CFPB Purposes And Functions

The Bureau of Consumer Financial Protection (CFPB) was established as an independent bureau of the Federal Reserve System by the Dodd-Frank Wall Street Reform and Consumer Protection Act (Public Law. 111-203, 124 Stat. 1376) (Dodd-Frank Act). Pursuant to the Dodd-Frank Act, the CFPB has rulemaking, supervisory, enforcement, and other authorities relating to consumer financial products and services. Among these are the consumer financial protection authorities that transferred to the CFPB from seven Federal agencies on the designated transfer date, July 21, 2011. These authorities include the ability to issue regulations under more than a dozen Federal consumer financial laws.

As provided in section 1021 of the Dodd-Frank Act, the purpose of the CFPB is to implement and enforce Federal consumer financial laws consistently for the purpose of ensuring that all consumers have access to markets for consumer financial products and services and that such markets are fair, transparent, and competitive. The CFPB is authorized to exercise its authorities for the purpose of ensuring that:

(1) Consumers are provided with timely and understandable information to make responsible decisions about transactions involving consumer financial products and services;

(2) Consumers are protected from unfair, deceptive, or abusive acts and practices and from discrimination;

(3) Outdated, unnecessary, or unduly burdensome regulations concerning consumer financial products and services are regularly identified and addressed in order to reduce unwarranted regulatory burdens;

(4) Federal consumer financial law is enforced consistently, without regard to status as a depository institution, in order to promote fair competition; and

(5) Markets for consumer financial products and services operate transparently and efficiently to facilitate access and innovation.

CFPB Regulatory Priorities

The CFPB's regulatory priorities for the period from November 1, 2014, to October 31, 2015, include continuing work to implement Dodd-Frank Act mortgage protections, a series of rulemakings to address critical issues in other markets for consumer financial products and services, and following up on earlier efforts to streamline and modernize regulations that the Bureau has inherited from other federal agencies.

Implementing Dodd-Frank Act Mortgage Protections

As reflected in the CFPB's semiannual regulatory agenda, a principal focus of the CFPB is the Bureau's continuing efforts to implement critical consumer protections under the Dodd-Frank Act to guard against mortgage market practices that contributed to the nation's most significant financial crisis in several decades.

A major rulemaking priority for the Bureau continues to be the implementation of the Dodd-Frank Act amendments to the Home Mortgage Disclosure Act (HMDA) and other revisions to the HMDA regulations. The Dodd-Frank Act amendments augment existing data reporting requirements regarding housing-related loans and applications for such loans. In addition to obtaining data that is critical to the purposes of HMDA - which include providing the public and public officials with information that can be used to help determine whether financial institutions are serving the housing needs of their communities, assisting public officials in the distribution of public sector investments, and assisting in identifying possible discriminatory lending patterns and enforcing antidiscrimination statutes - the Bureau views this rulemaking as an opportunity to streamline and modernize HMDA data collection and reporting, in furtherance of its mission under the Dodd-Frank Act to reduce unwarranted regulatory burden. The Bureau published a proposed HMDA rule in the Federal Register on August 29, 2014 to add several new reporting requirements and to clarify several existing requirements. Publication of the proposal followed initial outreach efforts and the convening of a panel under the Small Business Regulatory Enforcement Fairness Act in conjunction with the Office of Management and Budget and the Small Business Administration's Chief Counsel for Advocacy, to consult with small lenders who may be affected by the rulemaking. As the Bureau develops a final rule, it expects to review and consider public comments on the proposed rule, consult with other agencies and coordinate with them on implementation efforts, conduct additional outreach to build and refine operational capacity, and prepare to assist financial institutions in their compliance efforts.

A major effort of the Bureau is the implementation of its final rule combining several federal mortgage disclosures that consumers receive in connection with applying for and closing on a mortgage loan under the Truth in Lending Act (TILA) and the Real Estate Settlement Procedures Act (RESPA). This project is mandated under the Dodd-Frank Act both to increase consumer understanding of mortgage transactions and to facilitate compliance by industry. The integrated forms are the cornerstone of the Bureau's broader "Know Before You Owe" initiative. These new "Know Before You Owe" mortgage forms and their implementing regulations will replace several pages of existing federal disclosures with two simpler, streamlined forms that will help consumers understand their options, choose the deal that is best for them, and avoid costly surprises at the closing table. The Bureau conducted extensive qualitative testing of the new forms prior to issuing a proposal, and also conducted a post-proposal quantitative study to validate the results of the new forms. The results of the quantitative testing showed that consumers of all different experience levels, with different loan types - whether focused on buying a home or refinancing - were able to understand the Bureau's new forms better than the current forms.

The rule was issued in November 2013 and takes effect in August 2015. The Bureau is working intensively to support implementation efforts and prepare consumer education materials and initiatives to help consumers understand and use the new forms. To facilitate implementation, the Bureau has released two compliance guides, sample forms, and additional materials. The Bureau also has been conducting extensive industry outreach to identify interpretive questions or implementation challenges with the rule, and hosting ongoing webinars to address common questions. In addition, in late 2014, the Bureau plans to issue a small proposed rule to make technical corrections, allow for certain language related to new construction loans to be added to the Loan Estimate form, and modify the same-day redisclosure requirement for floating interest rates that are locked after the Loan Estimate is first provided.

In addition, the Bureau is working to support the full implementation of, and facilitate compliance with, various mortgage-related final rules issued by the Bureau in January 2013 to strengthen consumer protections involving the origination and servicing of mortgages. These rules, implementing requirements under the Dodd-Frank Act, were all effective by January 2014. The Bureau is working diligently to monitor the market and plans to make clarifications and adjustments to the rules where warranted. The Bureau is planning to issue rules in fall 2014 to provide certain adjustments to its rules for certain nonprofit entities and to provide a cure mechanism for lenders seeking to make "qualified mortgages" under rules requiring assessment of consumers' ability to repay their mortgage loans where the mortgages exceed certain limitations on points and fees. The Bureau also anticipates issuing a proposal in fall 2014 to amend various provisions of its mortgage servicing rules, in both Regulation X and Regulation Z, including further clarification of the applicability of certain provisions when the borrower is in bankruptcy, possible additional enhancements to loss mitigation requirements, and other topics. In addition, in order to promote access to credit, the Bureau is currently engaged in further research to assess the impact of certain provisions implemented under the Dodd-Frank Act that modify general requirements for small creditors that operate predominantly in "rural or underserved" areas, and expects to release a notice of proposed rulemaking in early 2015.

Further, the Bureau continues to participate in a series of interagency rulemakings to implement various Dodd-Frank Act amendments to TILA and the Financial Institutions Reform, Recovery and Enforcement Act (FIRREA) relating to mortgage appraisals. These include implementing certain other Dodd-Frank Act amendments to FIRREA concerning regulation of appraisal management companies and automated valuation models.

Bureau Regulatory Efforts in Other Consumer Financial Markets

In addition to the implementation of the Dodd-Frank Act mortgage related amendments, the Bureau is also working on a number of rulemakings to address important consumer protection issues in other markets for consumer financial products and services. Much of this effort will be based on previous work of the Bureau such as Requests for Information, Advance Notices of Proposed Rulemaking (ANPRMs), and previously issued Bureau studies and reports.

First, the Bureau anticipates in fall 2014 issuing a proposed rule to create a comprehensive set of protections for General Purpose Reloadable (GPR) cards and other prepaid products, such as payroll cards and student loan disbursement cards, which are increasingly being used by consumers in place of a traditional deposit account or credit card. The proposal will build on comments received by the Bureau in response to a 2012 ANPRM seeking comment, data, and information from the public about GPR cards. The proposed rule will seek to expand coverage in Regulation E (implementing the Electronic Fund Transfer Act) to prepaid accounts, including GPR cards, by extending and in some cases modifying disclosure, periodic statement, and error resolution requirements that apply to consumer asset accounts that are currently subject to Regulation E. The Bureau also expects the proposal to address treatment of overdraft services and credit features in connection with prepaid accounts under both Regulation Z (Truth in Lending Act) and Regulation E.

Building on Bureau research and other sources, the Bureau is also considering what rules may be appropriate for addressing the sustained use of short-term, high-cost credit products such as payday loans and deposit advance products. The Bureau issued a white paper on these products in April 2013 and a data point providing additional research in March 2014, and is continuing to analyze other consumer protection concerns associated with the use of high-cost, small-dollar credit products. Rulemaking might include disclosures or address acts or practices in connection with these products.

The Bureau is also continuing to develop research on other critical consumer protection markets to help assess whether regulation may be warranted. For example, the Bureau issued research on bank and credit union overdraft programs in 2013 and 2014 and is planning to release the results of further studies on overdraft programs and their effects on consumers.

In addition, the Bureau has launched research initiatives to build on its November 2013 ANPRM on debt collection. These efforts include undertaking a survey to obtain information from consumers about their experiences with debt collection and launching consumer testing initiatives to determine what information would be useful for consumers to have about debt collection and their debts and how that information should be provided to them.

Bureau work is also continuing on a number of earlier initiatives concerning consumer payment services. In addition to the prepaid rulemaking discussed above, in 2014, the Bureau engaged in a rulemaking to make further amendments to its existing rule that applies to consumer remittance transfers to foreign countries. The primary purpose of the rulemaking was to address whether to extend a provision under the Dodd-Frank Act that allows insured depository institutions to estimate certain information for purposes of consumer disclosures. The provision would have expired in July 2015 unless the Bureau exercises authority to extend it for up to five years. The Bureau's final rule extended the provision to July 2020.

The Bureau is continuing rulemaking activities that will further establish the Bureau's nonbank supervisory authority by defining larger participants of certain markets for consumer financial products and services. Larger participants of such markets, as the Bureau defines by rule, are subject to the Bureau's supervisory authority. In fall 2014, the Bureau issued a final rule that amended the regulation defining larger participants of certain consumer financial products and services markets by adding a new section to define larger participants of a market for international money transfers, and began a rulemaking that would define larger participants of a market for automobile financing and define certain automobile leasing activity as a financial product or service.

Bureau Regulatory Streamlining Efforts

Another priority for the Bureau is continuing work on an earlier initiative to consider opportunities to modernize and streamline regulations that it inherited from other agencies pursuant to a transfer of rulemaking authority under the Dodd-Frank Act. In connection with the HMDA rulemaking described above, the Bureau has identified potential opportunities to reduce unwarranted regulatory burden concerning reporting of mortgage application, origination, and purchase activity, as described in the proposed rule. Similarly, the Bureau took the opportunity when streamlining federal mortgage forms as mandated by the Dodd-Frank Act and discussed above, to clarify existing regulations to address longstanding compliance concerns. The Bureau also issued a final rule in fall 2014 to allow financial institutions that restrict their information sharing practices and meet other requirements to post their annual privacy notices to customers under the Gramm-Leach-Bliley Act online rather than delivering them individually. The rulemaking addresses longstanding concerns that the annual mailings are a source of unwarranted regulatory burden and unwanted paperwork for consumers.

Additional Analysis, Planning, and Prioritization

The Bureau is continuing to assess timelines for the issuance of additional Dodd-Frank Act related rulemakings and rulemakings inherited by the CFPB from other agencies as part of the transfer of authorities under the Dodd-Frank Act. The Bureau is also continuing to conduct outreach and research to assess issues in various other markets for consumer financial products and services. For example, as directed by Congress, the Bureau is conducting a study on the use of agreements providing for arbitration of consumer disputes in connection with the offering or providing of consumer financial products or services. Upon completion of this study, the Bureau will evaluate possible policy responses, including possible rulemaking actions, the findings of which shall be consistent with the study. The Bureau will similarly evaluate policy responses to other ongoing research and outreach, taking into account the critical need for and effectiveness of various policy tools. The Bureau will update its regulatory agenda in spring 2015 to reflect the results of further analysis, planning, and prioritization.