The Dodd-Frank Wall Street Reform and Consumer Protection Act was enacted in 2010 to deal with the aftermath of the financial crisis and the corresponding Great Recession. Elements of Dodd-Frank were devoted to reining in reckless behavior in the financial arena and preventing future financial crises, but one agency was designed specifically to protect the wallets of consumers.
The Consumer Financial Protection Bureau (CFPB) was developed to empower consumers of financial products by ensuring that information is clear and straightforward, risks are properly assessed, and that unfair or deceptive financial practices are halted. CFPB became a central location for consumer protection, taking the place of ten different agencies that had some responsibility but no direct mission to protect consumers.
Since its beginnings in early 2011, CFPB has been quite busy refining rules, creating online guides to assist consumers, and handling consumer complaints. As of mid-2015, the CFPB has handled over 650,000 complaints and their actions have provided $10.8 billion in compensation to consumers who were victims of deceptive and fraudulent practices.
Consumer Financial Protection Bureau Wins
Consider these examples of CFPB victories against fraud and other illegal practices:
- Credit Card Practices – CFPB has taken action against multiple credit card companies, including Chase Bank, Capital One, and subsidiaries of American Express, for deceptive and fraudulent practices with respect to add-on products. In some cases, the add-on programs were included on customer accounts without their consent; in other cases, consumers were misled into thinking that the product was free. CFPB was able to secure $1.8 billion in refunds to customers.
- Mortgage Documents – New mortgage documents were created to standardize the forms you receive during the home buying process in order to make them easier to understand. The Loan Estimate and Closing Disclosure forms can help you compare loan offers and fully understand all the fees associated with the process.
- Predatory Loans – CFPB has taken several actions against predatory lending practices and those who encourage them. Actions include relief for students deceived by certain for-profit colleges into taking predatory loans for tuition, and assisting the Department of Defense by highlighting loopholes in the Military Lending Act that subjected military members to predatory lending rates.
- Deceptive Mortgage Practices – Ocwen Financial Corporation, the largest U.S. non-bank mortgage loan servicer at the time, was engaging in deceptive practices such as unauthorized charges and inaccurate payment reports. CFPB's action resulted in $2 billion in relief to borrowers that owed more on their home than it was worth and another $125 million to those that suffered foreclosures.
- Discrimination – CFPB worked with the Justice Department to take action against Ally Financial Inc. and Ally Bank to remedy discrimination against minorities in auto loans. Approximately 235,000 minority borrowers were charged higher interest rates on auto loans due to discriminatory mark-up factors. Ally was ordered to pay $80 million in compensatory damages.
While the CFPB's consumer protection actions are the most quantifiable way that the agency is protecting your money, the bank regulation components of Dodd-Frank are an even larger protective element. They are designed to keep banks solvent in any future financial crisis and prevent the need to bail them out using our tax dollars. Since we can only speculate about the amount of damage that was prevented, it is sometimes easy to forget how important that effort is.
Whether it is leveling financial playing fields, correcting consumer injustices, or setting up useful consumer guides, we look forward to more proactive work from the CFPB — and so do our bank accounts.
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