Personal Finance

The Consumer Financial Protection Bureau has been under siege for years. Here's why.

Key Points
  • The current political disagreement centers on who has the legal authority to lead the agency.
  • Since 2011, the bureau has returned nearly $12 billion to 29 million people wronged by financial institutions.
  • Congressional Republicans recently overturned the CFPB rule banning mandatory arbitration clauses in customer agreements.
Mick Mulvaney reaffirms his belief in his authority over the CFPB

As politicians battle over who is now in charge at the Consumer Financial Protection Bureau, some people might wonder what the agency is, what it does and why it's at the center of debate in Washington.

The consumer watchdog and its former Director Richard Cordray have been for years. Generally speaking, Democrats support the agency and its goal of protecting consumers, while Republicans say its structure, funding and lack of oversight have resulted in government overreach.

This latest disagreement centers on who has the legal authority to lead the CFPB. On Friday, Cordray announced he was stepping down that day, and appointed a deputy director to act as interim head: Leandra English, previously his chief of staff. But shortly after Cordray's statement, President Donald Trump announced that his budget director, Mick Mulvaney, will serve in the acting CFPB director role.

Consumer Financial Protection Bureau Director Richard Cordray.
Bill Clark | CQ Roll Call | Getty Images

Over the weekend, English filed suit in U.S. District Court seeking to stop Mulvaney from taking over. Despite that legal challenge, Mulvaney showed up at the agency Monday morning to start his new job.

The brouhaha could threaten the CFPB's operations, said Alan Kaplinsky, a partner at national law firm Ballard Spahr.

"It will be chaotic at [the agency] until the court decides who is rightfully entitled to be the acting director," Kaplinsky said. "I think things will largely grind to a halt, particularly with respect to their rule-making and enforcement initiatives."

As the legal battle unfolds, here's a little bit about the embattled CFPB.

What is the Consumer Financial Protection Bureau?

The agency was created as part of the Dodd-Frank Act of 2010, a Wall Street reform bill passed in the wake of the financial crisis that led to the Great Recession. Unlike many other federal agencies, the bureau was granted broad authority and independence. Its mission includes protecting consumers from unfair, deceptive or abusive practices and taking action against companies that break the law.

What is its structure and source of funding?

The Dodd-Frank bill authorizes the president to name a director, who serves a five-year term and cannot be fired at will. (Cordray, who was appointed by President Barack Obama, stepped down eight months ahead of the end of his term.) The agency is funded through the Federal Reserve, which means Congress doesn't get to weigh in on its budget.

What has the agency accomplished?

Since 2011, the CFPB has received more than 1.2 million consumer complaints about their dealings with financial firms. It has returned nearly $12 billion to 29 million people wronged by financial institutions, including credit card companies and banks. Most of the complaints received by the agency relate to debt collection (27 percent) and mortgages (23 percent).

What recourse does Congress have?

Although Congress is excluded from weighing in on much of the functions of the agency, lawmakers have been able to affect the bureau's actions through legislative measures. Earlier this year, after the consumer bureau issued a regulation banning mandatory arbitration clauses from consumer agreements, it through the use of the Congressional Review Act.

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