Two years after the ‘Great Recession,” sweeping banking and consumer reforms were ushered in with the passage of The Dodd-Frank Act. One result of this unprecedented legislation was the creation of a consumer watchdog: The Consumer Financial Protection Bureau (CFPB). The CFPB is charged with protecting the rights of consumers in the marketplace. Their charge is to ensure the marketplace remains fair, transparent and competitive.
The CFPB regulates large and small banks, credit unions and non-bank financial institutions, such as payday lenders and private mortgage brokers, which were previously unregulated. When there is an egregious violation of consumer law, the CFPB can issue consent orders and levy significant monetary penalties. Often, such fines are in the millions. By statutory design, the CFPB has broad regulatory oversight, authority, and enforcement power. However, Dodd-Frank empowered the CFPB to engage in activities beyond enforcement. Below is a list of non-enforcement CFPB tasks:
- Creating financial tools for consumers
- Educating consumers from cradle to grave
- Providing answers to consumer inquiries
- Logging consumer complaints
- Educating financial institutions about their consumer responsibilities
- Publishing consumer behavior research
- Monitoring the marketplace for new consumer risks
The CFPB is uniquely positioned to use the proverbial ‘carrot and the stick’ to protect consumers, preserve the integrity of the marketplace and ensure accountability across the financial services industry.
By: sheryl Smikle PhD