The causes of the 2008 financial crisis were widespread and complex. However, almost every expert agrees that systemic failures in the regulation and supervision of U.S. financial institutions, combined with risky investments and a lack of transparency at these institutions, were key factors.
In response, Congress passed the "Dodd-Frank Wall Street Reform and Consumer Protection Act" in 2010. Today, it is known simply as Dodd-Frank. One of the key provisions of this act was to authorize the creation of a new federal agency — the Consumer Financial Protection Bureau (CFPB) — to help protect consumers from abuses in the financial sector. The CFPB was officially formed on July 21, 2011, as an independent agency inside the Federal Reserve.
According to the CFPB's website, its 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." The CFPB works to educate consumers about the financial marketplace, enforce federal consumer financial protection laws, and conduct market research to better understand consumers, financial services providers and consumer financial markets.
More specifically, the CFPB helps ensure that consumers are provided with the information they need to make good financial decisions. For example, the prices and terms for financial products like mortgages and credit cards should be clear and unambiguous; the risks entailed in purchasing financial products and services should be clearly explained, without important details buried in the fine print.
A critical issue that the CFPB is addressing is the use of unfair, deceptive or abusive acts or practices by financial institutions in the marketing and selling of financial products and services. Dodd-Frank prohibits the use of all such acts or practices (which are collectively referred to by the Act as UDAAPs) by financial institutions.
Unfair acts or practices are those that are likely to cause substantial consumer injury that cannot be reasonably avoided, and is not outweighed by consumer benefits. Deceptive acts or practices are those that mislead or are likely to mislead financial consumers. Abusive acts or practices are those that make it hard for a consumer to understand a term or condition of a financial product or service, or that take unreasonable advantage of the consumer.
If you believe that you have been subjected to an unfair, deceptive or abusive act or practice by a financial institution, you can submit a complaint directly to the CFPB. Visit the CFPB's complaint submission website to register your complaint. The CFPB will then forward it to the financial institution and work to help get your problem resolved.
The 2008 financial crisis is widely considered to be the worst financial crisis in the U.S. since the Great Depression. The creation of the CFPB is one of many steps taken by the government to help ensure that such a crisis doesn’t happen again. The CFPB's initiatives should provide Americans with more information and protection needed to maintain good credit.
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