Let’s back up... while we're sure most banks and credit unions are familiar with the Consumer Financial Protection Bureau (CFPB), many others aren't - and they're not alone. In a survey by CreditCards.com, 81% of consumers polled did not know what it is, which is a problem considering that the CFPB’s sole purpose is to protect consumers.
The CFPB is a regulatory and watchdog agency that was put in place in 2010 by the Dodd-Frank act. Over the course of the past five years, the bureau has worked to protect consumers from financial wrongdoing and to make financial institutions accountable for improper practices. Rules such as “know before you owe” protects consumers against deceptive mortgage lending or the “ability to pay” rules which were designed to prevent home foreclosure all came from the CFPB.
Since opening in 2011, the CFPB has cracked down on 179 companies. It has enforced almost $12 billion in refunds and relief for an estimated 29 million Americans who have been mistreated by financial companies.
Best Kept Secret?
The CreditCards.com poll asked if respondents would support an unnamed federal agency that protects consumers from unfair, deceptive or abusive conduct – ultimately the CFPB’s mission. Eighty percent said yes. So if people knew about the agency, the majority would support it.
So why have we not heard of it? The agency has enforced crackdowns on high-profile companies such as Wells Fargo and Citi Bank, but CFPB has flown largely under the radar – and not to its benefit.
One key factor is that most of the refunds ordered by the CFPB are paid by the companies directly to the consumers, meaning the enforcement and legwork of the CFPB stays in the shadows. In a probably more effective PR strategy the CFPB could send out the checks in its own name but the agency wants to avoid “political gimmicks”. While notable, it’s not necessarily an effective strategy for an unknown agency trying to stay alive.
The Future
We know that the majority of consumers are not aware of the CFPB, but it’s safe to say that the current administration is hyperaware as it has lasered in on the agency of late and has started to put plans and motions in place to potentially axe it.
Why? Opponents of the CFPB state that the government-run organization is too powerful and a strong example of overreach - too much government involvement. On the other end of the spectrum, supporters refer to the huge fines that the CFPB has secured as evidence of its success.
So what will happen? It is unclear but according to CreditCards.com, policy analysts believe there will be an eventual compromise that will result in some loss of power by the agency and a shift of funding to Congress. What is clear is that it’s unlikely that the CFPB will operate as it does today, especially under a new ruling which deems the structure “unconstitutional” due to its single-director leadership model.
There are still a lot of questions about the future of the CFPB, but at this point in time, it will be a wait and see game as the unknown becomes known. If the CFPB is disbanded, it will be even more important that financial institutions have the proper security measures to show they are taking precautions to protect their clients.
The CFPB also makes an appearance in this week's newsletter. Are you signed up? Click the link below to join the list: