The Consumer Financial Protection Bureau (CFPB) is a powerful federal agency tasked with the job of protecting American consumers from unscrupulous financial practices. So far the CFPB has been impressively productive. You know how credit card billing statements are now easier to read than they were a few years ago? How about those new rules that prevent credit card companies from raising your interest rate without warning or justification? You can credit the CFPB for enforcing all those rules.
Meanwhile the good folks at the CFPB are working night and day to conjure up a whole bunch of other ways to protect you from being manipulated and exploited by Wall Street wolves and slicksters. The CFPB has, in fact, fielded more than 175,000 complaints and responded to them vigorously, returning more than $430 million to the wallets of consumers who had been wronged in the marketplace. What’s even more impressive, the CFPB accomplished all of that during its infancy, in just a couple of years, without a real administrative director.
A New Sheriff is in Town
You can imagine how the CFPB’s performance is likely to soar and become even more vigorous now that Congress has finally decided to confirm its first official leader, Richard Cordray. While Attorney General of Ohio, Cordray managed to recoup $2 billion on behalf of retirees, investors and business owners, while going after wrongdoers including companies that engaged in predatory lending practices and foreclosure fraud. Then he moved up the food chain to join the newly minted CFPB, where he served within its law enforcement division.
Fast forward to July of 2013 and this tenacious bureaucrat is officially at the helm of the CFPB as its first-ever fully-confirmed permanent director. Right after his confirmation was announced, experts and policy watchers predicted that the CFPB director will hit the ground running – full speed ahead with both barrels blazing.
Ready to Go on the Offensive
The agency has expanded its watchdog efforts to include all different kinds of credit products, and now that the housing sector is bouncing back, most economists think that the CFPB will focus much of its energy on mortgages. These initiatives will guard homeowners from predatory mortgage practices while helping to make sure that no lender approves a mortgage unless the borrower demonstrates the ability to repay it.
The CFPB will stringently enforce rules, for instance, intended to keep consumers from slipping into the treacherous realm of default and foreclosure. While that will help to ensure that we don’t see a repeat of the foreclosure crisis, it will also make it more difficult for some people to qualify for a mortgage. If you were planning on borrowing more than you can afford, for example, think again. The underwriting policies are going to be carefully enforced – for your own sake – which will close the gaps that allow unqualified borrowers to take out loans they could not repay.
Policing Non-Bank Entities
The CFPB has been busy testing the financial strength of banks to make sure they don’t fail again and take down the economy with them. Under new leadership, the CFPB will continue to extend its reach into areas that are not limited to Wall Street. They are going to police companies that offer payday loans, student loans, and auto loans, for instance, to make sure they don’t gouge consumers with predatory rates and policies.
The CFPB will also keep a sharp eye on credit reporting agencies and debt collection companies. Along the way the CFPB is expected to insist that banks and other lenders improve the way that they report to credit agencies, to prevent lenders from inadvertently passing erroneous data along that might wind up in your credit file.
The Controversial History of the Young CFPB
The agency was launched back in 2011, following the passage of the Wall Street reform and Consumer Protection Act. Immediately the financial industry, with the help of its Congressional allies, came out swinging in an effort to prevent it from getting off the ground.
Elizabeth Warren, a bankruptcy expert and esteemed Harvard professor, was chosen to lead the organization because she has a long and distinguished track record as a champion of ordinary consumers against financial giants like big banks, hedge funds, and high-powered political operatives. Her nomination was stonewalled in Washington, however, and the impasse threatened to squelch the creation of the CFPB. In a controversial maneuver to overcome the opposition, President Obama put her in charge of the new agency as a consultant – not an official director. Once Warren succeeded at getting the CFPB rolling, the president then appointed Cordray to be its director in charge.
Again the process was stymied, however, because there were not enough votes in Congress to confirm him. The banking and lending industry doesn’t have a love affair with Cordray, either, because he has proven to be just as much of a watchdog as Dr. Warren.
Tom Kerr writes for CompareWallet.com in addition to others. He has been an avid writer for years, even winning awards for work he’s done.
