Updated January 13, 2022
Introduction to Financial Services: The Consumer Financial
Protection Bureau (CFPB)
In 2010, the Dodd-Frank Wall Street Reform and Consumer
Dodd-Frank also empowers the CFPB with new authority to
Protection Act (Dodd-Frank; P.L. 111-203) established the
issue rules declaring acts or practices associated with
Consumer Financial Protection Bureau (CFPB) to
consumer financial products and services to be unlawful
implement and enforce federal consumer financial law
because they are unfair, deceptive, or abusive. Other
while maintaining consumer access to financial products
aspects of the CFPB’s regulatory power—particularly the
and services. Dodd-Frank consolidated in the CFPB certain
scope of its supervisory and enforcement authority—vary
regulatory authorities related to consumer finance that were
depending on an institution’s size and whether it holds a
previously held by other agencies and created new powers
bank charter.
not previously held by federal regulators. Dodd-Frank
authorizes the CFPB to exercise these powers with the goal
Banks. Banks (i.e., institutions with bank, thrift, or credit
of promoting fair, transparent, and competitive markets for
union charters) are regulated for both safety and soundness
consumer financial products and services.
and consumer compliance. Bank regulators conduct safety
and soundness (prudential) regulation with the goal of
Structure of the CFPB
ensuring that banks maintain profitability and avoid failure.
Dodd-Frank established the CFPB as an independent
Consumer compliance regulation is designed to ensure that
bureau within the Federal Reserve System (Fed). The CFPB
banks comply with applicable consumer protection and fair-
is headed by a single director, appointed by the President
lending laws.
with the advice and consent of the Senate for a five-year
term. The Fed’s Board of Governors does not influence the
The CFPB and the federal banking regulators (i.e., the Fed,
CFPB’s operations other than through the Fed chairman’s
Office of the Comptroller of the Currency, Federal Deposit
role as a member of the Financial Stability Oversight
Insurance Corporation, and National Credit Union
Council (FSOC), which can overturn a CFPB rule with the
Administration) share consumer compliance regulation over
consent of two-thirds of its members. (The CFPB director is
banks, with their authorities varying depending on the
also a voting member of FSOC.) Rather than being funded
bank’s size. The CFPB holds primary consumer compliance
through regular appropriations, the CFPB funds its
regulatory authority over larger banks with more than $10
operations through monetary transfers from the Fed. The
billion in assets. Smaller “community” banks must comply
Fed must transfer amounts requested by the CFPB director
with CFPB’s rules on implementing enumerated consumer
based on the director’s determination of need, subject only
laws, but the bank regulators hold primary supervisory and
to a cap based on a statutory formula. For FY2021, the
enforcement authority for issuing consumer compliance
CFPB received approximately $596 million, which was
regulation for smaller banks.
below its $718 million limit.
Nonbanks. Nonbank financial institutions provide financial
CFPB Regulatory Authority
services but do not have bank, thrift, or credit union
Dodd-Frank charges the CFPB to implement and enforce
charters. The CFPB may issue and enforce rules that affect
consumer protection laws, lead financial education
these nonbank financial institutions, but the CFPB’s
initiatives, collect consumer complaints, and conduct
supervisory authority over these institutions varies based on
consumer finance research. The CFPB has broad regulatory
the nonbank’s activities and size.
authority over providers of an array of consumer financial
products and services, including deposit taking, mortgages,
First, Dodd-Frank expressly authorizes the CFPB to
credit cards and other extensions of credit, loan servicing,
supervise three categories of financial institutions
collection of consumer reporting data, and consumer debt
regardless of size—mortgage companies (including lenders,
collection. Although the scope of the CFPB’s regulatory
brokers, and servicers); payday lenders; and private
power is considerable, it is also subject to certain statutory
education lenders. Second, the CFPB may supervise
exceptions and limitations. The CFPB’s regulatory
nonbank institutions the CFPB determines are “larger
authorities fall into three broad categories: supervision
participants” in consumer financial markets. Third, the
(including the power to examine and impose reporting
CFPB may supervise a nonbank that, based on consumer
requirements on financial institutions), enforcement of
complaints or other sources, the CFPB “has reasonable
various consumer protection laws, and rulemaking.
cause to determine … is engaging, or has engaged in,
conduct that poses risks to consumers.... ”
The CFPB may issue regulations to implement 19 federal
consumer protection laws that largely predate Dodd-Frank.
Exempted Institutions. Dodd-Frank exempts some
These “enumerated consumer laws” govern a broad and
industries from the CFPB’s regulatory jurisdiction. The
diverse set of consumer financial services and providers.
CFPB generally does not have rulemaking, supervisory, or
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Introduction to Financial Services: The Consumer Financial Protection Bureau (CFPB)
enforcement authority over automobile dealers; merchants,
these cases, payday loans can cost more than other credit
retailers, and sellers of nonfinancial goods and services;
products. In October 2017, the CFPB finalized a rule
real estate brokers; real estate agents; sellers of
regulating payday and other similar types of short-term,
manufactured and mobile homes; income tax preparers;
high-cost loans. The rule would have, among other things,
insurance companies; or accountants. There are, however,
required lenders to verify that borrowers had the ability to
certain business practices that could trigger CFPB
repay the loans before they could be originated and
regulatory authority, such as when the entity engages in an
restricted lenders’ access to consumer bank accounts for
activity governed by an enumerated consumer law (e.g.,
loan repayment. However, in July 2020, the CFPB
debt collection activities subject to the Fair Debt Collection
rescinded part of the 2017 rule, including its ability-to-
Practices Act (FDCPA, 15 U.S.C. §§1692-1692p)).
repay provisions. Disagreement exists about how to weigh a
consumer’s right to access payday and other short-term,
Selected Policy Issues
small-dollar loan products against the possible value of
Policy debates involving the CFPB generally center on how
limiting loan terms that may encourage multiple rollovers
the agency balances protecting consumers, credit access,
and make them more expensive and difficult to repay.
and costs to industry in its policymaking. The following
section addresses a selection of policy issues of interest to
Agency Independence. The CFPB, much like the banking
Congress.
regulators, is funded outside the traditional appropriations
process, which limits congressional oversight of the agency.
The COVID-19 Pandemic. Since the onset of the COVID-
Dodd-Frank also protected the CFPB director from
19 pandemic, many Americans have lost income and had
presidential removal, except for cause; however, the
difficulty paying their debts. The CFPB has responded by
Supreme Court in Seila Law v. CFPB held this statutory
using its authorities to encourage loan forbearance and
removal protection unconstitutional. As a result of the Seila
other financial relief options for affected consumers. As
Law decision, the CFPB director now serves at the pleasure
COVID-19 mortgage relief programs end, the CFPB has
of, and may be removed at will by, the President.
proposed rules that would provide additional protections for
Policymakers debate the degree of independence the CFPB
consumers facing home foreclosure. However, how the
should have from Congress and the President, with some
ongoing pandemic will impact consumer credit markets in
arguing that the agency can operate more effectively when
the future is unclear.
insulated from political pressures and others countering that
such insulation decreases accountability and raises
Debt Collection. When a consumer defaults on a debt,
constitutional concerns. Some policymakers have called for
lenders often hire third parties to collect the arrears.
legislation that would change the CFPB’s funding and
Consumers have no say over the debt collectors that lenders
leadership structure consistent with Supreme Court
choose, arguably making consumer protections particularly
jurisprudence on agency independence.
consequential in this market. The CFPB recently finalized
two new rules to implement the FDCPA, which regulates
CRS Resources
the third-party debt collection market. The rules clarify how
CRS In Focus IF11682, Introduction to Financial Services:
debt collectors may communicate with consumers and the
Consumer Finance
information debt collectors must disclose to consumers.
Debate exists about whether these new regulations’
CRS Report R45813, An Overview of Consumer Finance
communication and other standards appropriately balance
and Policy Issues
consumer protection concerns with costs to industry.
CRS Insight IN11550, COVID-19: Consumer Debt Relief
Financial Technology. Financial technology, or fintech,
During the Pandemic
refers to new technologies used in the provision of financial
services or products. Related policy questions generally
CRS Insight IN11590, CFPB Finalizes Two New Debt
concern whether the current regulatory framework
Collection Regulations
appropriately fosters the benefits of new technologies while
mitigating potential risks to consumers. The CFPB has
CRS Insight IN11745, Open Banking, Data Sharing, and
launched several programs designed to reduce regulatory
the CFPB’s 1033 Rulemaking
uncertainty for fintech products, facilitate industry and
stakeholder coordination, and promote research into fintech
CRS Report R46333, Fintech: Overview of Financial
services and products. The agency is also developing a new
Regulators and Recent Policy Approaches
rule that would clarify standards regarding consumer-
authorized access to financial data.
CRS Insight IN11059, CFPB Finalizes New Payday
Lending Rule, Reversing Prior Regulation
Payday Lending. Payday loans are short-term, small-dollar
loans offered for a set fee. They allow consumers to access
CRS Legal Sidebar LSB10507, Supreme Court Rules CFPB
cash in advance of a paycheck or other scheduled payment
Structure Unconstitutional: Implications for Congress
(e.g., pension) with minimal underwriting conditions. Many
consumers “rollover” these loans or get new ones for
Cheryl R. Cooper, Analyst in Financial Economics
similar amounts shortly after the initial loan is due for an
David H. Carpenter, Legislative Attorney
additional fee, which can lead to some payday borrowers
remaining in debt far beyond the original loan term. In
IF10031
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Introduction to Financial Services: The Consumer Financial Protection Bureau (CFPB)


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https://crsreports.congress.gov | IF10031 · VERSION 9 · UPDATED

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