What the CFPB does: a guide to the consumer finance regulator

The Consumer Financial Protection Bureau (CFPB) is a federal agency whose job is to keep consumer finance markets open and fair, so that people can compare options and choose products that suit them. It writes and interprets rules, supervises certain companies, brings enforcement actions, takes consumer complaints and publishes educational material. Understanding what the CFPB does helps explain who sets the rules for mortgages, credit cards, student loans and other consumer financial products.

The Bureau was created to consolidate consumer protection duties that had been split among several agencies. This guide describes its functions, the laws it administers, how it relates to other regulators and what readers should check because the Bureau’s activity and priorities change over time.

In brief

• The CFPB sets rules, supervises companies, enforces consumer financial laws, handles complaints, promotes financial education and studies markets.
• It enforces laws that prohibit unfair, deceptive or abusive practices, and laws that prohibit discrimination in consumer finance.
• Its rules appear in Title 12 of the Code of Federal Regulations as regulations such as Regulation B and Regulation Z.
• It shares oversight with state regulators, the Federal Trade Commission and the banking agencies.
• Its priorities, staffing and authority are the subject of ongoing political and legal debate, so current status should be confirmed on its website.

Why the Bureau exists

Before the Bureau, consumer financial protection authority was spread across the banking agencies, the Federal Trade Commission, the Department of Housing and Urban Development and others. After the 2008 financial crisis, in which abusive mortgage practices played a part, Congress passed the Dodd-Frank Wall Street Reform and Consumer Protection Act, which created the CFPB and transferred to it rulemaking authority under many existing consumer laws. The idea was to give one agency primary responsibility and a single focus on consumers.

The main functions

The CFPB describes its work in several categories.

Rulemaking

The Bureau writes regulations that implement federal consumer financial laws. These include the Truth in Lending Act (Regulation Z), the Equal Credit Opportunity Act (Regulation B), the Real Estate Settlement Procedures Act (Regulation X), the Fair Debt Collection Practices Act (Regulation F) and others. A CFPB rule typically goes through proposal, public comment and a final rule published in the Federal Register, with an effective date and sometimes a longer compliance date. The Bureau also issues interpretive rules, advisory opinions and guidance. These do not all carry the same legal weight as regulations, and their status can change.

Supervision

The Bureau examines certain banks and nonbank companies to check compliance with consumer financial laws. Supervision of banks with more than a threshold amount in assets is by the CFPB, while smaller banks are generally supervised by their prudential regulators for consumer compliance. For nonbanks, the CFPB supervises companies in specified markets, such as mortgage origination and servicing, payday lending and private education lending, and larger participants in markets defined by rule, such as consumer reporting and debt collection. Exam results are generally confidential, though the Bureau publishes summaries of supervisory findings.

Enforcement

The CFPB can investigate and bring actions against companies and individuals that violate federal consumer financial law. The Bureau says it enforces laws that prohibit unfair, deceptive or abusive acts or practices and laws that prohibit discrimination in consumer finance. It can file cases in federal court or conduct administrative proceedings, and remedies can include restitution, civil money penalties and orders to change conduct. Enforcement actions and consent orders are posted on its enforcement page.

Consumer response

The Bureau accepts complaints from the public about financial products and services and forwards them to companies for response. A portion of complaints is published in a public database, with consumer consent and with personal information removed. The data is used by journalists, researchers and policymakers, and by the Bureau itself to spot trends.

Education and research

The Bureau publishes tools and plain-language resources, including its “Ask CFPB” answers, guides for homebuyers, and materials on credit reports and scores. It also studies how consumers experience financial products and watches markets for new risks, producing reports and data.

The legal standard: unfair, deceptive or abusive

Dodd-Frank prohibits “unfair, deceptive, or abusive acts or practices,” often abbreviated UDAAP. The terms have statutory definitions, and the Bureau and courts have interpreted them in cases and guidance. Unfairness generally concerns practices that cause or are likely to cause substantial injury that consumers cannot reasonably avoid. Deception concerns misleading representations or omissions that are material. Abusiveness covers certain practices that take unreasonable advantage of consumers’ lack of understanding, inability to protect their interests or reasonable reliance on a company. How the Bureau applies the abusiveness standard has varied over time and is a frequent subject of commentary.

How the CFPB fits with other agencies

Prudential regulators. The Federal Reserve, the OCC and the FDIC oversee the safety and soundness of banks. They retain consumer compliance supervision for smaller institutions.

The Federal Trade Commission. It has broad authority over unfair or deceptive practices by many businesses and shares enforcement of several consumer laws with the CFPB.

State authorities. State attorneys general and banking regulators enforce state consumer laws and, in some cases, federal ones. The federal framework generally sets a floor, and states can add protections, though preemption questions arise for national banks.

Other agencies. The Department of Housing and Urban Development, the Department of Education and others have roles in mortgage and student loan areas.

Structure and accountability

The Bureau is led by a director. Its funding comes from the Federal Reserve System under a statutory formula, which differs from most agencies that rely on annual appropriations. Its structure and independence have been challenged in court and debated in Congress. Court decisions, executive actions and statutory changes can alter its authority or priorities, so a reader should consult the CFPB’s website and the Federal Register for its present status, rules and staffing. This guide describes the Bureau’s functions generally and does not describe any specific recent change.

Reading a CFPB action

Rules and enforcement actions follow recognizable patterns, and knowing them makes news coverage easier to follow. A proposed rule opens a comment period, during which companies, consumer groups and individuals submit views. The final rule explains how the agency responded and sets an effective date. A consent order, by contrast, is a settlement: the company typically agrees to the order without admitting or denying the findings, and the document describes the conduct, the required changes and any money to be paid.

For compliance staff, the practical question is what a document binds. A regulation binds everyone covered by it. A consent order binds the named company. Guidance and advisory opinions show how the Bureau reads the law, and companies often follow them, but the legal weight differs. Anyone relying on a CFPB statement should identify which type of document it is, check its date and confirm that it has not been withdrawn or superseded.

Common misconceptions

“The CFPB regulates everything about banks.” It does not. Safety and soundness belongs to prudential regulators, and the Bureau’s supervisory reach over banks depends on size.

“The CFPB can resolve my dispute for me.” The complaint process asks the company to respond, and the Bureau reviews the response, but it does not act as a judge of individual disputes.

“Consumer finance rules are only federal.” State laws can be stricter, and state regulators are active.

“The CFPB sets interest rates.” It does not. It enforces disclosure and conduct rules. Rates are set by lenders and the market, subject to state usury laws where they apply.

A worked example

A consumer notices a charge on a credit card that she did not authorize and the issuer refuses to remove it. She first disputes it in writing with the issuer, using the process the Fair Credit Billing Act describes. When the response is unsatisfactory, she submits a complaint to the CFPB through its website. The Bureau sends it to the issuer, which must respond within a set time. The consumer sees the company’s reply and can provide feedback.

The complaint also adds to a pool of data. If many consumers report the same problem with the same issuer, the Bureau may examine it in supervision or, where it finds violations, open an enforcement investigation. The consumer’s case does not become a lawsuit by the Bureau, but it may help surface a pattern.

FAQ

Is the CFPB part of the Federal Reserve?

It is housed within the Federal Reserve System for funding purposes under the statute, but it operates as an independent bureau with its own director and rulemaking authority.

Does the CFPB regulate credit scores?

It enforces and writes rules under the Fair Credit Reporting Act, supervises larger consumer reporting agencies and publishes consumer education. It does not set a particular score.

How do I file a complaint?

Through the complaint portal at consumerfinance.gov. The Bureau forwards it to the company and posts updates.

Where do I find CFPB rules?

In Title 12 of the Code of Federal Regulations on the eCFR, and in the Federal Register for proposals and final rules.

Can the Bureau’s rules change?

Yes. Rules are revised through rulemaking, Congress and the courts. Confirm the current text and effective dates before relying on any rule.