The CFPB was created with a mandate to supervise consumer financial services companies, as well as large depository institutions and their affiliates. Two notable characteristics of the CFPB make it very different from other regulatory functions.
- The CFPB is a bureau, not a commission. For a bureau, there is a single director that is appointed by the president, subject to Senate confirmation. Richard Cordray is the only director the bureau has had, and he continues in this role today. A commission, conversely, is usually composed of several individuals that are selected from both of the main political parties, Republican and Democrat. The theory is this provides checks and balances to ensure no single party holds unfettered authority. For example, the Securities and Exchange Commission (SEC) is a commission that is composed of five individuals from competing political parties, which are also nominated by the president and confirmed by the Senate.
- The CFPB budget is embedded in the Federal Reserve budget. When the Dodd-Frank Act was created, the CFPB’s budget was tethered to the Federal Reserve, being a percentage of the same. This is consequential as it immunizes the CFPB from congressional oversight; Congress cannot freeze, stall, or change appropriations funding. In 2014, there was a government shutdown, during which Congress failed to allocate funds to certain aspects of government. The CFPB was not one of them due to the fact that it was immunized from congressional oversight.
What Is the CFPB’s Authority?
The CFPB was given the following three powers.
- Enforcement—The ability to enforce more than 20 consumer financial laws and regulations, which include the Truth in Lending Act, the Fair Credit Reporting Act, the Equal Credit Opportunity Act, and unfair, deceptive, or abusive acts and practices as defined by the Dodd-Frank Act
- Supervision—Broad authority to examine and supervise covered persons engaging in, offering, or providing consumer financial products or services
- Rulemaking—Authority to prescribe rules and guidelines for many consumer financial laws along with many laws established under the DFA