A Brief Overview of Actions Taken by the
Consumer Financial Protection Bureau (CFPB)
in Its First Year
Sean M. Hoskins
Analyst in Financial Economics
July 18, 2012
Congressional Research Service
7-5700
www.crs.gov
R42615
CRS Report for Congress
Pr
epared for Members and Committees of Congress
A Brief Overview of Actions Taken by the CFPB in Its First Year
Overview of the Bureau
The Consumer Financial Protection Bureau (CFPB), which formally started operating on July 21,
2011,1 was established by Title X of the Dodd-Frank Wall Street Reform and Consumer Financial
Protection Act (P.L. 111-203; the Dodd-Frank Act). The creation of the CFPB consolidates many
consumer financial protection responsibilities into one agency.2 The Dodd-Frank Act states that
the purpose of the CFPB is to implement and enforce federal consumer financial laws while
ensuring that consumers can access financial products and services.3 The CFPB is also instructed
to ensure that the markets for consumer financial services and products are fair, transparent, and
competitive.4 To fulfill its mandate, the CFPB can issue rules, examine certain institutions, and
enforce consumer protection laws and regulations.
Congress is currently engaged in oversight of the CFPB, but not its funding. The Dodd-Frank Act
established that the CFPB is to be headed by a director, appointed by the President with the
advice and consent of the Senate, who shall serve a five-year term. The current director, Richard
Cordray, was installed by President Obama via recess appointment on January 4, 2012.5 The
bureau is administratively situated within the Federal Reserve System (the Fed). The Federal
Reserve Board, however, cannot veto a rule issued by the CFPB, but the Financial Stability
Oversight Council (FSOC), with the vote of two-thirds of its members, can set aside a CFPB
proposed rule.6 The CFPB is funded through the earnings of the Fed, which is not subject to
congressional appropriation. The Dodd-Frank Act caps the CFPB’s funding at 11% of the Fed’s
operating expense for FY2011 and at 12% thereafter. If the director determines that additional
funding is needed, the Dodd-Frank Act provides authorization for an additional $200 million in
appropriations per year through FY2014.
The CFPB has the authority to enforce many of the financial consumer laws,7 primarily for large
depository institutions with assets of more than $10 billion as well as some nonbank institutions.8
However, some consumer protection responsibilities were not given to the bureau. The CFPB is
not the primary consumer protection regulator of depositories with less than $10 billion in assets.
The prudential regulators that regulate the smaller institutions for safety and soundness will
continue to regulate them for consumer protection.9 The Dodd-Frank Act also provides some
industries with exemptions from CFPB regulation. The CFPB will not oversee automobile
1 Consumer Financial Protection Bureau, “Designated Transfer Date,” 75 Federal Register 57252, September 20, 2010.
2 See CRS Report R41338, The Dodd-Frank Wall Street Reform and Consumer Protection Act: Title X, The Consumer
Financial Protection Bureau, by David H. Carpenter.
3 Dodd-Frank Act §1021.
4 Ibid.
5 For more on the legal issues surrounding the recess appointment, see CRS Report R42323, President Obama’s
January 4, 2012, Recess Appointments: Legal Issues, by David H. Carpenter et al.
6 The FSOC is a council of financial regulators, including CFPB, that is charged with monitoring systemic risk in the
financial system and coordinating several federal financial regulators. For more on the FSOC, see CRS Report R42083,
Financial Stability Oversight Council: A Framework to Mitigate Systemic Risk, by Edward V. Murphy. The authority
to review CFPB regulations is found in Dodd-Frank §1023.
7 For the list of the enumerated consumer laws that have been transferred to the CFPB, see Dodd-Frank §1002.
8 For more on the CFPB’s authority over nonbanks, see CRS Report R42156, The Early Agenda of the Consumer
Financial Protection Bureau: The Nonbank Supervision Program , by Sean M. Hoskins.
9 For more on the regulation of financial institutions, see CRS Report R40249, Who Regulates Whom? An Overview of
U.S. Financial Supervision, by Mark Jickling and Edward V. Murphy.
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A Brief Overview of Actions Taken by the CFPB in Its First Year
dealers, merchants, retailers, or sellers of nonfinancial goods and services, real estate brokers, real
estate agents, sellers of manufactured and mobile homes, income tax preparers, insurance
companies, or accountants.10
Multiple proposals have been introduced in the 112th Congress to alter the structure of the CFPB.
For example,
• H.R. 1315, which passed the House in July 2011, and S. 737 would establish a
five-person commission to lead the bureau in place of a single director.
• H.R. 1355 would place the CFPB in the Department of the Treasury, modifying
its current status as an independent bureau attached to the Fed.
• H.R. 1640 would repeal the requirement of an annual transfer to the CFPB of
funds from the Fed and would subject the CFPB to the regular authorization,
budget, and appropriations process.
Major CFPB Activities
Initiatives
The CFPB initiated the “Know Before You Owe” campaign, which is aimed at simplifying and
consolidating disclosure forms for mortgages, credit cards, and student loans.11 For example, on
July 9, 2012, the CFPB proposed new Loan Estimate and Closing Disclosure forms for
mortgages.12 If adopted, the prototypes would reduce the number of forms given to borrowers
when they apply for and close on a mortgage.13
In a second initiative, the CFPB is collecting borrower complaints about credit cards, mortgages,
bank products and services, private student loans, and other consumer loans.14 The CFPB
forwards the complaint to the relevant company and keeps the borrower updated on the status of
the complaint. Consumer complaints are used to inform CFPB’s supervision of companies and its
enforcement of consumer protection laws and regulations. Between July 21, 2011, and June 1,
2012, more than 45,000 consumer complaints were submitted to the CFPB.15 The CFPB makes
the consumer complaints available to the public, though there is no personally identifiable
information associated with individual complaints.16
10 The Dodd-Frank Act provides exceptions such that, under certain conditions, the CFPB may regulate these otherwise
excluded industries. See CRS Report R41338, The Dodd-Frank Wall Street Reform and Consumer Protection Act: Title
X, The Consumer Financial Protection Bureau, by David H. Carpenter.
11 See Consumer Financial Protection Bureau, at http://www.consumerfinance.gov/knowbeforeyouowe/.
12 See Consumer Financial Protection Bureau, at http://www.consumerfinance.gov/knowbeforeyouowe/#disclosure.
13 CRS Report R41980, Revisiting Mortgage Loan Disclosures Under the Consumer Financial Protection Bureau, by
Darryl E. Getter and Sean M. Hoskins.
14 Consumer Financial Protection Bureau, “Consumer Response: A Snapshot of Complaints Received,” at
http://files.consumerfinance.gov/f/201206_cfpb_shapshot_complaints-received.pdf. Consumers may contact the CFPB
about products besides the ones listed above.
15 Consumer Financial Protection Bureau, “Consumer Response: A Snapshot of Complaints Received,” p. 4, at
http://files.consumerfinance.gov/f/201206_cfpb_shapshot_complaints-received.pdf.
16 Consumer Financial Protection Bureau, “Making consumer complaints available to the public,” at
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A Brief Overview of Actions Taken by the CFPB in Its First Year
A third set of CFPB initiatives involves providing resources to help servicemembers, students,
and older Americans address their particular financial circumstances. For example, the CFPB’s
Office of Servicemember Affairs has hosted multiple events to help servicemembers with future
financial planning and protecting their personal finances. The CFPB has also partnered with the
Department of Defense, the Federal Trade Commission, and state Attorneys General to develop
the Repeat Offenders Against Military (ROAM) database to track financial frauds directed at
members of the military and their families.17 As part of their efforts to protect older Americans,
the CFPB released a Report to Congress on reverse mortgages on June 28, 2012.18
Rulemaking Activities in the Mortgage Market
The Dodd-Frank Act authorizes the CFPB to issue rules to enforce many of the federal consumer
protection laws, and the housing and mortgage markets have been central to many of the CFPB’s
rulemaking activities.19 In addition to proposed rules for mortgage disclosures in the Know
Before You Owe campaign, the CFPB has proposed rules related to property appraisals,20 high
cost mortgages,21 and other aspects of the mortgage market.
The CFPB has stated its intention to propose several rules during the second half of 2012 and the
beginning of 2013. One of the most frequently discussed rules that is expected to be issued by
January 2013 is the “ability to repay” or “qualified mortgage” (QM) rule.22 Section 1411 of the
Dodd-Frank Act states that
In accordance with regulations prescribed by the (Federal Reserve) Board, no creditor may
make a residential mortgage loan unless the creditor makes a reasonable and good faith
determination based on verified and documented information that, at the time the loan is
consummated, the consumer has a reasonable ability to repay the loan, according to its terms,
and all applicable taxes, insurance (including mortgage guarantee insurance), and
assessments.
On April 19, 2011, the Federal Reserve, as mandated by the Dodd-Frank Act, announced a
proposed rule to implement the ability to repay requirement. One of the ways in which a lender
may comply with the proposed rule would be to issue a QM that meets certain criteria, as spelled
out in the rule. The Dodd-Frank Act transferred the authority to prescribe the final rule to the
(...continued)
http://www.consumerfinance.gov/blog/making-consumer-complaints-available-to-the-public/.
17 Consumer Financial Protection Bureau, “Federal and state officials announce new law enforcement partnership to
protect military community,” January 25, 2012, at http://www.consumerfinance.gov/pressreleases/federal-and-state-
officials-announce-new-law-enforcement-partnership-to-protect-military-community/.
18 Consumer Financial Protection Bureau, “Reverse Mortgages,” June 28, 2012, at http://files.consumerfinance.gov/a/
assets/documents/201206_cfpb_Reverse_Mortgage_Report.pdf.
19 The CFPB also issued several non-mortgage market rules, such as one related to international remittance transfers.
See Consumer Financial Protection Bureau, “Electronic Fund Transfers (regulation E0,” 77 Federal Register 6194,
February 7, 2012.
20 See CRS Report RS22953, Regulation of Real Estate Appraisers, by Edward V. Murphy.
21 Consumer Financial Protection Bureau, “High-Cost Mortgage and Homeownership Counseling Amendments to the
Truth in Lending Act (Regulation Z) and Homeownership Counseling Amendments to the Real Estate Settlement
Procedures Act (Regulation X),” July 9, 2012, at http://files.consumerfinance.gov/f/201207_cfpb_proposed-rule_high-
cost-mortgage-protections.pdf.
22 CRS Report R42056, Ability to Repay, Risk-Retention Standards, and Mortgage Credit Access, by Darryl E. Getter.
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A Brief Overview of Actions Taken by the CFPB in Its First Year
CFPB. In May 2012, the CFPB re-opened the comment period on the QM rule, seeking further
comments on the litigation risks that could potentially arise from the new requirements. Under the
Dodd-Frank Act, the CFPB has until January 21, 2013, to finalize the rule.
The CFPB has announced plans to propose rules on the regulation of mortgage servicers during
the summer of 2012 and to finalize them by January 2013.23 Mortgage servicers are the entities
that collect payments from borrowers and forward them to the mortgage holders.24 If a borrower
is delinquent, the servicer acts on behalf of the mortgage holder to facilitate a loss mitigation
option or to initiate a foreclosure. The CFPB has stated that it is considering issuing rules to
• modify the monthly mortgage statements that servicers send to borrowers,
• mandate enhanced disclosures about possible interest rate adjustments,
• require servicers to provide delinquent borrowers with access to staff who are
dedicated to servicing delinquent borrowers, and
• aid borrowers through other possible measures.
Supervision and Enforcement of Banks and Nonbanks
The CFPB has the authority to enforce many of the federal financial consumer protection laws,
primarily for large depository institutions (defined as holding assets of more than $10 billion) as
well as certain nonbank institutions.25 As part of its supervision and enforcement efforts, the
CFPB started its Large Bank Supervision Program in July 2011.26 In this program, the CFPB’s
examiners perform on-site examinations, data analysis, and other forms of monitoring. The CFPB
performs periodic examinations of most large depositories, but has a year-round program for large
and complex institutions. The CFPB can seek corrective actions if institutions are not in
compliance. On July 18, 2012, the CFPB issued its first public enforcement action, requiring
Capital One Bank “to refund approximately $140 million to 2 million customers and pay an
additional $25 million penalty.”27 A CFPB examination identified “deceptive marketing tactics
used by Capital One’s vendors to pressure or mislead consumers into paying for ‘add-on
products’ such as payment protection and credit monitoring when they activated their credit
cards.”28
The CFPB could not exercise its power to regulate nonbanks for consumer protection until its
director was put in place. When President Obama installed Richard Cordray as the director of the
Consumer Financial Protection Bureau via recess appointment, the CFPB announced the
23 Consumer Financial Protection Bureau, “Putting the ‘Service’ Back in Mortgage Servicing,” at
http://files.consumerfinance.gov/f/201204_cfpb_factsheet_putting-service-back-in-mortgage-servicing.pdf.
24 See CRS Report R42041, National Mortgage Servicing Standards: Legislation in the 112th Congress, by Sean M.
Hoskins.
25 For more on the CFPB’s authority over nonbanks, see CRS Report R42156, The Early Agenda of the Consumer
Financial Protection Bureau: The Nonbank Supervision Program, by Sean M. Hoskins.
26 Department of the Treasury, “Consumer Financial Protection Bureau Outlines Bank Supervision Approach,” at
http://www.treasury.gov/press-center/press-releases/Pages/tg1236.aspx.
27 Consumer Financial Protection Bureau, “CFPB probe into Capital One credit card marketing results in $140 million
consumer refund,” July 18, 2012, at http://www.consumerfinance.gov/pressreleases/cfpb-capital-one-probe/.
28 Ibid.
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A Brief Overview of Actions Taken by the CFPB in Its First Year
Nonbank Supervision Program.29 The Nonbank Supervision Program subjects some nonbanks to
the same consumer protection standards as are currently applied to banks.30 Under the program,
the CFPB has authority to supervise nonbanks under three circumstances. First, the CFPB can
regulate nonbanks in three specific markets—mortgage companies, payday lenders, and private
education lenders. Second, the CFPB can regulate the “larger participants” in other financial
markets, such as debt collection and consumer reporting. Third, the CFPB may supervise a
nonbank that is performing actions that may pose a risk to consumers with regard to consumer
financial products or services. The CFPB uses the same examination manual and similar
procedures for nonbank supervision as for bank supervision.31
Author Contact Information
Sean M. Hoskins
Analyst in Financial Economics
shoskins@crs.loc.gov, 7-8958
29 See CRS Report R42323, President Obama’s January 4, 2012, Recess Appointments: Legal Issues, by David H.
Carpenter et al.
30 See CRS Report R42156, The Early Agenda of the Consumer Financial Protection Bureau: The Nonbank
Supervision Program, by Sean M. Hoskins.
31 Consumer Financial Protection Bureau, “Consumer Financial Protection Bureau launches nonbank supervision
program,” at http://www.consumerfinance.gov/pressreleases/consumer-financial-protection-bureau-launches-nonbank-
supervision-program/.
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