some say the consumer financial protection bureau (CFPB) unnecessarily limits consumers'choices and is not subject to sufficient oversight; others say it protects consumers from unethical business practices and unnecessary financial hardship. Regardless of the hoopla surrounding it, consumers have begun turning to the CFPB for help.
The CFPB is funded by the Federal Reserve and operates independently of Congress which is one reason some believe it does not have sufficient oversight. According to the CFPB's web site, its purpose is:
"Above all... ensuring that consumers get the information they need to make the financial decisions they believe are best for themselves and their families - that prices are clear up front, that risks are visible, and that nothing is buried in fine print. In a market that works, consumers should be able to make direct comparisons among products and no provider should be able to use unfair, deceptive, or abusive practices."
From July 2011 (the date the CFPB became effective) through February 2013, the CFPB had received and worked to address more than 131,000 consumer complaints, including 5,000 issues raised by members of the military, veterans, and their families. The complaints typically are related to mortgages, credit cards, bank accounts and services, private student loans, consumer loans, and credit reporting. According to a recent article in Barron's, the CFPB is:
"...Progressing in its original mission of reducing predatory lending by mortgage and auto lenders, credit-card issuers, and other consumer-finance outfits... So far, the agency has forced financial institutions to repay $425 million to consumers, and tackled bias in auto loans made by finance companies via car dealers. The CFPB has formulated tighter mortgage-lending rules that are being challenged in Congress. The bureau is about to begin regulating an estimated 22,000 payday offices."
For banks and financial firms, complying with CFPB rules may require operational makeovers and the not-insignificant expenses which may accompany them, according to American Banker.com. One financial institution spent 900 hours analyzing how its mortgage operations, servicing, collections, and legal compliance measured up to CFPB rules. Then it modified its systems, processes, and training programs (or created new ones) to ensure it would remain in compliance. One outcome was the firm's compliance team grew from four to 17 employees.
So, what is the CFPB? Is it an overreaching compliance nightmare or an effective consumer watchdog? Only time will tell.