excluded from federal consumer financial protection laws.
In addition to developing new regulations, the bureau is looking at updating, modifying or eliminating inherited regulatory requirements that may be outdated, unduly burdensome or unnecessary. As the comment period has recently closed, no decisions as to what may be modified or eliminated have been announced.
Supervision and Enforcement
The CFPB has a bifurcated supervision program. The first division focuses on compliance with consumer protection laws and regulations by insured banks, thrifts and credit unions with assets over $10 billion. The second division looks at nonbank institutions, including mortgage lenders and brokers, credit bureaus, payday lenders and service providers. As expected, CFPB examiners continue to actively examine large banks in each of its four regions throughout the country. However, the CFPB has also begun examinations of mortgage lenders, brokers and servicers, as well as short-term, small dollar lenders (payday lenders). In furtherance of it supervisory goals, the CFPB will soon issue the second version of its Supervision and Examination Manual.
Version two will replace outdated regulatory citations with new CFPB citations, reflecting the fact that authority for federal consumer financial laws was transferred to the bureau by the Dodd-Frank Act. In addition, the CFPB issued bulletins in the past six months that provide supervised entities with guidance on a variety of issues. These include confidentiality, business relationships with service providers, compliance with updated federal consumer financial laws, and clarifications to the Secure and Fair Enforcement for Mortgage Licensing Act of 2008 (SAFE Act).
The bureau’s latest report highlights its involvement in various task forces and working groups created to support consumer protection efforts by investigating potential violations, both independently and in conjunction with other state and federal law enforcement agencies. As the bureau is still in its infancy, it has endeavored to focus its investigative resources on violations of law that cause the greatest harm to consumers. In December 2011, the CFPB, in conjunction with the U.S. Department of Treasury, announced the creation of a joint task force to combat scams targeted at homeowners seeking to apply for the Home Affordable Modification Program.
Further, in January 2012, the CFPB joined the Residential Mortgage-Backed Securities (RMBS) Working Group, which was established by the U.S. Attorney General as a part of the Financial Fraud Enforcement Task Force (FFETF). Its purpose is to investigate potential false or misleading statements, deception or other misconduct by market participants in the creation, packaging and sale of mortgage-backed securities. In furtherance of these enforcement actions, the bureau created the Whistleblower Hotline, which allows individuals to anonymously submit information to the CFPB about potential violations of federal consumer finance laws.
As the bureau marked its first year in existence, the report trumpets its aspirations of transparency, accountability and fairness. Only time will tell whether the creation of the nation’s newest regulatory agency will make consumer financial markets work for consumers, businesses and the economy.