Consumer Financial Protection Bureau — BrandWiki

Consumer Financial Protection Bureau

agency name	Consumer Financial Protection Bureau
seal	Seal of the Consumer Financial Protection Bureau.svg
seal width	170
formed	July 21, 2011.
jurisdiction	United States
headquarters	Washington, D.C., U.S.
employees	1,758 (2024)‡R1R‡
budget	US$729 million (FY 2024)
chief1 name	Russell Vought
chief1 position	Acting Director
parent agency	Federal Reserve
keydocument1	Dodd–Frank Wall Street Reform and Consumer Protection Act
website	consumerfinance.gov
coordinates	38.898°N, -77.04°W

The Consumer Financial Protection Bureau (CFPB) is an independent agency of the United States government responsible for consumer protection in the financial sector. CFPB's jurisdiction includes banks, credit unions, securities firms, payday lenders, mortgage-servicing operations, foreclosure relief services, debt collectors, for-profit colleges, and other financial companies operating in the United States.

The agency was originally proposed in 2007 by Elizabeth Warren while she was a law professor and she played an instrumental role in its establishment.[2][3] The CFPB's creation was authorized by the Dodd–Frank Wall Street Reform and Consumer Protection Act, whose passage in 2010 was a legislative response to the 2008 financial crisis and the subsequent Great Recession,[4] and is an independent bureau within the Federal Reserve.[5]

Role

According to former director Richard Cordray, the bureau's priorities are mortgages, credit cards and student loans.[4] The CFPB qualifies as a large independent agency that was designed to consolidate its employees and responsibilities from a number of other federal regulatory bodies, including the Federal Reserve, the Federal Trade Commission, the Federal Deposit Insurance Corporation, the National Credit Union Administration and the Department of Housing and Urban Development.[13] The bureau is an independent unit located inside and funded by the Federal Reserve, with interim affiliation with the U.S. Treasury Department.[14] The CFPB's Federal Reserve-based funding has come under scrutiny by the bureau's critics.[15][16]

The CFPB writes and enforces rules for financial institutions, examines both bank and non-bank financial institutions, monitors and reports on markets, as well as collects and tracks consumer complaints.[17]

The CFPB opened its website in early February 2011 to accept suggestions from consumers via YouTube, Twitter, and its own website interface. According to the U.S. Treasury Department, the bureau is tasked with the responsibility to "promote fairness and transparency for mortgages, credit cards, and other consumer financial products and services".[18] According to its website, the CFPB's "central mission...is to make markets for consumer financial products and services work for Americans—whether they are applying for a mortgage, choosing among credit cards, or using any number of other consumer financial products".[19] In 2016 alone most of the hundreds and thousands of consumer complaints about their financial services—including banks and credit card issuers—were received and compiled by CFPB and are publicly available on a federal government database.[20]

Once a financial institution acquires $10billion in assets, it falls under the guidance, rules, and regulations under the CFPB- is a "CFPB regulated bank". The CFPB will examine the institution for compliance with bank regulatory laws.[21]

The regulations implemented by the bureau are in Chapter X of Title XII Banks and Banking of the US Code of Federal Regulations. Notable examples include the ECOA (Equal Credit Opportunity Act – Regulation B), HMDA (Home Mortgage Disclosure Act – Regulation C), Alternative Mortgage Transaction Parity Act of 1982 (Regulation D), EFTA (Electronic Fund Transfer Act – Regulation E), FDCPA (Fair Debt Collection Practices Act – Regulation F), FCRA (Fair Credit Reporting Act – Regulation V), RESPA (Real Estate Settlement Procedures Act – Regulation X), TILA (Truth in Lending Act – Regulation Z), and Truth in Savings Act (Regulation DD).[22][23]

History

In July 2010, Congress passed the Dodd–Frank Wall Street Reform and Consumer Protection Act, during the 111th United States Congress in response to the Great Recession and 2008 financial crisis.[4] The agency was originally proposed in 2007 by then-Harvard Law School professor Elizabeth Warren, who later became a US senator.[24] The proposed CFPB was actively supported by Americans for Financial Reform, a newly created umbrella organization of some 250 consumer, labor, civil rights and other activist organizations.[25]

On September 17, 2010, President Barack Obama announced the appointment of Warren as Assistant to the President and Special Advisor to the Secretary of the Treasury on the Consumer Financial Protection Bureau to set up the new agency.[26][27] Due to the way the legislation creating the bureau was written, until the first director was in place, the agency was not able to write new rules or supervise financial institutions other than banks.[28]

Elizabeth Warren, who proposed and established the CFPB, was removed from consideration as the bureau's first formal director after Obama administration officials became convinced Warren could not overcome strong Republican opposition.[29] On July 17, Obama nominated former Ohio attorney general and Ohio state treasurer Richard Cordray to be the first formal director of the CFPB.[30] Prior to his nomination, Cordray had been hired as chief of enforcement for the agency.[31]

However, Cordray's nomination was immediately in jeopardy due to 44 Senate Republicans vowing to derail any nominee in order to encourage a decentralized structure of the organization. Senate Republicans had also shown a pattern of refusing to consider regulatory agency nominees.[32][33] The CFPB formally began operation on July 21, 2011.[34]

Since the CFPB database was established in 2011, more than four million complaints have been published.[35] CFPB supporters include the Consumers Union claim that it is a "vital tool that can help consumers make informed decisions".[20] CFPB detractors argue that the CFPB database is a "gotcha game" and that there is already a database maintained by the Federal Trade Commission although that information is not available to the public.[20]

On January 4, 2012, Barack Obama issued a recess appointment to install Cordray as director through the end of 2013. This was a highly controversial move as the Senate was still holding pro forma sessions, and the possibility existed that the appointment could be challenged in court.[36] This type of recess appointment was unanimously ruled unconstitutional in NLRB v. Noel Canning.[37]

On July 16, 2013, the Senate confirmed Cordray as director in a 66–34 vote.[38] Cordray resigned in late 2017 to run for governor of Ohio.

The Financial CHOICE Act, proposed by the House Financial Services Committee's Jeb Hensarling, to repeal the Dodd–Frank Wall Street Reform and Consumer Protection Act, passed the House on June 8, 2017. Also in June 2017, the Senate was crafting its own reform bill.[39][40]

Testimony in US Congressional hearings of 2017 have elicited concerns that the wholesale publication of consumer complaints is both misleading and injurious to the consumer market. Rep. Barry Loudermilk (R-GA) said at one such congressional hearing, "Is the purpose of the database just to name and shame companies? Or should they have a disclaimer on there that says it's a fact-free zone, or this is fake news? That's really what I see happening here." Bill Himpler, executive vice president of the American Financial Services Association, a trade group representing banks and other lenders responded "Something needs to be done." "Once the damage is done to a company, it's hard to get your reputation back.[20]

Mick Mulvaney, as acting director of the CFPB, removed all 25 members of the agency's Consumer Advisory Board on June 5, 2018, after eleven of them held a press conference on June 3 in which they criticized him.[41]

On February 13, 2021, President Joe Biden formally submitted to the Senate the nomination of Rohit Chopra to serve as director of the CFPB.[42] His nomination was approved on September 30, 2021, by a 50–48 vote.[43]

In December 2021, CFPB fined LendUp $100,000 due to deceptive marketing and fair lending violations, and the company was required to stop issuing new loans.[44]

In June 2024, the CFPB proposed banning using medical debt in credit reports or loan decisions.[45] In July 2024, the CFPB gave Zelle a choice between a settlement or litigation around its handling of fraud and scams on its platform.[46]

Second Trump administration

On February 1, 2025, Chopra was fired by President Donald Trump, making deputy director Zixta Martinez the acting director of the agency by operation of law.[47][48] On February 3, Trump named Treasury Secretary and former hedge fund manager Scott Bessent as the agency's acting director. Bessent immediately ordered the agency to halt all work.[49] On February 7, Office of Management and Budget Director Russell Vought emailed CFPB staff to let them know he was the acting director of the agency.[50] On February 10, Vought ordered all CFPB staff to cease all work between February 10 and 14, and closed the CFPB Washington headquarters.[11][51]

Regulatory activities

From its creation until 2017, the CFPB "has curtailed abusive debt collection practices, reformed mortgage lending, publicized and investigated hundreds of thousands of complaints from aggrieved customers of financial institutions, and extracted nearly $12 billion for 29 million consumers in refunds and canceled debts."[60] That figure had risen to $19 billion by 2024.[61] Claims may be filed by individual customers and address a variety of unfair business practices by companies, such as refusals to remove errant fees, or to provide compensation for damages.[62]

Public outreach

The CFPB has created a number of personal finance tools for consumers, including Ask CFPB, which compiles plain-language answers to personal finance questions, and Paying for College, which estimates the cost of attending specific universities based on the financial aid offers a student has received.[63][64]

In 2014, the CFPB attempted to help consumers understand the risks of cryptocurrencies.[65]

Consumer data protection

In 2016, the CFPB took its first enforcement action against a company that the CFPB alleged had failed to properly protect the privacy and security of consumers' data.[66]

Credit card fees

In 2024, the CFPB limited credit card late fees to $8.[67] The rule was blocked by a judge, but the reason given for the block was overturned by the Supreme Court, giving the bureau confidence that the rule will be implemented.[67]

Controversies

A 2013 press release from the United States House Financial Services Committee criticized the CFPB for what was described as a "radical structure" that "is controlled by a single individual who cannot be fired for poor performance and who exercises sole control over the agency, its hiring and its budget." Moreover, the committee alleged a lack of financial transparency and a lack of accountability to Congress or the president. Committee vice chairman Patrick McHenry, expressed particular concern about travel costs and a $55 million renovation of CFPB headquarters, stating "$55 million is more than the entire annual construction and acquisition budget for GSA for the totality of federal buildings."[68]

In 2014, some employees and former employees of the CFPB testified before Congress about an alleged culture of racism and sexism at the agency. Former employees testified they were retaliated against for bringing problems to the attention of superiors.[69][70]

House Republicans criticized the methodology the CFPB uses to identify instances of racial discrimination among auto lenders. Because of legal constraints, the agency used a system to "guess" the race of auto loan applicants based on their last name and listed address. Based on that information, the agency charged several lenders were discriminating against minority applicants and levied large fines and settlements against those companies.

Legal challenges

Two lawsuits were filed in the early years of the CFPB; they were both dismissed by federal courts, but one was appealed and is still ongoing. The first one, filed on June 21, 2012, by a Texas bank along with the Competitive Enterprise Institute, challenged the constitutionality of provisions of the CFPB.[79] In August 2013, a federal judge dismissed the lawsuit because the plaintiffs had failed to show that they had suffered harm.[80] In July 2015, the United States Court of Appeals for the District of Columbia Circuit affirmed in part and reversed in part, holding that the bank, but not the states that later joined the lawsuit, had standing to challenge the law, and returned the case for further proceedings.[82][83]

A lawsuit filed July 22, 2013, by Morgan Drexen Integrated Systems, a provider of outsourced administrative support services to attorneys, and Connecticut attorney Kimberly A. Pisinski, challenged the constitutionality of the CFPB.[84][85] The complaint, filed in the U.S. District Court for the District of Columbia, alleged that the "CFPB's structure insulates it from political accountability and internal checks and balances in violation of the United States Constitution. Unbridled from constitutionally-required accountability, CFPB has engaged in ultra vires and abusive practices, including attempts to regulate the practice of law (a function reserved for state bars), attempts to collect attorney-client protected material, and overreaching demands for, and mining of, personal financial information of American citizens, which has prompted a Government Accountability Office ("GAO") investigation, commenced on July 12, 2013."[86] On August 22, 2013, one month after Morgan Drexen's lawsuit, the CFPB filed its own lawsuit against Morgan Drexen in the United States District Court for the Central District of California alleging that Morgan Drexen charged advance fees for debt relief services in violation of the Telemarketing Sales Rule and engaged in deceptive acts and practices in violation of the Consumer Financial Protection Act (CFPA).[87] The CFPB won this lawsuit and Morgan Drexen was ordered to pay $132,882,488 in restitution and a $40 million civil penalty.[88]

In October 2016, the Court of Appeals for the District of Columbia Circuit ruled that it was unconstitutional for the CFPB director to be removable by the president of the United States only for cause, such as "inefficiency, neglect of duty or malfeasance."[89] Circuit Judge Brett Kavanaugh, joined by Senior Circuit Judge A. Raymond Randolph, wrote that the law was "a threat to individual liberty" and instead found that the president could remove the CFPB director at will.[89] Circuit Judge Karen L. Henderson agreed that the CFPB Director had been wrong in adopting a new interpretation of the Real Estate Settlement Procedures Act, finding the statute of limitations did not apply to the CFPB, and fining the petitioning mortgage company PHH Corporation $109 million, but she dissented from giving the president a new power to remove the director, citing constitutional avoidance.[90] The U.S. Court of Appeals for the District of Columbia Circuit vacated the decision and ordered en banc review.[91] On January 31, 2018, the en banc D.C. Circuit found that the CFPB's structure was constitutional by a vote of 7–3. Judge Cornelia Pillard, writing for the majority, found that the

In June 2018, New York Federal District Court judge Loretta Preska ruled against its structure.[93][94] In January 2019, the Supreme Court denied review of the DC Circuit Court decision.[95]

In October 2019, the Supreme Court announced it would review the constitutionality of the bureau's structure in the case Seila Law v. Consumer Financial Protection Bureau considering the split decision of the lower courts.[96] Oral arguments began on March 3, 2020.[97]

On June 29, 2020, the Supreme Court ruled in a 5–4 decision that the firing protections of the director are an unconstitutional restraint on the president's ability to oversee executive branch agencies. "Such an agency lacks a foundation in historical practice and clashes with constitutional structure by concentrating power in a unilateral actor insulated from Presidential control," Chief Justice John Roberts wrote in the majority opinion, which was joined by his conservative colleagues.[98] The statutes around the Director's position on the CFPB were considered severable from the remaining structure of the CFPB, and the Court ordered that "The agency may therefore continue to operate, but its Director, in light of our decision, must be removable by the President at will." The dissenting opinion, written by Justice Elena Kagan, stated that the majority's decision has the court "second-guessing" the two political branches of government (Congress and the president) on how to structure the executive branch and "wipes out a feature of [the CFPB] its creators thought fundamental to its mission—a measure of independence from political pressure."[99]

2017 dispute over acting director

On November 24, 2017, Director Cordray appointed Leandra English to the position of deputy director, and announced that he would leave office at the close of business that day.[100][101] Cordray indicated that would make English the acting director after his resignation,[102] citing provisions of the Dodd–Frank Wall Street Reform and Consumer Protection Act providing that the deputy director of the CFPB becomes acting director in the "absence or unavailability" of the director.[103] Later the same day, however, President Donald Trump appointed the incumbent director of the Office of Management and Budget, Mick Mulvaney, as acting director, citing the authority of the Federal Vacancies Reform Act of 1998.[103]

2019 dispute over CFPB leadership

Seila Law LLC (Seila Law), a law firm that provided debt relief services, was under investigation by the CFPB. As part of its investigation, the CFPB issued a civil investigative demand (CID) to Seila Law, which required Seila Law to produce certain documents. Seila Law declined to comply with the CID and challenged the constitutionality of the CFPB. The CFPB brought a motion to enforce the CID to the United States District Court for the Central District of California, where District Judge Josephine Staton granted the motion after finding the CFPB was constitutionally structured.[112]

Seila Law's appeal to the Ninth Circuit was dismissed. The 9th Circuit panel affirmed the District Court's ruling, and agreed that the Supreme Court's prior decisions upholding for-cause removal in Humphrey's Executor and Morrison were "controlling".[113] It also referred approvingly to the en banc decision of the DC Circuit in PHH Corp. v. CFPB (2018), in which the Circuit found that the structure of the CFPB was constitutional.[114]

There was arguably a circuit split on the question presented in Seila Law. While the Ninth Circuit and DC Circuit had held that the CFPB's structure is constitutional, the Fifth Circuit in Collins v. Mnuchin (2018) held that the structure of the Federal Housing Finance Agency—another agency whose director can be removed only for cause—violated the separation of powers.[115]

The Supreme Court granted certiorari in Seila Law on October 18, 2019, and heard oral argument on March 3, 2020.[116]

The Court issued its decision on June 29, 2020. The 5-4 decision ruled that the CFPB structure, with a sole director that could only be terminated for cause, was unconstitutional as it violated the separation of powers, vacating the lower court judgement and remanding the case for review. The Court recognized that the statutes around the director of the CFPB was severable from the rest of the statute establishing the agency, and thus "The agency may therefore continue to operate, but its Director, in light of our decision, must be removable by the President at will."[117]

Chief Justice John Roberts wrote the majority opinion joined by conservative Justices Clarence Thomas, Samuel Alito, Neil Gorsuch, and Brett Kavanaugh. Roberts wrote that the CFPB structure with a single point of leadership that could only be removed for cause "has no foothold in history or tradition", and has only been used in four other instances: three current uses for the United States Office of Special Counsel, the Social Security Administration, and the Federal Housing Finance Agency, and temporarily for one year during the American Civil War for the Office of the Comptroller of the Currency.[99] Roberts wrote that the three current uses "are modern and contested. And they do not involve regulatory or enforcement authority comparable to that exercised by the CFPB."[99] Roberts also wrote that the CFPB structure "is also incompatible with the structure of the Constitution, which—with the sole exception of the Presidency—scrupulously avoids concentrating power in the hands of any single individual."[99] Roberts referred back to the precedent established by Humphrey's Executor and Morrison as a basis for the majority's decision.[118]

Justice Elena Kagan wrote the dissent joined by justices Ruth Bader Ginsburg, Stephen Breyer, and Sonia Sotomayor. Kagan challenged the separation of powers argument presented by the majority: "Nowhere does the text [of the Constitution] say anything about the President's power to remove subordinate officials at will."[119] The dissenting Justices did concur on the matter of severability of the remaining structure of the CFPB outside of the director.

Consumer Financial Protection Bureau

Role

History

Second Trump administration

Regulatory activities

Public outreach

Consumer data protection

Credit card fees

Controversies

Amendment

Proposed amendment

Legal challenges

2017 dispute over acting director

List of directors

See also

External links

References

2019 dispute over CFPB leadership

2022 dispute over funding structure