The CFPB: Helping or Hurting?

One of the results of the financial crisis of 2008 was the Consumer Financial Protection Bureau, which was formed as part of the Dodd–Frank Wall Street Reform and Consumer Protection Act. Although the word ‘protection” is their title, given some of the actions of this agency one has to wonder who exactly it is that they are protecting. The CFPB’s stated purpose is to "promote fairness and transparency for mortgages, credit cards, and other consumer financial products and services" and is “empowered to set and enforce rules for banks and non-banks,” such as payday loan lenders and the like. Predatory lending was and still is a problem, but is the CFPB is truly the answer to this problem?

Criticisms of the CFPB

The CFP, like many other government agencies, is subject to very little oversight- presidential, congressional, or otherwise. Although there are probably many who will disagree with this statement, it is my opinion that any agency that can operate without any sort of oversight is a potentially dangerous one. Furthermore, the CFPB has a remarkably wide jurisdiction, and one of the foremost criticisms of the CFPB is that most of the abuses that it was formed to handle are already under the jurisdiction of other federal agencies. One issue that many lenders have with the CFPB is their ability to issue huge fines against companies as well as individuals. This has instilled a sense of paranoia in many lenders, many of which are now unwilling to loan to otherwise qualified consumers. This reduction in consumer choice has been exacerbated by the CFPB judging certain lending programs as "abusive" and forcing the companies to discontinue them. In addition, the CFPB has yet to address some of the worst abuses in the lending industry, although, in defense of the CFPB, the organization is only a little over two years old.

The Response to These Criticisms

Despite these criticisms, the CFPB has been hailed by many as a protector of homebuyers. According to this site, the CFPB has “heard from more than 5,000,000 consumers seeking information and advice” and has won restitutions for consumers to the tune of hundreds of millions of dollars. In addition, the agency’s focus on protecting the interests of military families as well as older Americans is one that is hard for anyone to discredit. The CFPB’s practice of encouraging victims of predatory lending to come forward has resulted in definitely progress for the company and for the many consumers who have been awarded restitution.

There is a question of personal freedom at the center of these criticisms, and a person’s opinion of what a government should be used for is at the core of that. Many who oppose the CFPB believe that an individual should be better suited for making their own decisions in regard to taking out loans, while advocates of the CFPB think that predatory lenders should be stopped at all costs. Time will tell whether or not the CFPB is actually the solution to the problem of predatory lending, or if it’s yet another example of political grandstanding by American politicians.

Katie Kent is a real estate agent and writer from Tucson, Arizona. Her writing interests include real estate, sales, and Tucson mortgage rates.