The CFPB at Five Years: Beyond the Numbers

NORTH CAROLINA BANKING INSTITUTE Volume 21 | Issue 1 Article 8 3-1-2017 The CFPB at Five Years: Beyond the Numbers Kelly Thompson Cochran Follow this and additional works at: http://scholarship.law.unc.edu/ncbi Part of the Banking and Finance Law Commons Recommended Citation Kelly T. Cochran, The CFPB at Five Years: Beyond the Numbers, 21 N.C. Banking Inst. 55 (2017). Available at: http://scholarship.law.unc.edu/ncbi/vol21/iss1/8 This Article is brought to you for free and open access by Carolina Law Scholarship Repository. It has been accepted for inclusion in North Carolina Banking Institute by an authorized editor of Carolina Law Scholarship Repository. For more information, please contact . THE CFPB AT FIVE YEARS: BEYOND THE NUMBERS KELLY THOMPSON COCHRAN* I. INTRODUCTION TO THE CFPB As the Consumer Financial Protection Bureau (“CFPB” or the “Bureau”) has passed its five-year anniversary, the Bureau has amassed an impressive set of numbers measuring some of its impacts on consumers and the financial services marketplace.1 Other accomplishments may get less attention, but have nonetheless created important infrastructure and partnerships to help leverage and magnify the agency’s effectiveness. This Article briefly summarizes some of the ways in which the Bureau has evolved in its early years to better fulfill its mission and improve the functioning of consumer financial markets. As detailed in past issues of the North Carolina Banking Institute Journal,2 the CFPB was created by the Dodd-Frank Wall Street Reform and Consumer Protection Act (“Dodd-Frank”) in the wake of the country’s worst financial crisis since the Great Depression.3 * Kelly Thompson Cochran is the Assistant Director for Regulations at the Consumer Financial Protection Bureau; B.A. & M.R.P., University of North Carolina at Chapel Hill; J.D. University of North Carolina School of Law. The views expressed in this article are the author’s and do not necessarily reflect those either of the North Carolina Banking Journal or the agency. 1. See, e.g., CONSUMER FIN. PROT. BUREAU, CONSUMER FINANCIAL PROTECTION BUREAU: BY THE NUMBERS (July 2016) [hereinafter NUMBERS FACTSHEET], http:// s3.amazonaws.com/files.consumerfinance.gov/f/documents/ 07132016_cfpb_By_the_numbers_factsheet.pdf; see also infra Part II. 2. See generally e.g., Melissa Jacoby, Dodd-Frank, Regulatory Innovation, and the Safety of Consumer Financial Products, 15 N.C. BANKING INST. 99 (2011); Alex C. Covington, Note, Fighting Yesterday’s Battles: Proposed Changes to the Consumer Financial Protection Bureau, 16 N.C. BANKING INST. 299 (2012); Dylan J. Castellino, Note, A Spotlight on Shadow Banking: The CFPB Finalizes Procedures to Supervise Risky Nonbanks, 18 N.C. BANKING INST. 333 (2014). 3. Dodd-Frank Wall Street Reform and Consumer Protection Act (“Dodd-Frank”) §1011, 12 U.S.C § 5491 (2015). More than eight million jobs were lost during the first eighteen months after the crisis. From their pre-crisis peaks, housing prices declined by an average of 30%, retirement savings by 22%, and overall household wealth by $13 trillion. More than seven million homes entered foreclosure between 2007 and 2010. Eight years after the crisis, monthly foreclosure rates remain volatile as states with substantial 56 NORTH CAROLINA BANKING INSTITUTE [Vol. 21 Congress structured the Bureau as an independent entity within the Federal Reserve System to consolidate authorities that had previously been divided across seven federal agencies.4 Dodd-Frank also vested the Bureau with additional responsibilities and authorities, including general market monitoring,5 a mandate to supervise various types of nonbank providers of consumer financial products and services on an ongoing basis,6 and the authority to promulgate regulations under certain existing federal statutes as well as new provisions of DoddFrank.7 The momentum to create the Bureau grew out of a widespread recognition that regulatory fragmentation had made it substantially more difficult—in the years leading up to the financial crisis—to address the build up of high levels of consumer and systemic risk within mortgage-related markets. In particular, Congress and outside observers recognized that because seven federal agencies had varying roles in consumer financial rulemaking and enforcement, no one agency was able to maintain a broad view of consumer risks across all relevant inventories continue to work to reduce backlogs. S. REP. NO. 111-176, at 39 (2010); DEP’T OF HOUS. & URBAN DEV., NATIONAL SCORECARD 1 (Nov. 2016), https://portal.hud.gov/ hudportal/documents/huddoc?id=Scorecard_2016_11_508C.pdf (reporting 43,352 foreclosure starts and 34,288 foreclosure completions in October 2016, compared with 52,280 and 23,120 pre-crisis monthly averages, respectively). 4. Dodd-Frank § 1011(a), 12 U.S.C. § 5491(a). The agencies were the Board of Governors of the Federal Reserve System (“FRB”), the Office of the Comptroller of the Currency (“OCC”), the Federal Deposit Insurance Corporation (“FDIC”), the Office of Thrift Supervision (“OTS”), the National Credit Union Administration (“NCUA”), the Department of Housing and Urban Development, and the Federal Trade Commission. The Dodd-Frank Act abolished the OTS. S. REP. NO. 111-176, at 10–11, 23–26, 178 (2010). 5. Dodd-Frank § 1022(c), 12 U.S.C. § 5512(c); see also Dodd-Frank §§ 1024(b)(1), 1025(b)(1), 12 U.S.C. §§ 5514(b)(1), 5515(b)(1) (giving the Bureau the authority to “require reports and conduct examinations”). 6. Dodd-Frank § 1024(b), 12 U.S.C. § 5514(b). 7. See, e.g., Dodd-Frank § 1031(b), 12 U.S.C. § 5531(b) (granting the Bureau the authority to prescribe rules to prevent unfair, deceptive, and abusive acts or practices); Dodd-Frank § 1032(a), 12 U.S.C. § 5532(a) (granting the Bureau the authority to prescribe rules to ensure that the features of consumer financial products and services are “fully, accurately, and effectively disclosed to consumers” both initially and over the term of the product or service); Dodd-Frank § 1089(4), 15 U.S.C. § 1692l(d) (granting the Bureau the authority to prescribe rules under the Fair Debt Collections Practices Act (“FDCPA”)); Dodd-Frank § 1088(a)(2)(A),(e), 15 U.S.C. § 1681s(e) (granting the Bureau the authority to prescribe rules under most provisions of the Fair Credit Reporting Act (“FCRA”)). Prior to the Dodd-Frank Act, other federal financial services regulators had had more limited rulemaking authority with regard to unfair and deceptive acts and practices and certain provisions of the FCRA. No federal agency had had authority to issue general FDCPA regulations. 2017] THE CFPB AT FIVE YEARS 57 markets. The fragmentation also encouraged regulatory arbitrage, allowing companies to create a “race to the bottom” in which the institutions with the least effective consumer regulation, supervision, and enforcement attracted more business and put pressure on institutions with more robust oversight to lower stand (...truncated)