Few problems are more frustrating than being unable to resolve a dispute with a large financial institution. The Consumer Financial Protection Bureau (CFPB) is a government agency that helps consumers do just that. Born out of a necessity to combat the abuses of the 2008 recession, the CFPB “…makes sure banks, lenders, and other financial companies treat you fairly…” by instituting rules prohibiting unfair lending and collection practices and maintaining a complaint filing system that is accessible to all.
The job losses, foreclosures, and bankruptcies brought about by the 2008 recession devastated the economy and financially hobbled many citizens. Adding insult to injury, taxpayers were forced to bail out the banking industry—a task suffering citizens found particularly distasteful given that by all accounts, the financial sector's unethical and fiscally unsound decisions were the root cause of the crisis.
Congress, recognizing the need to protect people from another collapse, passed the Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank Act) in 2010. As part of its reforms, the Act established the CFPB to give citizens a voice against the banking and finance industry. It also protects individuals and families from unfair, deceptive, and abusive financial practices. (Learn more by reading What Is the Dodd-Frank Act?)
The CFPB oversees and regulates consumer financial products and provides individuals a place to lodge complaints. You’ll find examples of significant consumer benefits below.
The Act mandated the CFPB to take strong action to protect homeowners. The CFPB complied. Not only did the CFPB institute rules requiring transparency in lending, but it took steps to slow down the foreclosure process, as well.
Under rules put in place in 2014, in most cases, a lender or servicer can't start a foreclosure proceeding until a homeowner is at least 120 days in default (behind) on a mortgage. During the waiting period, the bank must consider a homeowner’s request for a foreclosure alternative, such as a loan modification. The filing of a completed application stays (stops) the foreclosure until the bank completes the evaluation.
The waiting period is a lifesaver for many owners. It provides time to recover financially after suffering from an illness, job loss, or similar downturn. The law is especially critical in states that allow nonjudicial foreclosures, particularly in a few states where a lender may sell a home at auction as soon as 30 days after a default. (To find out about the foreclosure process in your state, see Key Aspects of State Foreclosure Law: 50-State Chart.)
Anyone who has tried to solve a problem with a large company knows how frustrating it can be—especially if you’re unable to come to a reasonable resolution. Now, a consumer can file a complaint on the CFPB website regarding any loan or financial service, including issues involving a:
The CFPB will work as an intermediary on behalf of the consumer by not only submitting the complaint to the company but by following up to resolve the problem, as well.
In its February 3, 2017, executive order, the Trump administration signaled its intent to make good on the campaign promise to unwind the Dodd-Frank Act and increase the availability of credit.
One of the causes of the financial collapse was the failure of banks to keep enough money on hand to weather a financial downturn. The Dodd-Frank Act tightened credit availability by requiring banks to maintain a higher percentage of capital. Repealing capital requirements instituted under Dodd-Frank would allow lenders to dip into reserves.
Of course, what remains unsaid is that the cost of this action would be to subject taxpayers to the risk of another banking bailout. Further, if the Trump administration unwinds the Dodd-Frank Act, individuals would lose valuable protections under the CFPB and be subjected to predatory practices once again. (Learn more by reading Trump Administration Executive Order Targets the Dodd-Frank Act.)
On May 24, 2018, President Trump signed the Economic Growth, Regulatory Relief, and Consumer Protection Act (SB 2155) into law, amending the Dodd-Frank Act. The goal of SB 2155 was to make it easier for banks to lend to customers by scaling back certain requirements under Dodd-Frank, like by raising the asset threshold at which certain enhanced prudential standards apply from $50 billion to $250 billion and eliminating the Volcker Rule (a federal regulation that prohibits banks from conducting certain investment activities with their own accounts) for small banks with total assets valued at less than $10 billion.