The federal agency, CFPB, released its annual report in July 2012 to address that issue.
The CFPB was created by the Dodd-Frank Wall Street Reform and Consumer Protection Act in the wake of the near financial meltdown of 2007. On its website it defines its role in the following manner: “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.” Consumer protection, not business advocacy, is the number one goal.
The agency’s start has not been a smooth one. The head of the bureau was appointed by President Obama during a congressional recess, thereby avoiding an approval vote, which Republicans said they would block. In short, Democrats created the agency and are in favor of it, and Republicans are attempting to dismantle the agency. For now, it exists.
In spite of this rocky start, the CFPB is conducting reviews and going about their business of protecting consumers. In addition to setting up rules and establishing relationships with existing governmental agencies, they have investigated certain industries and individual companies.
Here are some of the actions of the bureau’s first year:
• With the cooperation of several federal agencies they created a database to “combat consumer financial fraud directed at military members, veterans and their families.”
• Commenced investigations into the following industries: payday loans, credit bureaus, bank checking account overdraft programs, debt collection agencies and private college loan lenders, among others.
• Started “Ask CFPB” an online tool to help consumers find clear and “unbiased” answers to questions regarding finance.
• Gathered complaints in the bank services arena, including credit cards and bank loans
• Levied a serious fine against Citibank ($210M) for misleading business practices
• Issued a report about reverse mortgages
• Set up a system for gathering consumer input including online, telephone and mail sources.
Of these complaints, 43% were mortgage related, 34% credit cards and 15% regarded bank accounts
According to the report, “significant rules, orders and other initiatives” are expected in the next six months, including,
• Publish reports on the state of student loans,
• Submit rules for approval regarding non-bank entities such as payday loan lenders
• Create a best practices report that financial advisors should follow when dealing with “older Americans”
• A slew of rulings regarding the mortgage industry including escrow requirements and minimum loan standards for lending institutions to follow to keep bad loans from being made
• Possible standardized fee disclosure forms that banks would follow to disclose bank account fee structures publically
The CFPB is working with other federal agencies to avoid duplication of rules and oversight. It is additionally working to produce rules that foster consumer understanding through transparency. The CFPB wants financial institutions to be clear with consumers regarding the fees they are charging them.
The success or failure of the Bureau has yet to be determined. Time and politics will ultimately determine whether it’s effective as a consumer protection tool.