For years leading up to the 2008 financial collapse, federal bank regulators ignored numerous warnings of increasingly predatory mortgage practices, credit card tricks and unfair overdraft policies used by banks. The banks were earning billions from “gotcha” practices. Incredibly, bank regulators actively encouraged this behavior, arguing it was profitable and kept banks safe. No regulator cared about its other (and, to them, secondary) job: enforcing consumer laws. Some regulators rejected the role and even actively worked to prevent states from carrying it out. Worse, firms were able to pick and choose among regulators, encouraging a “race-to-the-regulatory-bottom.” That is the system that failed to protect us.
This report outlines predatory financial practices that hurt consumers and helped collapse the economy, costing us eight million jobs, millions of foreclosed homes and trillions of dollars in lost home and retirement values. It explains these and other emerging problems as “10 Reasons We Need The Consumer Financial Protection Bureau Now.”
In response to the problems caused by those predatory practices, the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 included a major reform demanded by the public: it established the landmark Consumer Financial Protection Bureau.
On July 21, 2011, the law provides that the CFPB takes over as the primary regulator of 18 consumer financial laws that 7 federal regulators had unevenly and inadequately implemented and enforced in both the bank and non-bank financial sectors.
Making Markets Work: According to the CFPB itself, “The central mission of the Consumer Financial Protection Bureau (CFPB) 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.”
The CFPB also has special roles granted by Congress to protect senior citizens, military families and other frequent targets of unfair financial practices.
As described on its own website, the CFPB was created:
“1) to ensure that consumers have timely and understandable information to make responsible decisions about financial transactions;
2) to protect consumers from unfair, deceptive, or abusive acts or practices, and from discrimination;
3) to reduce outdated, unnecessary, or overly burdensome regulations;
4) to promote fair competition by enforcing the Federal consumer financial laws consistently; and
5) to advance markets for consumer financial products and services that operate transparently and efficiently to facilitate access and innovation.”