CFPB's Impact, Five Years On

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The Consumer Financial Protection Bureau is taking a victory lap this week as it celebrates its fifth anniversary, noting its accomplishments during the past five years, including collecting $11.7 billion in restitution for 27 million consumers.

Yet the milestone also marks an important shift for the agency. Up until recently the CFPB has been largely focused on fulfilling the many responsibilities given to it by the Dodd-Frank Act, which created the agency. But with rulemakings governing qualified mortgages, mortgage disclosures, remittances and arbitration mostly behind it, the CFPB will begin wading further into uncharted waters where it has more flexibility over what to pursue.

Those include finalizing rules governing payday lending and targeting additional areas like prepaid cards, overdraft fees and auto lending — areas where action is not required by Dodd-Frank.

"You could call the impact of the CFPB monumental — it's huge," said Alan Kaplinsky, who leads Ballard Spahr's Consumer Financial Services Group. "They've done a lot in five years, but I'm not sure they should be popping the cork on the champagne bottles yet."

Despite that freedom, however, the agency faces challenges ahead, both politically and legally. A federal appeals court is expected to rule soon on a case challenging the constitutionality of the CFPB and its single-director structure.

Meanwhile, Republican lawmakers continue to gun for the CFPB. More than 50 bills pending in Congress have sought to defund, change or somehow restrict the agency.

CFPB Director Richard Cordray and Sen. Elizabeth Warren, D-Mass., highlighted the agency's accomplishments in a video and blog released to mark the agency's anniversary on July 21.

"I think we've made a lot of change in how financial institutions treat consumers," Cordray said in the five-minute video. "They know that they have to comply with the law, that somebody is looking over their shoulder to make sure they do that, that somebody is standing on the side of people and making sure they're treated fairly."

Warren, who first conceptualized the bureau, said the CFPB has given consumers "an ally in this fight."

"The idea behind the Consumer Financial Protection Bureau was to draw together all of those laws and to put them in one place and to say this agency has the tools to watch out for the American consumer, to level the playing field, and will be held responsible for doing that," Warren said. "There were a lot of consumer protection laws out there, but the problem is that there was nobody really to enforce them; they were spread among a bunch of different agencies and none of them had as their first job to watch out for America's consumers."

Josh Rosner, a managing director at Graham Fisher & Co. Inc., agreed the bureau's exists primarily because of other financial regulators' failure to look out for the interests of consumers.

"The perspective that gets lost is that the CFPB was a direct response to the failure of regulators that had the authority to protect consumers, but were more interested in protecting the business models of regulated institutions," Rosner said.

Beyond promulgating rules, the CFPB has issued more than 120 enforcement actions against a wide range of companies, including credit card issuers, banks, payday lenders and debt collectors. Banks have paid roughly 65% of the more than $11 billion in relief that has gone to consumers.

"The CFPB is probably overzealous in doing its job, but it's a job that other federal regulators had failed to do even though they had the authority to do," Rosner said.

The CFPB has also come under attack for using enforcement actions as a substitute for issuing new rules or guidelines.

Perhaps its biggest controversy involves PHH Corp., a mortgage lender that the agency accused of illegally taking kickbacks from mortgage insurers. PHH sued the bureau after Cordray reversed a $6 million disgorgement recommended by an administrative law judge and instead fined the company $109 million.

The CFPB also has come under attack for claiming to be a "data driven" agency but using a methodology that overcounted potential discrimination by indirect auto lenders.

"Problematic bureau data practices have undermined the effective use of data to serve as a check on arbitrary action by the bureau, weakened the contribution of information to the quality of policymaking, and undercut the role of data to prevent regulatory abuses," Wayne Abernathy, executive vice president for financial institutions policy and regulatory affairs at the American Bankers Association, said in congressional testimony.

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Compliance Originations Servicing Qualified Mortgages Dodd-Frank Enforcement