The CFPB at Three: A Child Prodigy

The Consumer Financial Protection Bureau turned just three years old Monday, July 21st, but when you look at its massive and compelling body of work, you must wonder: Are watchdog years like plain old dog years? Is the CFPB now a full-sized, 21-year-old adult?

The Consumer Financial Protection Bureau (CFPB) turned just three years old Monday, July 21st, but when you look at its massive and compelling body of work, you must wonder: Are watchdog years like plain old dog years? Is the CFPB now a full-sized, 21-year-old adult?

The answer is no, not yet. The CFPB is still growing and developing and adding programs and projects. The CFPB is, however, at three years old, certainly a child prodigy.

The CFPB was established as an integral part of the Wall Street Reform and Consumer Protection Act enacted in 2010 to fix the mess created when banks ran amok, resulting in the Great Recession that began with the September 2008 economic collapse.

It is the nation’s first financial agency with just one job, protecting consumers. It’s also the first federal agency with authority over the full financial marketplace, so consumers are protected whether they shop at a bank, non-bank mortgage company or payday lender, or are harmed by credit bureau mistakes or debt collector abuses. It even has special offices to protect older Americans, servicemembers (and veterans) and students.

In poll after poll (new Lake poll for PIRG-backed Americans for Financial Reform), the American people overwhelmingly support the CFPB and ongoing Wall Street oversight. Nevertheless, the CFPB remains subject to withering attacks from the financial industry whose tricks and traps led our economy into collapse.

After you take a look at some of its successes and some of its work in progress, we think you’ll agree: the idea of the CFPB needs no defense, only more defenders.

The CFPB is protecting credit card customers: It has ordered five of the nation’s six biggest credit card companies — Capital One, Discover, American Express, Bank of America and JP Morgan Chase — to return a total of $1.5 billion dollars directly to the consumers they ripped off with fraudulently-marketed, junky add-on products. And in June, it ordered GE Capital (now Synchrony) to refund more than $225 million for illegal and discriminatory credit card practices (CFPB Enforcement blog page).

CFPB Complaint ButtonThe CFPB is helping with complaints: The CFPB has established a Public Consumer Complaint Database that is already the nation’s largest collection of financial complaints, with more than 400,000 complaints about banks, credit bureaus, credit cards, debt collectors, private student lenders and mortgage companies received so far. Just last week, the CFPB proposed (and seeks comments for 30 days) an important enhancement to the database: By posting narrative contextual details of consumer stories, it will be easier for bank examiners, researchers, other consumers and even financial firms themselves to determine whether bad practices are isolated or common.

The CFPB is protecting students from unfair practices: Earlier this year, the CFPB filed a lawsuit against the for-profit college ITT Educational Services, arguing that they engaged in predatory student lending practices that push students into high-cost private student loans that inevitably will default. The CFPB has also investigated the growing use of high-fee debit cards to disburse student loans, and issued “Know Before You Owe” tools for student consumers.

The CFPB is helping stop fraud against servicemembers, veterans and their families: The CFPB’s Office of Servicemember Affairs targets financial frauds and scams aimed at military families and veterans. Sadly, it’s a big problem. In November, the CFPB obtained $14 million in servicemember refunds from Cash America, a payday lender that violated the Military Lending Act.

The CFPB is reining in debt collector abuses: As a 21st century, data-driven agency, the CFPB is keenly aware that debt collection complaints have rapidly eclipsed all others in its complaint database. Consequently it is looking very closely at debt collector practices. This month, the CFPB fined payday lender Ace Cash Express $5 million and ordered it to return an additional $5 million to its customers for illegal debt collection tactics. It also filed a lawsuit against a “debt collection lawsuit mill” for using “illegal tactics to intimidate consumers into paying debts they may not owe.”

The CFPB is forcing credit bureaus to do a better job: The often-lethargic credit bureaus are responding to the recommendations in the CFPB’s comprehensive report on the industry. In particular, the so-called Big Three bureaus — Experian, Equifax and Trans Union — have agreed to share full consumer complaint files with creditors during reinvestigations, instead of merely converting the details into a 2-digit code meaning, for example, “Consumer says not my account.” Without the details, how could the creditor determine whether the consumer had a valid dispute?

The CFPB is listening to consumers: In addition to taking consumer complaints, the CFPB is urging consumers to simply tell their financial stories, good or bad (Watch videos of stories or tell your own story here). The CFPB is helping consumers with its “Ask CFPB” tool. It’s been on the road all over the country, to hear from consumers and small bankers in the communities where they live and work, from El Paso and Long Beach to Des Moines, from Boston to Itta Bena, Mississippi.

Over the next six months, the CFPB is expected to take major steps in three important areas where powerful industry forces may challenge it. But already, the House of Representatives has passed appropriations amendments designed to eliminate the CFPB’s independent funding. No other bank regulator is subject to the politicized appropriations process, for good reason. Earlier this year, the House passed a broader package designed to cripple the bureau.

The same lobbies that supported rolling back the CFPB’s independence are expected to oppose its pending efforts to protect consumers.

Soon, the CFPB is expected to propose rules regulating the exploding prepaid card market. Credit cards are heavily regulated, with debit cards, payroll cards and gift cards somewhat regulated, but the rapidly-growing general purpose prepaid card market is generally not regulated at all. The CFPB is also expected to propose rules governing high-cost, short-term payday loans that some, but not all, states have regulated. Finally, the CFPB was tasked by Congress to investigate whether small-print binding arbitration clauses in “take-it-or-leave-it” financial contracts encourage companies to ignore the law, because their customers cannot take them to court. If it so finds, the CFPB is authorized to ban or regulate the clauses.

Each of these projects threatens one or more powerful special interests that have long challenged the CFPB’s activities, and they are expected to escalate their attacks if the CFPB’s reforms go forward in a pro-consumer way. Consumers who depend on the CFPB to make markets work fairly, for both consumers and good actors, will need to step up and support the CFPB. After all, the idea of the CFPB needs no defense, only more defenders.


Ed Mierzwinski

Senior Director, Federal Consumer Program, PIRG

Ed oversees U.S. PIRG’s federal consumer program, helping to lead national efforts to improve consumer credit reporting laws, identity theft protections, product safety regulations and more. Ed is co-founder and continuing leader of the coalition, Americans For Financial Reform, which fought for the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010, including as its centerpiece the Consumer Financial Protection Bureau. He was awarded the Consumer Federation of America's Esther Peterson Consumer Service Award in 2006, Privacy International's Brandeis Award in 2003, and numerous annual "Top Lobbyist" awards from The Hill and other outlets. Ed lives in Virginia, and on weekends he enjoys biking with friends on the many local bicycle trails.