Dodd-Frank at 5: Grading the New Financial Protection Bureau

Five years ago, Congress and the President created the Consumer Financial Protection Bureau (CFPB) when the Dodd-Frank Act was signed into law. The CFPB's sole mission is to protect consumers when they use financial products, including checking accounts, prepaid cards, and mortgages. "Five years in, the CFPB gets, I think, an 'A' for effort and an ‘incomplete’…. They had a number of mandated rules that they had to get into place before they could move on to the issues that we care about. But we’ve seen them moving in the right direction,” says The Pew Charitable Trusts' Susan Weinstock. As Weinstock mentions in this video, prior to the creation of the CFPB, oversight of financial products was managed by seven different government agencies. The CFPB’s sole focus on protecting consumers helps to ensure these products will be safe, fair, and transparent. For more insights on this CFPB milestone from Susan, view her analysis here: http://www.pewtrusts.org/en/research-and-analysis/analysis/2015/07/16/better-banking-the-opportunity-and-challenge-for-the-cfpb. *Full Transcript* Q: What was significant about the creation of the Consumer Financial Protection Bureau as a part of Dodd-Frank? A: Five years ago Congress passed the Dodd-Frank Act and created the Consumer Financial Protection Bureau (CFPB). We now have a new agency whose sole mission is to look out for consumers and to protect consumers with regard to financial products, which are so important to consumers’ everyday lives. These are things like mortgages, checking accounts, credit cards. It’s the whole panoply of consumer products and services. So this is really important and it’s a whole new world for consumers now that we have this agency. Previously this oversight was spread out over seven different government agencies. It’s now consolidated into one agency that has the back of consumers, that looks out to make sure that products are safe, that they’re fair, and that they’re transparent. Q: What’s your assessment of the CFPB’s performance so far? A: Five years in, the CFPB gets, I think, an “A” for effort and an “incomplete.” They’ve been doing a lot of really great work on many of the issues that we care about. On checking accounts, they’ve been looking at overdrafts and have done two really excellent reports on that. They did a stellar report on arbitration. They wrote prepaid card proposed rules that adhere to many of the things that we’ve been advocating, like no overdraft and hidden fees on these cards, and disclosures that are going to be uniform, allowing consumers to make a choice of the card that works best for them. It took them a while to get a little up and running. The director didn’t get in place for over a year. And they had a number of mandated rules that they had to get into place before they could move on to the issues that we care about. But we’ve seen them moving in the right direction. Q: Where would you like the CFPB to be five years from now? A: In five years we’d love to see them finish up very specific rules on the issues that we’ve been promoting. Overdraft is the first one that comes to mind: making sure that banks are not allowed to reorder transactions that maximize fees; making sure that overdraft fees are reasonable and proportional, so that a consumer does not get hit with a $35 fee for a $24 transaction; making sure that consumers understand their overdraft options and can make informed choices about what their options are. On prepaid cards, we’d love to see them finalize the rules that they’ve already proposed. They’ve done a great job with that, and we just need them to finalize those. And then arbitration: They’ve written a very extensive report on arbitration that was mandated by the Dodd-Frank Act, and now they just need to write the rules that go along with that report, and make sure that pre-dispute mandatory arbitration is not allowed in consumer financial products. Ultimately we’d like to see this marketplace be someplace that consumers can use products responsibly knowing that the CFPB has their back, that they’re not going to run into practices that are going to harm them unexpectedly or, that they are going to incur fees that are going to surprise them.