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The Consumer Financial Protection Bureau (CFPB) is an agency of the
United States government The federal government of the United States (U.S. federal government or U.S. government) is the national government of the United States, a federal republic located primarily in North America, composed of 50 states, a city within a feder ...
responsible for
consumer protection Consumer protection is the practice of safeguarding buyers of goods and services, and the public, against unfair practices in the marketplace. Consumer protection measures are often established by law. Such laws are intended to prevent busines ...
in the financial sector. CFPB's jurisdiction includes
bank A bank is a financial institution that accepts deposits from the public and creates a demand deposit while simultaneously making loans. Lending activities can be directly performed by the bank or indirectly through capital markets. Because ...
s, credit unions, securities firms, payday lenders, mortgage-servicing operations,
foreclosure Foreclosure is a legal process in which a lender attempts to recover the balance of a loan from a borrower who has stopped making payments to the lender by forcing the sale of the asset used as the collateral for the loan. Formally, a mor ...
relief services, debt collectors, and other financial companies operating in the
United States The United States of America (U.S.A. or USA), commonly known as the United States (U.S. or US) or America, is a country primarily located in North America. It consists of 50 states, a federal district, five major unincorporated territorie ...
. Since its founding, the CFPB has used technology tools to monitor how financial entities used social media and algorithms to target consumers. The CFPB's creation was authorized by the
Dodd–Frank Wall Street Reform and Consumer Protection Act The Dodd–Frank Wall Street Reform and Consumer Protection Act, commonly referred to as Dodd–Frank, is a United States federal law that was enacted on July 21, 2010. The law overhauled financial regulation in the aftermath of the Great Recess ...
, whose passage in 2010 was a legislative response to the
financial crisis of 2007–08 Finance is the study and discipline of money, currency and capital assets. It is related to, but not synonymous with economics, the study of production, distribution, and consumption of money, assets, goods and services (the discipline of fin ...
and the subsequent
Great Recession The Great Recession was a period of marked general decline, i.e. a recession, observed in national economies globally that occurred from late 2007 into 2009. The scale and timing of the recession varied from country to country (see map). At t ...
. The CFPB's status as an
independent agency A regulatory agency (regulatory body, regulator) or independent agency (independent regulatory agency) is a government authority that is responsible for exercising autonomous dominion over some area of human activity in a licensing and regulati ...
has been subject to many challenges in court. In June 2020, the
United States Supreme Court The Supreme Court of the United States (SCOTUS) is the highest court in the federal judiciary of the United States. It has ultimate appellate jurisdiction over all U.S. federal court cases, and over state court cases that involve a point o ...
found the single-director structure removable only with-cause unconstitutional but allowed the agency to remain in operation.


Role

According to former Director Richard Cordray, the Bureau's priorities are mortgages, credit cards and student loans. The CFPB qualifies as a large independent agency that was designed to consolidate its employees and responsibilities from a number of other federal regulatory bodies, including the
Federal Reserve The Federal Reserve System (often shortened to the Federal Reserve, or simply the Fed) is the central banking system of the United States of America. It was created on December 23, 1913, with the enactment of the Federal Reserve Act, after a ...
, the
Federal Trade Commission The Federal Trade Commission (FTC) is an independent agency of the United States government whose principal mission is the enforcement of civil (non-criminal) antitrust law and the promotion of consumer protection. The FTC shares jurisdiction ov ...
, the
Federal Deposit Insurance Corporation The Federal Deposit Insurance Corporation (FDIC) is one of two agencies that supply deposit insurance to depositors in American depository institutions, the other being the National Credit Union Administration, which regulates and insures credi ...
, the National Credit Union Administration and even the Department of Housing and Urban Development.Bureau of Consumer Financial Protection
topics. nytimes.com Updated: December 8, 2011
The bureau is an independent unit located inside and funded by the United States Federal Reserve, with interim affiliation with the U.S. Treasury Department. The CFPB writes and enforces rules for financial institutions, examines both bank and non-bank financial institutions, monitors and reports on markets, as well as collects and tracks consumer complaints. The CFPB opened its website in early February 2011 to accept suggestions from consumers via
YouTube YouTube is a global online video sharing and social media platform headquartered in San Bruno, California. It was launched on February 14, 2005, by Steve Chen, Chad Hurley, and Jawed Karim. It is owned by Google, and is the second most v ...
,
Twitter Twitter is an online social media and social networking service owned and operated by American company Twitter, Inc., on which users post and interact with 280-character-long messages known as "tweets". Registered users can post, like, a ...
, and its own website interface. According to the United States Treasury Department, the bureau is tasked with the responsibility to "promote fairness and transparency for
mortgages A mortgage loan or simply mortgage (), in civil law jurisdicions known also as a hypothec loan, is a loan used either by purchasers of real property to raise funds to buy real estate, or by existing property owners to raise funds for any p ...
,
credit card A credit card is a payment card issued to users (cardholders) to enable the cardholder to pay a merchant for goods and services based on the cardholder's accrued debt (i.e., promise to the card issuer to pay them for the amounts plus the ot ...
s, and other consumer financial products and services". According to its web site, the CFPB's "central 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". In 2016 alone most of the hundreds and thousands of consumer complaints about their financial services—including banks and credit card issuers—were received and compiled by CFPB and are publicly available on a federal government database. Once a
financial institution Financial institutions, sometimes called banking institutions, are business entities that provide services as intermediaries for different types of financial monetary transactions. Broadly speaking, there are three major types of financial inst ...
acquires $10
billion Billion is a word for a large number, and it has two distinct definitions: *1,000,000,000, i.e. one thousand million, or (ten to the ninth power), as defined on the short scale. This is its only current meaning in English. *1,000,000,000,000, i.e ...
in
assets In financial accounting, an asset is any resource owned or controlled by a business or an economic entity. It is anything (tangible or intangible) that can be used to produce positive economic value. Assets represent value of ownership that can ...
, it falls under the guidance, rules, and regulations under the CFPB. The bank will then be known as a CFPB regulated bank. The CFPB will examine the institution for compliance with bank regulatory laws.


History

In July 2010, Congress passed the
Dodd–Frank Wall Street Reform and Consumer Protection Act The Dodd–Frank Wall Street Reform and Consumer Protection Act, commonly referred to as Dodd–Frank, is a United States federal law that was enacted on July 21, 2010. The law overhauled financial regulation in the aftermath of the Great Recess ...
, during the 111th United States Congress in response to the late-2000s recession and
financial crisis A financial crisis is any of a broad variety of situations in which some financial assets suddenly lose a large part of their nominal value. In the 19th and early 20th centuries, many financial crises were associated with banking panics, and man ...
. The agency was originally proposed in 2007 by then
Harvard Law School Harvard Law School (Harvard Law or HLS) is the law school of Harvard University, a private research university in Cambridge, Massachusetts. Founded in 1817, it is the oldest continuously operating law school in the United States. Each class ...
professor Elizabeth Warren, who later became a US senator. The proposed CFPB was actively supported by
Americans for Financial Reform Americans for Financial Reform (AFR) is a progressive nonprofit organization which advocates for financial reform in the United States, including stricter regulation of Wall Street. AFR is a coalition of approximately 200 consumer, labor and spe ...
, a newly created umbrella organization of some 250 consumer, labor, civil rights and other activist organizations. On September 17, 2010, President Obama announced the appointment of Warren as Assistant to the President and Special Advisor to the Secretary of the Treasury on the Consumer Financial Protection Bureau to set up the new agency. Due to the way the legislation creating the bureau was written, until the first Director was in place, the agency was not able to write new rules or supervise financial institutions other than banks. On July 21, 2011, Senator Richard Shelby wrote an op‑ed for ''
The Wall Street Journal ''The Wall Street Journal'' is an American business-focused, international daily newspaper based in New York City, with international editions also available in Chinese and Japanese. The ''Journal'', along with its Asian editions, is published ...
'' affirming his continued opposition to a centralized structure, noting that both the Securities Exchange Commission and
Federal Deposit Insurance Corporation The Federal Deposit Insurance Corporation (FDIC) is one of two agencies that supply deposit insurance to depositors in American depository institutions, the other being the National Credit Union Administration, which regulates and insures credi ...
had executive boards and that the CFPB should be no different. He noted lessons learned from experiences with Fannie Mae and Freddie Mac as support for his argument. ''
Politico ''Politico'' (stylized in all caps), known originally as ''The Politico'', is an American, German-owned political journalism newspaper company based in Arlington County, Virginia, that covers politics and policy in the United States and inter ...
'' interpreted Shelby's statements as saying that Cordray's nomination was "dead on arrival". Republican threats of a filibuster to block the nomination in December 2011 led to Senate inaction. Elizabeth Warren, who proposed and established the CFPB, was removed from consideration as the bureau's first formal director after Obama administration officials became convinced Warren could not overcome strong Republican opposition. On July 17, President Obama nominated former Ohio Attorney General and Ohio State Treasurer Richard Cordray to be the first formal director of the CFPB. Prior to his nomination, Cordray had been hired as chief of enforcement for the agency. However, Cordray's nomination was immediately in jeopardy due to 44
Senate A senate is a deliberative assembly, often the upper house or chamber of a bicameral legislature. The name comes from the ancient Roman Senate (Latin: ''Senatus''), so-called as an assembly of the senior (Latin: ''senex'' meaning "th ...
Republicans vowing to derail any nominee in order to encourage a decentralized structure of the organization. Senate Republicans had also shown a pattern of refusing to consider regulatory agency nominees. The CFPB formally began operation on July 21, 2011. Since the CFPB database was established in 2011, more than 730,000 complaints have been published. CFPB supporters include the
Consumers Union A consumer is a person or a group who intends to order, or uses purchased goods, products, or services primarily for personal, social, family, household and similar needs, who is not directly related to entrepreneurial or business activities. ...
claim that it is a "vital tool that can help consumers make informed decisions". CFPB detractors argue that the CFPB database is a "gotcha game" and that there is already a database maintained by the
Federal Trade Commission The Federal Trade Commission (FTC) is an independent agency of the United States government whose principal mission is the enforcement of civil (non-criminal) antitrust law and the promotion of consumer protection. The FTC shares jurisdiction ov ...
although that information is not available to the public. On January 4, 2012,
Barack Obama Barack Hussein Obama II ( ; born August 4, 1961) is an American politician who served as the 44th president of the United States from 2009 to 2017. A member of the Democratic Party, Obama was the first African-American president of the ...
issued a recess appointment to install Cordray as director through the end of 2013. This was a highly controversial move as the Senate was still holding '' pro forma'' sessions, and the possibility existed that the appointment could be challenged in court. This type of recess appointment was unanimously ruled unconstitutional in '' NLRB v. Noel Canning''. On July 16, 2013, the Senate confirmed Cordray as director in a 66–34 vote. Cordray resigned in late 2017 to run for governor of Ohio. The Financial CHOICE Act, proposed by the House Financial Services Committee's Jeb Hensarling, to repeal the
Dodd–Frank Wall Street Reform and Consumer Protection Act The Dodd–Frank Wall Street Reform and Consumer Protection Act, commonly referred to as Dodd–Frank, is a United States federal law that was enacted on July 21, 2010. The law overhauled financial regulation in the aftermath of the Great Recess ...
, passed the House on June 8, 2017. Also in June 2017, the Senate was crafting its own reform bill. Testimony in US Congressional hearings of 2017 have elicited concerns that the wholesale publication of consumer complaints is both misleading and injurious to the consumer market. Rep. Barry Loudermilk (R-GA) said at one such congressional hearing, "Is the purpose of the database just to name and shame companies? Or should they have a disclaimer on there that says it's a fact-free zone, or this is fake news? That's really what I see happening here." Bill Himpler, executive vice president of the American Financial Services Association, a trade group representing banks and other lenders responded "Something needs to be done." "Once the damage is done to a company, it's hard to get your reputation back. Mick Mulvaney, as acting director of the CFPB, removed all 25 members of the agency's Consumer Advisory Board on June 5, 2018, after eleven of them held a press conference on June 3 in which they criticized him. On February 13, 2021, President Joe Biden formally submitted to the Senate the nomination of Rohit Chopra to serve as director of the CFPB. His nomination was approved on September 30, 2021, by a 50-48 vote. On October 20th, 2022 The Fifth Circuit Court of Appeals struck down the CFPB’s payday lending rule on the grounds that the funds used to draft the bill were unconstitutionally obtained. This court ruling only impacts the 5th circuit.


Regulatory activities

From its creation until 2017, the CFPB "has curtailed abusive debt collection practices, reformed mortgage lending, publicized and investigated hundreds of thousands of complaints from aggrieved customers of financial institutions, and extracted nearly $12 billion for 29 million consumers in refunds and canceled debts."


Mortgages

Regulatory implementation regarding mortgages is covered on the bureau website. Topics provided for consumers include, 2013 mortgage rule implementation, resources to help people comply, quick reference charts, supervision and examination materials, and a link for feedback. It also provides additional information that covers rural or under-served counties, HUD-approved housing counselors, and Appendix Q. Appendix Q relates to the debt-to-income ratio that must be possessed for "qualified mortgages" and provides details about how to determine the factors for that calculation. The standard is set at no more than 43 percent.


Retirement and insurance investments

The CFPB is weighing whether it should take on a role in helping Americans manage retirement savings and regulate savings plans, particularly focusing on investment scams that target the retired and elderly. "That's one of the things we've been exploring and are interested in terms of whether and what authority we have", bureau director Richard Cordray said in a January 2013 interview. Some conservatives have been critical of this potential role, with William Tucker of the American Media Institute asserting that the agency intends to "control" retirement savings and force people to buy federal debt.Financial Repression From The Obama Administration: How Savers May Be Forced To Buy Federal Debt
William Tucker, Forbes.com, December 23, 2013
The
AARP AARP (formerly called the American Association of Retired Persons) is an interest group in the United States focusing on issues affecting those over the age of fifty. The organization said it had more than 38 million members in 2018. The magazin ...
has encouraged the agency to take an active role, arguing that the bureau will help protect elderly Americans from affinity fraud that often targets senior citizens, ensuring that their investments are less likely to be stolen through securities fraud or malpractice.6 Ways the Consumer Financial Protection Bureau Will Fight for You
Carole Fleck,
AARP AARP (formerly called the American Association of Retired Persons) is an interest group in the United States focusing on issues affecting those over the age of fifty. The organization said it had more than 38 million members in 2018. The magazin ...
, March 1, 2012
The main regulator of retirement and benefit plans established by employers and private industry is the U.S. Department of Labor, which enforces the main laws ( ERISA, COBRA, and HIPAA), retirement plans (including
401(k) In the United States, a 401(k) plan is an employer-sponsored, defined-contribution, personal pension (savings) account, as defined in subsection 401(k) of the U.S. Internal Revenue Code. Periodical employee contributions come directly out of their ...
, SIMPLE,
403(b) In the United States, a 403(b) plan is a U.S. tax-advantaged retirement savings plan available for public education organizations, some non-profit employers (only Internal Revenue Code 501(c)(3) organizations), cooperative hospital service organiz ...
, and traditional defined-benefit pensions) as well as many aspects of employer group-health plans. The
Affordable Care Act The Affordable Care Act (ACA), formally known as the Patient Protection and Affordable Care Act and colloquially known as Obamacare, is a landmark U.S. federal statute enacted by the 111th United States Congress and signed into law by Presi ...
, establishing marketplaces selling health plans directly to consumers, adopted the ERISA-style regulatory model, requiring all plans to have standardized documents such as a "summary plan document" (SPD), but the marketplace was regulated by the individual insurance commissioners of every state, with some states having multiple regulators (California maintains both a Department of Insurance and a Department of Managed Care). IRAs, also directed to consumers, are regulated by type of custodian (the FDIC regulates bank custodians, the IRS regulates non-bank custodians). Annuities, life insurance, and disability insurance purchased directly by consumers, are regulated by individual state insurance commissioners. Marketing to consumers is generally regulated by the FCC and various state laws. Because state commissioners are the main regulators, the CFPB is unlikely to assume a leadership role in retirement investment regulation without further legislation and possibly a US constitutional amendment transferring insurance lawmaking power to the federal government. In 2011, the National Association of Insurance Commissioners identified "the single most significant challenge for state insurance regulators is to be vigilant in the protection of consumers, especially in light of the changes taking place in the financial services marketplace", and the CFPB may help fill this void. Many have argued the state-based system of insurance regulation (including insurance-like products such as annuities) is highly economically inefficient, results in uneven and non-portable insurance plans, artificially shrinks risk pools (especially in smaller states) resulting in higher premiums, limits mobility of brokers who have to re-certify in new states, complicates the needs of multi-state business, and should be replaced with a national insurance regulator or national insurance charter option as has taken place with the regulation of securities and banking.


Public outreach

The CFPB has created a number of
personal finance Personal finance is the financial management which an individual or a family unit performs to budget, save, and spend monetary resources over time, taking into account various financial risks and future life events. When planning personal f ...
tools for consumers, including Ask CFPB, which compiles plain-language answers to personal finance questions, and Paying for College, which estimates the cost of attending specific universities based on the
financial aid Student financial aid in the United States is funding that is available exclusively to students attending a post-secondary educational institution in the United States. This funding is used to assist in covering the many costs incurred in the p ...
offers a student has received. The CFPB has also attempted to help consumers understand virtual currencies such as
Bitcoin Bitcoin (abbreviation: BTC; sign: ₿) is a decentralized digital currency that can be transferred on the peer-to-peer bitcoin network. Bitcoin transactions are verified by network nodes through cryptography and recorded in a public distrib ...
.


Consumer data protection

In 2016, the CFPB took its first enforcement action against a company that the CFPB alleged had failed to properly protect the privacy and security of consumers data.


Controversies

A 2013 press release from the United States House Financial Services Committee criticized the CFPB for what was described as a "radical structure" that "is controlled by a single individual who cannot be fired for poor performance and who exercises sole control over the agency, its hiring and its budget." Moreover, the committee alleged a lack of financial transparency and a lack of accountability to Congress or the President. Committee Vice Chairman Patrick McHenry, expressed particular concern about travel costs and a $55 million renovation of CFPB headquarters, stating "$55 million is more than the entire annual construction and acquisition budget for GSA for the totality of federal buildings." In 2012, the majority of GSA's Federal Buildings Fund went to rental costs, totaling $5.2 billion. $50 million was budgeted for construction and acquisition of facilities. In 2014, some employees and former employees of the CFPB testified before Congress about an alleged culture of racism and sexism at the agency. Former employees testified they were retaliated against for bringing problems to the attention of superiors. As described in articles in ''Motor Finance'' and ''The Wall Street Journal'', the CFPB has been criticized for the methodology it uses to identify instances of racial discrimination among auto lenders. Because of legal constraints, the agency used a system to "guess" the race of auto loan applicants based on their last name and listed address. Based on that information, the agency charged several lenders were discriminating against minority applicants and levied large fines and settlements against those companies. Ally Financial paid $98 million in fines and settlement fees in 2013. As the agency's methodology means it can only guess who may be victims of discrimination entitled to settlement funds, as of late 2015, the CFPB had yet to compensate any individuals who were victims of Ally's allegedly discriminatory practices. Cordray was accused of multiple violations of the Hatch Act as Director of the CFPB and investigated by the Office of Special Counsel (OSC), who found no violations.


Amendments

On May 21, 2018, US President Donald Trump signed into law Congressional legislation repealing the enforcement of automobiles lending rules. On May 24, 2018, Trump signed into law the Economic Growth, Regulatory Relief and Consumer Protection Act, exempting dozens of banks from the CFPB's regulations.


Proposed amendments

On July 11, 2013, the CFPB Rural Designation Petition and Correction Act (H.R. 2672; 113th Congress) was introduced into the House of Representatives. The bill would amend the
Dodd–Frank Wall Street Reform and Consumer Protection Act The Dodd–Frank Wall Street Reform and Consumer Protection Act, commonly referred to as Dodd–Frank, is a United States federal law that was enacted on July 21, 2010. The law overhauled financial regulation in the aftermath of the Great Recess ...
to direct the CFPB to establish an application process that would allow a person to have their
county A county is a geographic region of a country used for administrative or other purposesChambers Dictionary, L. Brookes (ed.), 2005, Chambers Harrap Publishers Ltd, Edinburgh in certain modern nations. The term is derived from the Old French ...
designated as "rural" for purposes of federal consumer financial law. One practical effect of having a county designated rural is that people can qualify for some types of mortgages by getting them exempted from the CFPB's qualified mortgage rule. On September 26, 2013, the Consumer Financial Protection Safety and Soundness Improvement Act of 2013 (H.R. 3193; 113th Congress) was introduced into the United States House of Representatives. If adopted, the bill would have modified the CFPB by transforming it into a five-person commission and removing it from the Federal Reserve System. The CFPB would have been renamed the "Financial Product Safety Commission". The bill was also intended to make it easier to override the CFPB decisions. It passed in the House of Representatives on February 27, 2014 and was received by the Senate on March 4. It was never considered in the Democratic controlled Senate.


Legal challenges

Two lawsuits were filed in the early years of the CFPB; they were both dismissed by federal courts, but one was appealed and is still ongoing. The first one, filed on June 21, 2012, by a Texas bank along with the
Competitive Enterprise Institute The Competitive Enterprise Institute (CEI) is a non-profit libertarian think tank founded by the political writer Fred L. Smith Jr. on March 9, 1984, in Washington, D.C., to advance principles of limited government, free enterprise, and individu ...
, challenged the constitutionality of provisions of the CFPB. One year later, in August 2013, a federal judge dismissed the lawsuit because the plaintiffs had failed to show that they had suffered harm. In July 2015, the Court of Appeals for the District of Columbia Circuit affirmed in part and reversed in part, holding that the bank, but not the states that later joined the lawsuit, had standing to challenge the law, and returned the case for further proceedings. A lawsuit filed July 22, 2013, by Morgan Drexen Integrated Systems, a provider of outsourced administrative support services to attorneys, and Connecticut attorney Kimberly A. Pisinski, challenged the constitutionality of the CFPB. The complaint, filed in the U.S. District Court for the District of Columbia, alleged that the "CFPB's structure insulates it from political accountability and internal checks and balances in violation of the United States Constitution. Unbridled from constitutionally-required accountability, CFPB has engaged in ultra vires and abusive practices, including attempts to regulate the practice of law (a function reserved for state bars), attempts to collect attorney-client protected material, and overreaching demands for, and mining of, personal financial information of American citizens, which has prompted a Government Accountability Office ("GAO") investigation, commenced on July 12, 2013." That October, this case was dismissed by a D.C. Federal Court. On August 22, 2013, one month after Morgan Drexen's lawsuit, the CFPB filed its own lawsuit against Morgan Drexen in the United States District Court for the Central District of California alleging that Morgan Drexen charged advance fees for debt relief services in violation of the Telemarketing Sales Rule and engaged in deceptive acts and practices in violation of the Consumer Financial Protection Act (CFPA). The CFPB won this lawsuit and Morgan Drexen was ordered to pay $132,882,488 in restitution and a $40 million civil penalty. In October 2016, the United States Court of Appeals for the District of Columbia Circuit ruled that it was unconstitutional for the CFPB Director to be removable by the
President of the United States The president of the United States (POTUS) is the head of state and head of government of the United States of America. The president directs the executive branch of the federal government and is the commander-in-chief of the United ...
only for cause, such as "inefficiency, neglect of duty or malfeasance." Circuit Judge Brett Kavanaugh, joined by Senior Circuit Judge A. Raymond Randolph, wrote that the law was "a threat to individual liberty" and instead found that the President could remove the CFPB Director at will. Circuit Judge Karen L. Henderson agreed that the CFPB Director had been wrong in adopting a new interpretation of the Real Estate Settlement Procedures Act, finding the
statute of limitations A statute of limitations, known in civil law systems as a prescriptive period, is a law passed by a legislative body to set the maximum time after an event within which legal proceedings may be initiated. ("Time for commencing proceedings") In mo ...
did not apply to the CFPB, and fining the petitioning mortgage company PHH Corporation $109 million, but she dissented from giving the President a new power to remove the Director, citing constitutional avoidance. The U.S. Court of Appeals for the District of Columbia Circuit vacated the decision and ordered ''
en banc In law, an en banc session (; French for "in bench"; also known as ''in banc'', ''in banco'' or ''in bank'') is a session in which a case is heard before all the judges of a court (before the entire bench) rather than by one judge or a smaller ...
'' review. On January 31, 2018, the ''en banc'' D.C. Circuit found that the CFPB's structure was constitutional by a vote of 7–3. Judge Cornelia Pillard, writing for the majority, found that the Take Care Clause does not forbid independent agencies, while each of the circuit judges from the earlier panel wrote separate dissents. In June 2018, New York Federal District Court judge Loretta Preska ruled against its structure. In January 2019, the Supreme Court denied review of the DC Circuit Court decision. In October 2019, the Supreme Court announced it would review the constitutionality of the Bureau's structure in the case '' Seila Law v. Consumer Financial Protection Bureau'' considering the split decision of the lower courts. Oral arguments began on March 3, 2020. On June 29, 2020, the Supreme Court ruled in a 5–4 decision that the firing protections are an unconstitutional restraint on the president's ability to oversee executive branch agencies. "Such an agency lacks a foundation in historical practice and clashes with constitutional structure by concentrating power in a unilateral actor insulated from Presidential control," Chief Justice
John Roberts John Glover Roberts Jr. (born January 27, 1955) is an American lawyer and jurist who has served as the 17th chief justice of the United States since 2005. Roberts has authored the majority opinion in several landmark cases, including '' Nat ...
wrote in the majority opinion, which was joined by his conservative colleagues. The statutes around the Director's position on the CFPB were considered severable from the remaining structure of the CFPB, and the Court ordered that "The agency may therefore continue to operate, but its Director, in light of our decision, must be removable by the President at will." The dissenting opinion, written by Justice
Elena Kagan Elena Kagan ( ; born April 28, 1960) is an American lawyer who serves as an associate justice of the Supreme Court of the United States. She was nominated by President Barack Obama on May 10, 2010, and has served since August 7, 2010. Kagan ...
, stated that the majority's decision has the court "second-guessing" the two political branches of government (Congress and the president) on how to structure the executive branch and "wipes out a feature of he CFPBits creators thought fundamental to its mission — a measure of independence from political pressure."


2017 dispute over acting director

On November 24, 2017, Director Cordray appointed Leandra English to the position of deputy director, and announced that he would leave office at the close of business that day. Cordray indicated that would make English the acting director after his resignation, citing provisions of the
Dodd–Frank Wall Street Reform and Consumer Protection Act The Dodd–Frank Wall Street Reform and Consumer Protection Act, commonly referred to as Dodd–Frank, is a United States federal law that was enacted on July 21, 2010. The law overhauled financial regulation in the aftermath of the Great Recess ...
providing that the deputy director of the CFPB becomes acting director in the "absence or unavailability" of the director.Alison Frankel
CFPB's controversial structure looms over leadership showdown
Reuters (November 27, 2017).
Later the same day, however, President
Donald Trump Donald John Trump (born June 14, 1946) is an American politician, media personality, and businessman who served as the 45th president of the United States from 2017 to 2021. Trump graduated from the Wharton School of the University of Pe ...
appointed the incumbent director of the
Office of Management and Budget The Office of Management and Budget (OMB) is the largest office within the Executive Office of the President of the United States (EOP). OMB's most prominent function is to produce the president's budget, but it also examines agency programs, poli ...
, Mick Mulvaney, as acting director, citing the authority of the Federal Vacancies Reform Act of 1998. On November 25, the Office of Legal Counsel released an opinion, written by Assistant Attorney General Steven Engel, asserting that the President has the authority under the FVRA to designate an acting CFPB Director. The OLC memo maintained that "both the Vacancies Reform Act and 1011(b)(5) of Dodd-Frankare available for filling on an acting basis a vacancy that results from the resignation of the CFPB's Director" but that "when the President designates an individual...outside the ordinary order of succession, the President's designation necessarily controls." This position was also supported by the General Counsel of the CFPB, Mary E. McLeod. On November 26, English (represented by former CFPB Senior Counsel Deepak Gupta) filed a lawsuit in the United States District Court for the District of Columbia seeking a temporary restraining order and declaratory judgment to prevent Mulvaney from becoming acting director, Mulvaney was given access by unnamed individuals with the keys to the director's office on November 27 and ordered all CFPB employees to disregard any claims from English that she is the acting director. Both English and Mulvaney sent emails to the entire 1,600-person staff of the CFPB, each signing as "Acting Director" of the agency. On November 28, 2017, U.S. District Judge Timothy J. Kelly, who had been appointed by President Trump just a few months earlier, denied English's motion for a
preliminary injunction An injunction is a legal and equitable remedy in the form of a special court order that compels a party to do or refrain from specific acts. ("The court of appeals ... has exclusive jurisdiction to enjoin, set aside, suspend (in whole or in p ...
and allowed Mulvaney to begin serving as CFPB Acting Director.


2019 dispute over CFPB leadership

Seila Law LLC (Seila Law), a law firm that provided debt relief services, was under investigation by the CFPB. As part of its investigation, the CFPB issued a civil investigative demand (CID) to Seila Law, which required Seila Law to produce certain documents. Seila Law declined to comply with the CID and challenged the constitutionality of the CFPB. The CFPB brought a motion to enforce the CID to the United States District Court for the Central District of California, where District Judge Josephine Staton granted the motion after finding the CFPB was constitutionally structured. Seila Law's appeal to the
Ninth Circuit The United States Court of Appeals for the Ninth Circuit (in case citations, 9th Cir.) is the U.S. federal court of appeals that has appellate jurisdiction over the U.S. district courts in the following federal judicial districts: * District ...
was dismissed. The 9th Circuit panel affirmed the District Court's ruling, and agreed that the Supreme Court's prior decisions upholding for-cause removal in ''Humphrey's Executor'' and ''Morrison'' were "controlling." It also referred approvingly to the ''en banc'' decision of the DC Circuit in ''PHH Corp. v. CFPB'' (2018), in which the Circuit found that the structure of the CFPB was constitutional. There was arguably a circuit split on the question presented in ''Seila Law''. While the Ninth Circuit and DC Circuit had held that the CFPB's structure is constitutional, the Fifth Circuit in '' Collins v. Mnuchin'' (2018) held that the structure of the
Federal Housing Finance Agency The Federal Housing Finance Agency (FHFA) is an independent federal agency in the United States created as the successor regulatory agency of the Federal Housing Finance Board (FHFB), the Office of Federal Housing Enterprise Oversight (OFHEO), ...
—another agency whose director can be removed only for cause—violated the separation of powers. The Supreme Court granted ''
certiorari In law, ''certiorari'' is a court process to seek judicial review of a decision of a lower court or government agency. ''Certiorari'' comes from the name of an English prerogative writ, issued by a superior court to direct that the record of ...
'' in ''Seila Law'' on October 18, 2019, and heard oral argument on March 3, 2020. The Court issued its decision on June 29, 2020. The 5–4 decision ruled that the CFPB structure, with a sole director that could only be terminated for cause, was unconstitutional as it violated the separation of powers, vacating the lower court judgement and remanding the case for review. The Court recognized that the statutes around the director of the CFPB was severable from the rest of the statute establishing the agency, and thus "The agency may therefore continue to operate, but its Director, in light of our decision, must be removable by the President at will." Chief Justice
John Roberts John Glover Roberts Jr. (born January 27, 1955) is an American lawyer and jurist who has served as the 17th chief justice of the United States since 2005. Roberts has authored the majority opinion in several landmark cases, including '' Nat ...
wrote the majority opinion joined by Justices Clarence Thomas, Samuel Alito, Neil Gorsuch, and Brett Kavanaugh. Roberts wrote that the CFPB structure with a single point of leadership that could only be removed for cause "has no foothold in history or tradition", and has only been used in four other instances: three current uses for the United States Office of Special Counsel, the
Social Security Administration The United States Social Security Administration (SSA) is an independent agency of the U.S. federal government that administers Social Security, a social insurance program consisting of retirement, disability and survivor benefits. To qualify fo ...
, and the
Federal Housing Finance Agency The Federal Housing Finance Agency (FHFA) is an independent federal agency in the United States created as the successor regulatory agency of the Federal Housing Finance Board (FHFB), the Office of Federal Housing Enterprise Oversight (OFHEO), ...
, and temporarily for one year during the
American Civil War The American Civil War (April 12, 1861 – May 26, 1865; also known by other names) was a civil war in the United States. It was fought between the Union ("the North") and the Confederacy ("the South"), the latter formed by states ...
for the
Office of the Comptroller of the Currency The Office of the Comptroller of the Currency (OCC) is an independent bureau within the United States Department of the Treasury that was established by the National Currency Act of 1863 and serves to charter, regulate, and supervise all nationa ...
. Roberts wrote that the three current uses "are modern and contested. And they do not involve regulatory or enforcement authority comparable to that exercised by the CFPB." Roberts also wrote that the CFPB structure "is also incompatible with the structure of the Constitution, which — with the sole exception of the Presidency — scrupulously avoids concentrating power in the hands of any single individual." Roberts referred back to the precedent established by ''Humphrey's Executor'' and ''Morrison'' as a basis for the majority's decision. Justice
Elena Kagan Elena Kagan ( ; born April 28, 1960) is an American lawyer who serves as an associate justice of the Supreme Court of the United States. She was nominated by President Barack Obama on May 10, 2010, and has served since August 7, 2010. Kagan ...
wrote the dissent joined by Justices Ruth Bader Ginsburg, Stephen Breyer, and Sonia Sotomayor. Kagan wrote that "Today's decision wipes out a feature of that agency its creators thought fundamental to its mission — a measure of independence from political pressure." Kagan challenged the separation of powers argument presented by the majority: "Nowhere does the text f the Constitutionsay anything about the President's power to remove subordinate officials at will." The dissenting Justices did concur on the matter of severability of the remaining structure of the CFPB outside of the director.


2022 dispute over funding structure

In 2018, the Community Financial Services Association of America sued the CFPB over its 2017 rule that blocked lenders to attempt to collect funds from borrowers' accounts after two consecutive failed attempts, unless the borrower had consented. Part of its argument in the case was that the CFPB's budgetary structure was unconstitutional, as it did not receive funding through Congressional appropriations but requested its funding through the Federal Reserve. While the district court ruled against the association, the Fifth Circuit ruled in favor of the association in October 2022, deeming that its funding structure was unconstitutional. The CFPB subsequently argued in other simultaneous legal disputes that the Fifth Circuit's decision was "neither controlling nor correct."


List of directors

; Status


See also

* List of financial regulatory authorities by country * Regulatory responses to the subprime crisis * Subprime mortgage crisis solutions debate *
Title 12 of the Code of Federal Regulations CFR Title 12 – Banks and Banking is one of 50 titles composing the United States Code of Federal Regulations In the law of the United States, the ''Code of Federal Regulations'' (''CFR'') is the codification of the general and permanent ...
*
Volcker Rule The Volcker Rule iof the Dodd–Frank Wall Street Reform and Consumer Protection Act (). The rule was originally proposed by American economist and former United States Federal Reserve Chairman Paul Volcker to restrict United States banks from m ...
*
Wall Street reform Wall Street reforms are reforms or regulations of the financial industry in the United States. Wall Street is the home of the country's two largest stock exchanges, and "Wall Street" is a metonym for the United States financial sector. Major Wal ...


References


Further reading


Holding the CFPB Accountable: Review Of The First Semi-Annual Report: Hearing before the Committee on Banking, Housing, and Urban Affairs, United States Senate, One Hundred Twelfth Congress, Second Session, January 31, 2012

The Semi-Annual Report of the Consumer Financial Protection Bureau: Hearing before the Committee on Financial Services, U.S. House of Representatives, One Hundred Twelfth Congress, Second Session, September 20, 2012

The Consumer Financial Protection Bureau's Semi-annual Report to Congress: Hearing before the Committee on Banking, Housing, and Urban Affairs, United States Senate, One Hundred Thirteenth Congress, First Session, April 23, 2013
*Sorelle, Mallory. 2020.

'. University of Chicago Press.


External links

*
Consumer Financial Protection Bureau
in the
Federal Register The ''Federal Register'' (FR or sometimes Fed. Reg.) is the official journal of the federal government of the United States that contains government agency rules, proposed rules, and public notices. It is published every weekday, except on fede ...
{{DEFAULTSORT:Consumer Financial Protection Bureau Corporate crime Financial regulatory authorities of the United States Government agencies established in 2011 2011 establishments in Washington, D.C. Consumer rights agencies