In response to the 2008 financial crisis, Dodd-Frank Wall Street Reform and Consumer Protection Act, signed into law by President Obama in 2010, established the Consumer Financial Protection Bureau (CFPB) to protect American consumers by tightening the monitoring and regulation of the financial industry. “We are a U.S. government agency that protects consumers from unfair, deceptive, or abusive practices and take action against companies that break the law,” states the CFPB website. “We listen to consumers and make their voices heard.”
Today, the agency’s efficacy and even its survival are threatened in a new political climate that views the CFPB’s consumer protection activities as excessive regulatory overreach. In March, the U.S. Department of Justice told a federal appeals court on Friday that the U.S. president should have the authority to fire the head of the Consumer Financial Protection Bureau, but stopped short of asking for the bureau to be abolished. A hearing to challenge that ruling was held in late May.
It may not ride in on a white horse, but the CFPB has done battle like a valiant knight. On its fifth anniversary in 2016, the bureau reported that its actions had resulted in $11.7 billion [today $12 billion] in relief for more than 27 million [today 29 million] harmed consumers. The bureau had handled nearly one million consumer complaints, and empowered consumers with clear reliable information about mortgages, student loans, and credit cards through its “Know Before You Owe” efforts. It has curbed potentially harmful financial practices with new consumer protections, and put in place new rules to make the mortgage market safer for homebuyers.
The CFPB has recouped billions of dollars for taxpayers as well. In April, the Corporation for Enterprise Development (CFED), a national nonprofit dedicated to expanding economic opportunity for low-income families and communities in the U.S., noted, “Since it was launched in 2011, the CFPB has done a tremendous amount to protect victims of predatory financial practices and foster fair practices in the financial industry. . . . To put [it] in perspective, the CFPB has helped more people than live in the state of Texas, all while leveraging a total of $2.9 billion in funding, providing taxpayers with a return on public investment at a rate of 4:1.”
Under Dodd-Frank, the CFPB’s budget comes from the Federal Reserve Board, outside the normal budgeting process. If challengers like House Financial Services Committee Chairman Jeb Hensarling get their way, the agency would come under the regular congressional appropriations system, giving Congress significantly more power to rein in the CFPB and its pro-consumer activities.