Understanding the Consumer Financial Protection Bureau

The Consumer Financial Protection Bureau (CFPB) is a federal agency established by the passing of the Dodd-Frank Act in July of 2010. It regulates businesses that deliver financial products and services to consumers, including nonbank companies and financial institutions. The CFPB is not restricted to any particular financial area or product, and it provides communication and guidance to consumers in a manner that is easy to understand. 

Who is supervised by the CFPB?

• Financial institutions with more than $10 billion in assets
• Nonbanks that pose risks to consumers: mortgage lenders, payday lenders that provide short-term loans, private education lenders, collection agencies

The CFPB has taken action against financial organizations for violating regulations, collecting millions of dollars since its inception. Complying with these expanded regulations is costly, requiring adding staff and enhancing necessary processes to comply with the new regulations. Many nonbanking businesses have not had the same levels of regulations faced by traditional financial institutions, and CPAs and advisors close to the financial services sector must be increasingly aware of the potential impact these regulations can pose. 

The Bureau’s strong enforcement shows the need for awareness among businesses that can be affected by these regulations. Detailed documentation is being complied for consumer transactions, and business should evaluate if their documentation practices effectively protect their business, should consumer complaints be made. In advising clients on risk management, regulatory risk must be considered alongside legal, reputational, financial and operational risk. 

Read more about the CFPB’s impact on the financial services sector in Today’sCPA article The Consumer Financial Protection Bureau: A New Regulatory Dynamic by James Mihills, a partner in the financial institutions consulting practice for Weaver.