The CFPB writes and enforces rules for financial institutions, examines both bank and non-bank financial institutions, monitors and reports on markets, as well as collects and tracks consumer complaints.[6]
The CFPB opened its website in early February 2011 to accept suggestions from consumers via YouTube, Twitter, and its own website interface. According to the United States Treasury Department, the bureau is tasked with the responsibility to "promote fairness and transparency for mortgages, credit cards, and other consumer financial products and services".[9] According to its web site, the CFPB's "central mission...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".[10] In 2016 alone most of the hundreds and thousands of consumer complaints about their financial services—including banks and credit card issuers—were received and compiled by CFPB and are publicly available on a federal government database.[11]
Once a financial institution acquires $10billion in assets, it falls under the guidance, rules, and regulations under the CFPB. The bank will then be known as a CFPB regulated bank. The CFPB will examine the institution for compliance with bank regulatory laws.[12]
On September 17, 2010, President Obama announced the appointment of Warren as Assistant to the President and Special Advisor to the Secretary of the Treasury on the Consumer Financial Protection Bureau to set up the new agency.[16][17] Due to the way the legislation creating the bureau was written, until the first Director was in place, the agency was not able to write new rules or supervise financial institutions other than banks.[7]
President Barack Obama announces the nomination of Richard Cordray as the first director of the CFPB on July 18, 2011.
Elizabeth Warren, who proposed and established the CFPB, was removed from consideration as the bureau's first formal director after Obama administration officials became convinced Warren could not overcome strong Republican opposition.[20] On July 17, President Obama nominated former Ohio Attorney General and Ohio State TreasurerRichard Cordray to be the first formal director of the CFPB.[21] Prior to his nomination, Cordray had been hired as chief of enforcement for the agency.[22]
However, Cordray's nomination was immediately in jeopardy due to 44 Senate Republicans vowing to derail any nominee in order to encourage a decentralized structure of the organization. Senate Republicans had also shown a pattern of refusing to consider regulatory agency nominees.[23] The CFPB formally began operation on July 21, 2011.[24]
Since the CFPB database was established in 2011, more than four million complaints have been published.[25] CFPB supporters include the Consumers Union claim that it is a "vital tool that can help consumers make informed decisions".[11] CFPB detractors argue that the CFPB database is a "gotcha game" and that there is already a database maintained by the Federal Trade Commission although that information is not available to the public.[11]
On January 4, 2012, Barack Obama issued a recess appointment to install Cordray as director through the end of 2013. This was a highly controversial move as the Senate was still holding pro forma sessions, and the possibility existed that the appointment could be challenged in court.[26] This type of recess appointment was unanimously ruled unconstitutional in NLRB v. Noel Canning.[27]
On July 16, 2013, the Senate confirmed Cordray as director in a 66–34 vote.[28] Cordray resigned in late 2017 to run for governor of Ohio.
Testimony in US Congressional hearings of 2017 have elicited concerns that the wholesale publication of consumer complaints is both misleading and injurious to the consumer market. Rep. Barry Loudermilk (R-GA) said at one such congressional hearing, "Is the purpose of the database just to name and shame companies? Or should they have a disclaimer on there that says it's a fact-free zone, or this is fake news? That's really what I see happening here." Bill Himpler, executive vice president of the American Financial Services Association, a trade group representing banks and other lenders responded "Something needs to be done." "Once the damage is done to a company, it's hard to get your reputation back.[11]
Mick Mulvaney, as acting director of the CFPB, removed all 25 members of the agency's Consumer Advisory Board on June 5, 2018, after eleven of them held a press conference on June 3 in which they criticized him.[31]
On February 13, 2021, President Joe Biden formally submitted to the Senate the nomination of Rohit Chopra to serve as director of the CFPB.[32] His nomination was approved on September 30, 2021, by a 50-48 vote.[33]
Regulatory activities
From its creation until 2017, the CFPB "has curtailed abusive debt collection practices, reformed mortgage lending, publicized and investigated hundreds of thousands of complaints from aggrieved customers of financial institutions, and extracted nearly $12 billion for 29 million consumers in refunds and canceled debts."[34]
Public outreach
The CFPB has created a number of personal finance tools for consumers, including Ask CFPB, which compiles plain-language answers to personal finance questions, and Paying for College, which estimates the cost of attending specific universities based on the financial aid offers a student has received.[35][36]
In 2016, the CFPB took its first enforcement action against a company that the CFPB alleged had failed to properly protect the privacy and security of consumers data.[38]
Controversies
A 2013 press release from the United States House Financial Services Committee criticized the CFPB for what was described as a "radical structure" that "is controlled by a single individual who cannot be fired for poor performance and who exercises sole control over the agency, its hiring and its budget." Moreover, the committee alleged a lack of financial transparency and a lack of accountability to Congress or the President. Committee Vice Chairman Patrick McHenry, expressed particular concern about travel costs and a $55 million renovation of CFPB headquarters, stating "$55 million is more than the entire annual construction and acquisition budget for GSA for the totality of federal buildings."[39] In 2012, the majority of GSA's Federal Buildings Fund went to rental costs, totaling $5.2 billion. $50 million was budgeted for construction and acquisition of facilities.[40]
In 2014, some employees and former employees of the CFPB testified before Congress about an alleged culture of racism and sexism at the agency. Former employees testified they were retaliated against for bringing problems to the attention of superiors.[41][42]
As described in articles in Motor Finance and The Wall Street Journal, the CFPB has been criticized for the methodology it uses to identify instances of racial discrimination among auto lenders. Because of legal constraints, the agency used a system to "guess" the race of auto loan applicants based on their last name and listed address. Based on that information, the agency charged several lenders were discriminating against minority applicants and levied large fines and settlements against those companies. Ally Financial paid $98 million in fines and settlement fees in 2013. As the agency's methodology means it can only guess who may be victims of discrimination entitled to settlement funds, as of late 2015, the CFPB had yet to compensate any individuals who were victims of Ally's allegedly discriminatory practices.[43][44][needs update]
Cordray was accused of multiple violations of the Hatch Act as Director of the CFPB and investigated by the Office of Special Counsel (OSC), who found no violations.[45]
Amendments
On May 21, 2018, US President Donald Trump signed into law Congressional legislation repealing the enforcement of automobiles lending rules.[46] On May 24, 2018, Trump signed into law the Economic Growth, Regulatory Relief and Consumer Protection Act, exempting dozens of banks from the CFPB's regulations.[47]
Proposed amendments
On September 26, 2013, the Consumer Financial Protection Safety and Soundness Improvement Act of 2013 (H.R. 3193; 113th Congress) was introduced into the United States House of Representatives.[48] If adopted, the bill would have modified the CFPB by transforming it into a five-person commission and removing it from the Federal Reserve System.[49] The CFPB would have been renamed the "Financial Product Safety Commission". The bill was also intended to make it easier to override the CFPB decisions. It passed in the House of Representatives on February 27, 2014 and was received by the Senate on March 4.[50] It was never considered in the Democratic controlled Senate.[51]
Two lawsuits were filed in the early years of the CFPB; they were both dismissed by federal courts, but one was appealed and is still ongoing. The first one, filed on June 21, 2012, by a Texas bank along with the Competitive Enterprise Institute, challenged the constitutionality of provisions of the CFPB.[52] One year later, in August 2013, a federal judge dismissed the lawsuit because the plaintiffs had failed to show that they had suffered harm.[53] In July 2015, the United States Court of Appeals for the District of Columbia Circuit affirmed in part and reversed in part, holding that the bank, but not the states that later joined the lawsuit, had standing to challenge the law, and returned the case for further proceedings.[54][55]
A lawsuit filed July 22, 2013, by Morgan Drexen Integrated Systems, a provider of outsourced administrative support services to attorneys, and Connecticut attorney Kimberly A. Pisinski, challenged the constitutionality of the CFPB.[56][57] The complaint, filed in the U.S. District Court for the District of Columbia, alleged that the "CFPB's structure insulates it from political accountability and internal checks and balances in violation of the United States Constitution. Unbridled from constitutionally-required accountability, CFPB has engaged in ultra vires and abusive practices, including attempts to regulate the practice of law (a function reserved for state bars), attempts to collect attorney-client protected material, and overreaching demands for, and mining of, personal financial information of American citizens, which has prompted a Government Accountability Office ("GAO") investigation, commenced on July 12, 2013."[58] On August 22, 2013, one month after Morgan Drexen's lawsuit, the CFPB filed its own lawsuit against Morgan Drexen in the United States District Court for the Central District of California alleging that Morgan Drexen charged advance fees for debt relief services in violation of the Telemarketing Sales Rule and engaged in deceptive acts and practices in violation of the Consumer Financial Protection Act (CFPA).[59] The CFPB won this lawsuit and Morgan Drexen was ordered to pay $132,882,488 in restitution and a $40 million civil penalty.[60]
In October 2016, the Court of Appeals for the District of Columbia Circuit ruled that it was unconstitutional for the CFPB Director to be removable by the President of the United States only for cause, such as "inefficiency, neglect of duty or malfeasance."[61] Circuit Judge Brett Kavanaugh, joined by Senior Circuit Judge A. Raymond Randolph, wrote that the law was "a threat to individual liberty" and instead found that the President could remove the CFPB Director at will.[61] Circuit Judge Karen L. Henderson agreed that the CFPB Director had been wrong in adopting a new interpretation of the Real Estate Settlement Procedures Act, finding the statute of limitations did not apply to the CFPB, and fining the petitioning mortgage company PHH Corporation $109 million, but she dissented from giving the President a new power to remove the Director, citing constitutional avoidance.[62] The U.S. Court of Appeals for the District of Columbia Circuit vacated the decision and ordered en banc review.[63] On January 31, 2018, the en banc D.C. Circuit found that the CFPB's structure was constitutional by a vote of 7–3. Judge Cornelia Pillard, writing for the majority, found that the Take Care Clause does not forbid independent agencies, while each of the circuit judges from the earlier panel wrote separate dissents.[64]
In October 2019, the Supreme Court announced it would review the constitutionality of the Bureau's structure in the case Seila Law v. Consumer Financial Protection Bureau considering the split decision of the lower courts.[68] Oral arguments began on March 3, 2020.[69]
On June 29, 2020, the Supreme Court ruled in a 5–4 decision that the firing protections are an unconstitutional restraint on the president's ability to oversee executive branch agencies. "Such an agency lacks a foundation in historical practice and clashes with constitutional structure by concentrating power in a unilateral actor insulated from Presidential control," Chief Justice John Roberts wrote in the majority opinion, which was joined by his conservative colleagues.[70] The statutes around the Director's position on the CFPB were considered severable from the remaining structure of the CFPB, and the Court ordered that "The agency may therefore continue to operate, but its Director, in light of our decision, must be removable by the President at will." The dissenting opinion, written by Justice Elena Kagan, stated that the majority's decision has the court "second-guessing" the two political branches of government (Congress and the president) on how to structure the executive branch and "wipes out a feature of [the CFPB] its creators thought fundamental to its mission—a measure of independence from political pressure."[71]
On November 25, the Office of Legal Counsel released an opinion, written by Assistant Attorney General Steven Engel, asserting that the President has the authority under the FVRA to designate an acting CFPB Director. The OLC memo maintained that "both the Vacancies Reform Act and [§1011(b)(5) of Dodd-Frank] are available for filling on an acting basis a vacancy that results from the resignation of the CFPB's Director" but that "when the President designates an individual...outside the ordinary order of succession, the President's designation necessarily controls."[76] This position was also supported by the General Counsel of the CFPB, Mary E. McLeod.[77][78]
On November 26, English (represented by former CFPB Senior Counsel Deepak Gupta) filed a lawsuit in the United States District Court for the District of Columbia seeking a temporary restraining order and declaratory judgment to prevent Mulvaney from becoming acting director,[79] Mulvaney was given access by unnamed individuals with the keys to the director's office on November 27 and ordered all CFPB employees to disregard any claims from English that she is the acting director.[80] Both English and Mulvaney sent emails to the entire 1,600-person staff of the CFPB, each signing as "Acting Director" of the agency.[81][82] On November 28, 2017, U.S. District Judge Timothy J. Kelly, who had been appointed by President Trump just a few months earlier, denied English's motion for a preliminary injunction and allowed Mulvaney to begin serving as CFPB Acting Director.[83]
Seila Law LLC (Seila Law), a law firm that provided debt relief services, was under investigation by the CFPB. As part of its investigation, the CFPB issued a civil investigative demand (CID) to Seila Law, which required Seila Law to produce certain documents. Seila Law declined to comply with the CID and challenged the constitutionality of the CFPB. The CFPB brought a motion to enforce the CID to the United States District Court for the Central District of California, where District Judge Josephine Staton granted the motion after finding the CFPB was constitutionally structured.[84]
Seila Law's appeal to the Ninth Circuit was dismissed. The 9th Circuit panel affirmed the District Court's ruling, and agreed that the Supreme Court's prior decisions upholding for-cause removal in Humphrey's Executor and Morrison were "controlling".[85] It also referred approvingly to the en banc decision of the DC Circuit in PHH Corp. v. CFPB (2018), in which the Circuit found that the structure of the CFPB was constitutional.[86]
There was arguably a circuit split on the question presented in Seila Law. While the Ninth Circuit and DC Circuit had held that the CFPB's structure is constitutional, the Fifth Circuit in Collins v. Mnuchin (2018) held that the structure of the Federal Housing Finance Agency—another agency whose director can be removed only for cause—violated the separation of powers.[87]
The Supreme Court granted certiorari in Seila Law on October 18, 2019, and heard oral argument on March 3, 2020.[88]
The Court issued its decision on June 29, 2020. The 5–4 decision ruled that the CFPB structure, with a sole director that could only be terminated for cause, was unconstitutional as it violated the separation of powers, vacating the lower court judgement and remanding the case for review. The Court recognized that the statutes around the director of the CFPB was severable from the rest of the statute establishing the agency, and thus "The agency may therefore continue to operate, but its Director, in light of our decision, must be removable by the President at will."[89]
Chief Justice John Roberts wrote the majority opinion joined by Justices Clarence Thomas, Samuel Alito, Neil Gorsuch, and Brett Kavanaugh. Roberts wrote that the CFPB structure with a single point of leadership that could only be removed for cause "has no foothold in history or tradition", and has only been used in four other instances: three current uses for the United States Office of Special Counsel, the Social Security Administration, and the Federal Housing Finance Agency, and temporarily for one year during the American Civil War for the Office of the Comptroller of the Currency.[71] Roberts wrote that the three current uses "are modern and contested. And they do not involve regulatory or enforcement authority comparable to that exercised by the CFPB."[71] Roberts also wrote that the CFPB structure "is also incompatible with the structure of the Constitution, which—with the sole exception of the Presidency—scrupulously avoids concentrating power in the hands of any single individual."[71] Roberts referred back to the precedent established by Humphrey's Executor and Morrison as a basis for the majority's decision.[90]
Justice Elena Kagan wrote the dissent joined by Justices Ruth Bader Ginsburg, Stephen Breyer, and Sonia Sotomayor. Kagan wrote that "Today's decision wipes out a feature of that agency its creators thought fundamental to its mission—a measure of independence from political pressure."[71] Kagan challenged the separation of powers argument presented by the majority: "Nowhere does the text [of the Constitution] say anything about the President's power to remove subordinate officials at will."[71] The dissenting Justices did concur on the matter of severability of the remaining structure of the CFPB outside of the director.
In 2018, the Community Financial Services Association of America sued the CFPB over its 2017 rule that blocked lenders to attempt to collect funds from borrowers' accounts after two consecutive failed attempts, unless the borrower had consented. Part of its argument in the case was that the CFPB's budgetary structure was unconstitutional, as it did not receive funding through Congressional appropriations but requested its funding through the Federal Reserve. While the district court ruled against the association, the Fifth Circuit ruled in favor of the association in October 2022, deeming that its funding structure was unconstitutional.[91] That opinion has been appealed to the US Supreme Court.[92]
2023 sanctioned over conduct
The Eleventh Circuit affirmed sanctions levied by the United States District Court for the Northern District of Georgia against the Consumer Financial Protection Bureau due to its conduct during discovery.[93]
The Fair Debt Collection Practices Act (FDCPA), Pub. L. 95-109; 91 Stat. 874, codified as 15 U.S.C. § 1692 –1692p, approved on September 20, 1977, is a consumer protection amendment, establishing legal protection from abusive debt collection practices, to the Consumer Credit Protection Act, as Title VIII of that Act. The statute's stated purposes are: to eliminate abusive practices in the collection of consumer debts, to promote fair debt collection, and to provide consumers with an avenue for disputing and obtaining validation of debt information in order to ensure the information's accuracy. The Act creates guidelines under which debt collectors may conduct business, defines rights of consumers involved with debt collectors, and prescribes penalties and remedies for violations of the Act. It is sometimes used in conjunction with the Fair Credit Reporting Act.
The Competitive Enterprise Institute (CEI) is a non-profit libertarian think tank founded by the political writer Fred L. Smith Jr. on March 9, 1984, in Washington, D.C., to advance principles of limited government, free enterprise, and individual liberty. CEI focuses on a number of regulatory policy issues, including business and finance, labor, technology and telecommunications, transportation, food and drug regulation, and energy and environment in which they have promoted climate change denial. Kent Lassman is the current President and CEO.
The Fair and Accurate Credit Transactions Act of 2003 is a U.S. federal law, passed by the United States Congress on November 22, 2003, and signed by President George W. Bush on December 4, 2003, as an amendment to the Fair Credit Reporting Act. The act allows consumers to request and obtain a free credit report once every 12 months from each of the three nationwide consumer credit reporting companies. In cooperation with the Federal Trade Commission, the three major credit reporting agencies set up the web site AnnualCreditReport.com to provide free access to annual credit reports.
Richard Adams Cordray is an American lawyer and politician serving as the COO of Federal Student Aid in the United States Department of Education. He served as the first director of the Consumer Financial Protection Bureau (CFPB) from 2012 to 2017. Before that, Cordray variously served as Ohio's attorney general, solicitor general, and treasurer. He was the Democratic nominee for governor of Ohio in 2018.
Loretta A. Preska is an American lawyer who serves as a senior United States district judge of the United States District Court for the Southern District of New York. Born in Albany, Preska received law degrees from Fordham University School of Law and New York University School of Law. She practiced law in New York City from 1973 to 1992 at the law firms of Cahill Gordon & Reindel and Hertzog, Calamari & Gleason. President George H. W. Bush appointed her to the district bench in 1992. She served as chief judge of the court for a seven-year term from 2009 to 2016, and took senior status in 2017. President George W. Bush nominated Preska to the U.S. Court of Appeals for the Second Circuit in 2008, but the Senate did not act on the nomination.
The PHH Corporation is an American financial services corporation headquartered in Mount Laurel, New Jersey which provides mortgage services to some of the world's largest financial services firms. PHH is the biggest U.S. outsourcer of home loans, processes and originates mortgages on behalf of small banks and some of the world's largest financial firms, including Morgan Stanley and HSBC Holdings Plc. On October 4, 2018 Ocwen Financial completed its acquisition of PHH Corporation and PHH is now a wholly owned subsidiary of Ocwen Financial Corp.
The Federal Housing Finance Agency (FHFA) is an independent federal agency in the United States created as the successor regulatory agency of the Federal Housing Finance Board (FHFB), the Office of Federal Housing Enterprise Oversight (OFHEO), and the U.S. Department of Housing and Urban Development government-sponsored enterprise mission team, absorbing the powers and regulatory authority of both entities, with expanded legal and regulatory authority, including the ability to place government-sponsored enterprises (GSEs) into receivership or conservatorship.
The Dodd–Frank Wall Street Reform and Consumer Protection Act, commonly referred to as Dodd–Frank, is a United States federal law that was enacted on July 21, 2010. The law overhauled financial regulation in the aftermath of the Great Recession, and it made changes affecting all federal financial regulatory agencies and almost every part of the nation's financial services industry.
Josephine Laura Staton is a United States district judge of the United States District Court for the Central District of California.
Rajeev V. Date is an American businessman, attorney, and venture capital investor who served as Deputy Director and Special Advisor for the United States Consumer Financial Protection Bureau. He had previously served in a variety of leadership positions at the Bureau, including several months as the startup agency's leader, as the Special Advisor to the United States Secretary of the Treasury. He is credited with guiding the Consumer Financial Protection Bureau's early strategic, operational, and policy initiatives.
The Consumer Financial Protection Safety and Soundness Improvement Act of 2013 is a bill that would restructure the Consumer Financial Protection Bureau (CFPB) by transforming it into a five-person commission and removing it from the Federal Reserve System. The CFPB would be renamed the "Financial Product Safety Commission." This bill is also intended to make overturning the decisions about regulations that the new commission makes easier to do.
Financial CHOICE Act is a bill introduced to the 115th United States Congress in 2017 that would, if enacted, roll back "many of the protections in the landmark Dodd-Frank 2010 federal law, including the "strongest" Wall Street "regulations from the financial crisis. The legislation passed the House 233–186 on June 8, 2017. The 600-page legislation was crafted by Congressman Jeb Hensarling (R-TX), chair of the House Financial Services Committee.
Keith A. Noreika is an American lawyer who specializes in the regulation of financial institutions. He served as Acting Comptroller of the Currency from May 5, 2017, to November 27, 2017, following the 30th Comptroller of the Currency, Thomas J. Curry, and preceding the 31st Comptroller of the Currency, Joseph Otting. Noreika rejoined the law firm of Simpson Thacher on January 8, 2018. He joined Patomak Global Partners as Executive Vice President and Chairman of its Banking Supervision and Regulation Group on July 5, 2022.
Leandra English is an American political advisor serving as an advisor to the Superintendent of the New York State Department of Financial Services. She formerly was the Deputy Director of the Consumer Financial Protection Bureau (CFPB) from 2017 until her resignation in 2018. She was the plaintiff in the lawsuit English v. Trump, in which she unsuccessfully sought to have herself acknowledged as Acting Director of the CFPB.
Leandra English v. Donald Trump, et al., No. 1:17-cv-02534, was a lawsuit before the United States District Court for the District of Columbia. The plaintiff, Leandra English, alleged that the defendants, Donald Trump and Mick Mulvaney, violated 12 U.S.C. § 5491(b)(5)(B), a component of the Dodd–Frank Act of 2010, when President Trump appointed Mulvaney to be Acting Director of the Consumer Financial Protection Bureau (CFPB).
Rohit Chopra is an American consumer advocate who is the third director of the Consumer Financial Protection Bureau (CFPB) and previous member of the Federal Trade Commission (FTC). Prior to this, Chopra served as assistant director of the CFPB and as the agency's first Student Loan Ombudsman, an office created by the Dodd–Frank Act.
Kathleen Laura Kraninger is an American government official who served as director of the Consumer Financial Protection Bureau (CFPB) from December 11, 2018, until her resignation on January 20, 2021. Before that, she served in the White House Office of Management and Budget during the Trump administration.
Seila Law LLC v. Consumer Financial Protection Bureau, 591 U.S. ____ (2020) was a U.S. Supreme Court case which determined that the structure of the Consumer Financial Protection Bureau (CFPB), with a single director who could only be removed from office "for cause", violated the separation of powers. Handed down on June 29, 2020, the Court's 5–4 decision created a new test to determine when Congress may limit the power of the president of the United States to remove an officer of the United States from office.
Collins v. Yellen, 594 U.S. ___ (2021), was a United States Supreme Court case dealing with the structure of the Federal Housing Finance Agency (FHFA). The case follows on the Court's prior ruling in Seila Law LLC v. Consumer Financial Protection Bureau, which found that the establishing structure of the Consumer Financial Protection Bureau (CFPB), with a single director who could only be removed from office "for cause", violated the separation of powers; the FHFA shares a similar structure as the CFPB. The case extends the legal challenge to the federal takeover of Fannie Mae and Freddie Mac in 2008.
Consumer Financial Protection Bureau v. Community Financial Services Association of America, Limited is a pending United States Supreme Court case related to the Consumer Financial Protection Bureau's funding mechanism.
↑ Borak, Donna (June 8, 2017). "House votes to kill Dodd-Frank. Now what?". Retrieved June 9, 2017. ..."advanced the 'crown jewel' of the GOP-led regulatory reform effort, effectively gutting the Dodd-Frank financial regulations that were put in place during the Obama administration."
This page is based on this Wikipedia article Text is available under the CC BY-SA 4.0 license; additional terms may apply. Images, videos and audio are available under their respective licenses.
