The APQC Blog

The CFPB at Four: The Watch Dog Gets Its Bite

On January 11, 2016, The Wall Street Journal reported that the Consumer Financial Protection Bureau (CFPB) doubled the number of enforcement cases it handled in 2015. For those unfamiliar with the CFPB, it was created in 2011 as an independent government entity to protect consumers in the financial sector.  The mandate for the CFPB was established in 2010 under the Dodd-Frank Act. While the enforcement arm of the CFPB can investigate any consumer financial services provider, the services most commonly investigated are credit cards, debt collection, and lenders.

Enforcement is up as a result of the CFPB establishing function institutional norms over the past few years. With the finance services industry making up between 7 and 8 percent of U.S. GDP, it is likely that the CFPB will continue to see its enforcement arm grow in importance and reach.

What does this mean for financial services? Possibly nothing if they are operating within the law. The CFPB aims to end the use of unfair, deceptive, or abusive acts or practices (UDAAP). A similar concept exists within the Federal Trade Commission, the main difference being UDAAP is generally applied to the consumer end of financial services. Unfortunately, the novelty of the legislation and the  practice of the U.S. Court System to help interpret regulations means a bit of vagueness still exists in determining what does and does not fall under UDAAP.

Financial services providers have a number of options to help avoid this issue. Such options for avoiding UDAAP claims include the input from legal counsel specializing in such regulations, regular review of products and services, and organizations keeping a close eye on the policies and procedures of third party providers. While the CFPB and the UDAAP are not designed to trap financial service providers, as the old saying goes, “ignorance of the law is no excuse from it.”

Now that does not mean the CFPB is free from fault. The use of names and geography to establish points for determining racial discrimination claims may not stand up to the test of time. There is also a concern by some industry groups that the CFPB may try to extend its reach beyond its original mandate. These are all items that could be handled over time as the CFPB, Congress, and the financial services industry feel each other out. A the end of the day, the CFPB is designed to make consumers feel safer and better protected when using financial services, and if it can do that, consumers and providers of such services will both benefit.

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