What is the U.S. Consumer Financial Protection Bureau?
The U.S. Consumer Financial Protection Bureau (CFPB) has been thrown into disarray by a battle between the White House and Obama-era officials over who gets to run the federal watchdog on an interim basis after its director resigned.
Outgoing director Richard Cordray elevated an agency official to replace him on an interim basis. But Republican President Donald Trump then named his budget chief, Mick Mulvaney, as acting director until the president names a permanent successor who is confirmed by the Senate, which could take months.
Here are some facts about the CFPB.
The CFPB’s creation
The CFPB was created in 2011 under Democratic former President Barack Obama in the aftermath of the 2008 financial crisis to look out for the interests of ordinary borrowers. Prior to the enactment of the Dodd Frank Act, which created the CFPB, consumer financial protection was spread across seven federal agencies.
None of them prioritized the consumer, which critics said allowed predatory and deceptive mortgage practices to flourish, fueling the crisis.
The agency’s duties
The CFPB is the only federal agency focused exclusively on enforcing consumer financial laws. It is meant to ensure that all consumers have access to markets for consumer financial products and services and that such markets are fair, transparent and competitive.
It was given the power to issue regulations and monitor a range of lenders from banks to non-bank firms that were previously unsupervised at the federal level including mortgage companies and payday lenders.
It also has the power to discipline firms for misconduct. Since opening its doors, it has levied fines and dealt with more than a million consumer complaints relating to mortgages, credit cards, student loans, debt collection and other financial products.
The CFPB said it has provided $11.7 billion in relief for more than 27 million harmed customers. That figure includes debts that were canceled or reduced as well as compensation paid out by firms.
Controversy over the agency
The brainchild of Elizabeth Warren, now a leading liberal voice in the U.S. Senate, the agency draws strong support from Democrats and strong opposition from Republicans, who say it wields too much unchecked power.
Republicans objected to a clause in the Dodd Frank law that the CFPB director could be fired only “for cause” and they foiled Obama’s first choice for CFPB director, Warren, who at the time was a Harvard professor.
Obama then appointed Richard Cordray as director while Congress was in recess. Republicans have introduced legislation to put a commission in charge of the CFPB to weaken the power of its single director and have Congress decide its funding. Currently, the U.S. Federal Reserve funds the agency.
A federal appeals court ruled in 2016 that the structure of the CFPB was unconstitutional because it gave too much power to its director. Other agency heads who answer to the president can be fired at will.
The CFPB has appealed that ruling, which came after it was sued by mortgage servicer PHH Corp.
Wall Street accuses the agency of imposing overly burdensome regulations and large fines.
The agency during the Trump administration
The Republican-led Congress and White House have put a halt to rule-making by the CFPB. The Trump administration is focused on rolling back Obama-era financial rules. Trump this month signed a congressional resolution that lets banks, credit card companies and other financial firms block customers from filing class action lawsuits. The move killed a CFPB rule released in July.
CFPB restrictions on payday lenders, also known as “small-dollar” lending, are seen as the potential next target for Republicans. The CFPB’s power now is concentrated on enforcement, but that power may also be blunted.