Consumer Financial Protection Act

What Is the Consumer Financial Protection Act?

The Consumer Financial Protection Act of 2010 is an amendment to the National Bank Act designed to identify and explain the standards that apply to national banks. The Consumer Financial Protection Act aims to increase oversight and clarify the consumer finance laws governing financial transactions to protect consumers in these transactions.

The act, known as Dodd-Frank Wall Street Reform, resulted in the creation of the Consumer Financial Protection Bureau (CFPB) to centralize the regulation of various financial products and services.

Understanding the Consumer Financial Protection Act

After the housing market collapse of the late 2000s, which many blamed, at least partly, on "predatory" lending practices, the Consumer Financial Protection Bureau was established in 2011 to create more oversight of various financial processes. The agency strives to consolidate or resolve discrepancies between federal and state financial laws. CFPB's primary goal is to protect consumers from fraudulent and/or overly aggressive behavior from banks and other financial institutions.

Under its first director, Richard Cordray, the CFPB was aggressive in actions against financial companies in its first five years. It handled nearly one million consumer complaints; its enforcement actions returned almost $12 billion to 29 million consumers, and it enacted new financial regulations.

Consumer Financial Protection Act Legal Actions

Examples of the agency's legal actions include suing credit card companies for engaging in unfair, deceptive, and abusive practices, prosecuting banks for charging overdraft fees to consumers who had not agreed to overdraft services, and bringing lawsuits against payday lenders.

However, Republicans generally do not like the agency and want to dismantle it. Abolishing the CFPB was a significant part of the 2016 Republican Party Platform. In the platform, the authors stated that the CFPB was a "rogue agency" with a director with dictatorial powers, and its actions have been unfair to local and regional banks while favoring big banks.

The authors also complained that the agency has funding outside the appropriation process and uses its slush fund to steer settlements to politically favored groups. Republicans in the House and Senate have proposed bills to weaken the agency by challenging its funding, leadership structure, oversight, and data collection.

Since its formation, actions taken by the CFPB helped return billions of dollars to millions of consumers.

Special Considerations

In Nov. 2017, former President Trump appointed the head of the Office of Management and Budget, Mick Mulvaney, as interim director of the CFPB. After taking office, Mulvaney refused to request funding for the agency, reconsidered payday lending resolutions drafted by Cordray, and scaled back ongoing investigations — including one into the Equifax data breach.

On Jan. 20, 2021, President Joe Biden nominated Rohit Chopra, a commissioner on the Federal Trade Commission, to be the director of the CFPB. As of May 2021, he is still waiting on the Senate to confirm his nomination.