Updated January 8, 2019
Introduction to Financial Services: The Bureau of Consumer
Financial Protection (CFPB)

The 2010 Dodd-Frank Wall Street Reform and Consumer
unfair, deceptive, or abusive. Other aspects of the CFPB’s
Protection Act (Dodd-Frank; P.L. 111-203) established the
regulatory power—particularly the scope of its supervisory
Bureau of Consumer Financial Protection (CFPB) to
and enforcement authority—vary depending on an
implement and enforce federal consumer financial law
institution’s size and whether it holds a bank charter.
while ensuring consumers can access financial products and
services. The CFPB also aims to ensure that markets for
Banks. Banks (which include institutions with a bank,
consumer financial services and products are fair,
thrift, or credit union charter) are regulated for safety and
transparent, and competitive. Dodd-Frank consolidated
soundness as well as for consumer compliance. Safety and
certain consumer finance-related responsibilities previously
soundness, or prudential, regulation is intended to ensure an
covered by other regulators in the CFPB and created new
institution is managed to maintain profitability and avoid
authorities unique to the CFPB, as discussed below.
failure. The focus of consumer compliance regulation, by
contrast, is to ensure institutions conform to applicable
Structure of the CFPB
consumer protection and fair-lending laws.
The CFPB is headed by a director appointed by the
President with the consent of the Senate for a five-year
Pursuant to Dodd-Frank, the CFPB acquired certain
term. It is located within the Federal Reserve System (Fed),
consumer compliance powers over banks that vary based on
although the Federal Reserve Board does not influence the
whether a bank holds more or less than $10 billion in assets
CFPB’s budget or personnel decisions. The Federal Reserve
(a common threshold for what qualifies as a small bank or a
Board also cannot veto a rule issued by the CFPB, but the
community bank). For banks with more than $10 billion in
Financial Stability Oversight Council can overturn a CFPB
assets, the CFPB is the primary regulator for consumer
rule with the vote of two-thirds of its members. The CFPB,
compliance, whereas safety and soundness regulation
which is not subject to congressional appropriations, is
continues to be performed by the bank regulator. For banks
funded through the earnings of the Fed. The CFPB requests
with $10 billion or less in assets, the rulemaking,
monetary transfers from the Fed with a cap on the amount
supervisory, and enforcement authorities for consumer
of these transfers based on a formula set in statute. For
protection are divided between the CFPB and a bank
FY2018, the CFPB’s funding cap was $663 million, while
regulator. The CFPB may issue rules that would apply to
the agency’s net operating costs were $523 million.
smaller banks, but bank regulators hold primary supervisory
and enforcement authority for consumer compliance
CFPB Regulatory Authority
regulation of smaller banks.
The CFPB generally has regulatory authority over providers
of an array of consumer financial products and services,
Nonbanks. A nonbank financial institution is an institution
including deposit taking, mortgages, credit cards and other
that provides financial services but does not have a bank,
extensions of credit, loan servicing, collection of consumer
thrift, or credit union charter. The CFPB may issue and
reporting data, and debt collection associated with
enforce rules that affect many nonbank financial
consumer financial products. The authorities that the CFPB
institutions, but the CFPB’s supervisory authority over
may exercise and the breadth of products, services, and
these institutions varies based on their activities and size.
entities that fall within its jurisdiction are considerable, but
Dodd-Frank imposes some important exceptions to and
The CFPB is authorized to supervise three groups of
limitations on those powers. The CFPB’s authorities fall
nonbanks. First, the CFPB supervises nonbanks, regardless
into three broad categories: supervisory, including the
of size, in three specific markets—mortgage companies
power to examine and impose reporting requirements on
(such as lenders, brokers, and servicers), payday lenders,
financial institutions; enforcement of various consumer
and private education lenders. Second, the CFPB may
protection laws and regulations; and rulemaking.
supervise “larger participants” in certain consumer financial
markets. The CFPB has some discretion to determine what
The CFPB is authorized to prescribe regulations to
those markets are and what constitutes a larger participant.
implement 19 federal consumer protection laws that largely
Third, the CFPB may supervise a nonbank if, based on
predated Dodd-Frank. These “enumerated consumer laws”
consumer complaints or other sources, the CFPB has
govern a broad and diverse set of consumer financial
reasonable cause to determine that the nonbank poses risks
services and generally apply to any entity engaged in the
to consumers in offering its financial services or products.
business of offering those services. Dodd-Frank also
provided CFPB new power to issue rules declaring certain
Exempted Institutions. Dodd-Frank exempts some
acts or practices associated with consumer financial
industries from the CFPB’s regulatory jurisdiction. The
products and services to be unlawful because they are
CFPB generally does not have rulemaking, supervisory, or
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Introduction to Financial Services: The Bureau of Consumer Financial Protection (CFPB)
enforcement authority over automobile dealers; merchants,
with such criteria, while others have questioned the
retailers, and sellers of nonfinancial goods and services;
sufficiency of CFPB’s enforcement of these laws.
real estate brokers; real estate agents; sellers of
manufactured and mobile homes; income tax preparers;
Student Lending. Student loans are loans that allow
insurance companies; or accountants. Certain business
students to pay for tuition and living expenses while they
practices of these entities, however, could trigger CFPB
are in post-secondary school. The CFPB is the primary
regulatory authority, such as if they engage in an activity
regulator for private student loan lending and servicing.
governed by an enumerated consumer law.
However, most student loans are owned by the federal
government. Unlike other types of credit, most federal
Policy Issues
student loans are accessible to all students without regard to
This section highlights selected policy issues of
creditworthiness, estimated future income, or other
congressional interest relating to the CFPB. Generally,
estimates of the student’s ability to repay the loan. Federal
policy debates concern whether CFPB policymaking
student loan programs are managed by the Department of
appropriately balances protecting consumers, credit access,
Education, which contracts out student loan servicing and
and costs to industry.
sets standards in these contracts. The CFPB has asserted a
role in ensuring compliance with consumer protection laws
Payday Lending. Payday loans are designed to be short-
in federal student loan servicing.
term advances that allow consumers to access cash before
they receive a paycheck. Often, these loans are designed to
Policymakers continue to debate the role that the CFPB
be paid back on a consumer’s next payday. Payday loans
should play in the federal student loan industry. Consumer
are offered through storefront locations or online for a set
groups advocate for more active enforcement of consumer
fee. Generally, underwriting of these loans is minimal, with
protection standards. Yet, because the Department of
consumers required to provide little more than a prior
Education already assumes a significant role in the
paystub and checking account information to take out a
regulation of federal student loans—and a substantial
loan. Many consumers “roll over” these loans shortly after
amount of default risk for their nonpayment—some have
the initial loan is due, which may result in these consumers
questioned the need for the CFPB to regulate in the same
being in debt for an extended period of time. Because
space.
consumers generally pay a fee for each new loan, payday
loans can be more expensive than other credit products.
Congressional Oversight. The CFPB’s structure continues
to spark debate among policymakers over whether it
In October 2017, the CFPB finalized a rule covering
provides the agency an appropriate amount of
payday, vehicle title, and other high-cost installment loans,
independence, particularly from Congress and the
with which lenders generally are expected to comply by
President. The constitutionality of the CFPB’s structure also
August 2019. However, the CFPB has announced that it is
is currently the subject of litigation. The CFPB’s
reconsidering this rule and planning to propose changes in
independence is achieved in part by the fact that it is headed
the near future.
by a director who, rather than serving at the pleasure of the
President, may only be removed for cause. Moreover,
The regulation of payday lending has been an area of
although the CFPB Director is required to testify biannually
intense disagreement. In particular, debate exists around the
before Congress and respond to congressional requests for
value of requiring lenders to determine whether consumers
information, the CFPB is funded outside the traditional
can reasonably pay back their loans before extending them
appropriations process, which reduces congressional
credit. There is also disagreement about how to weigh a
oversight. Some have argued that these structural elements
consumer’s right to choose a particular financial product
improperly reduce accountability of the agency’s decision
against the possible value of limiting loan terms that may
making and activities. Others argue that the CFPB’s
encourage multiple rollovers that consumers might have
structure allows the agency to meet its statutory obligations
difficulty repaying.
efficiently and with an appropriate amount of insulation
from political pressures.
Fair Lending. The CFPB implements and, for certain
entities, enforces various fair lending laws, including the
CRS Resources
Equal Credit Opportunity Act (ECOA; 15 U.S.C. §§ 1691-
CRS Report R44868, Short-Term, Small-Dollar Lending:
1691f) and the Home Mortgage Disclosure Act (HMDA; 12
Policy Issues and Implications, by Darryl E. Getter.
U.S.C. §§ 2801-2811). These laws are intended to ensure
that lenders do not discriminate against consumers on the
CRS Report R43391, Independence of Federal Financial
basis of race, gender, or other protected bases. Dodd-Frank
Regulators: Structure, Funding, and Other Issues, by Henry
also requires the CFPB to maintain an Office of Fair
B. Hogue, Marc Labonte, and Baird Webel.
Lending and Equal Opportunity.
Cheryl R. Cooper, Analyst in Financial Economics
Some Members of Congress have questioned whether the
David H. Carpenter, Legislative Attorney
CFPB has appropriately defined and sufficiently articulated
fair lending enforcement criteria to firms trying to comply
IF10031

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Introduction to Financial Services: The Bureau of Consumer Financial Protection (CFPB)



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