With the passage of the Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank Act) the Consumer Financial Protection Bureau (CFPB) was established as the primary regulatory authority over consumer financial products, and nearly every federal consumer financial protection statute. The CFPB is authorized to regulate activities relating to financial products and services for unfair, deceptive, and abusive acts or practices, and examines large depository institutions, and non-depository entities for compliance with federal consumer financial laws.
While the CFPB is housed within the Federal Reserve System, it operates as an autonomous agency. The CFPB is funded from earnings of the Federal Reserve System and is not required to receive appropriations from Congress. The agency is headed by a single director appointed for a five-year term by the President of the United States, with the consent of the U.S. Senate.
The CFPB is charged with administering the “federal consumer financial laws,” which include nearly every existing federal consumer financial statute as well as new consumer financial protection mandates prescribed by the Dodd-Frank Act.
The CFPB also has authority to prohibit the commission of a particular act or practice on the grounds that it is unfair, deceptive, or abusive. This authority expands the Unfair and Deceptive Act of Practices (UDAP) doctrine under the Federal Trade Commission Act and adds the term “abusive” to the UDAP doctrine.
The CFPB has primary examination authority over “large depository institutions,” defined as those with total assets greater than $10 billion. These institutions are subject to consumer financial compliance examination by the CFPB. While depository institutions with total assets of $10 billion or less are to be examined for compliance with federal consumer financial laws exclusively by the institution’s primary federal banking regulator, the CFPB has secondary enforcement authority over smaller depository institutions upon notifying the federal banking regulator in writing when there is a reason to believe that a material violation of a federal consumer financial law has occurred. Although the CFPB regulatory authority is to be confined to “large depository institutions,” all institutions should be aware of and pay attention to CFPB mandates as they frequently morph into “best practices” for smaller depository institutions.