The CFPB is responsible for regulating various types of short term loans that Americans depend daily such as credit card, payday loans, student loans and home loans. It was set up under the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010. The organization has the power to make rules that they believe will protect the consumers from fraud in regard to loans. These rules aim to ensure that the borrowers don’t get cheated and fully understand the lending terms.
The lenders, on the other hand, are to follow the guidelines set up by the CFPB when approving a loan. Previously, there was not a single agency that has the authority to regulate and set standards for all the banks and other lending institutions in the market. This has led to the economy crisis that occurred in 2008. The aftermath of the 2008 economy crisis still exist in the market.
Consumer Financial Protection Bureau was established to replace the 7 ineffective agencies that used to regulate consumer financial protection. The CFPB regulate all the banks and credit union that had been previously regulated under the Federal government. It also regulate private lending institutions that are not bank.
Non bank lenders pay an important role in offering credit access to millions of consumers in the USA. The purpose of regulating these non bank lenders is to prevent them from using deceptive practices that are unfair on the borrowers. Examples of non bank lenders are payday loans, online lenders and P2P loans. All lenders are subjected to the CFPB to provide clear information. With the standards set by the CFPB, consumers will receive strong protection.
The website of the Consumer Financial Protection Bureau, consumerfinance.gov, was officially launched in February 2011. It starts to accept consumers’ feedback in regards to the promotion fairness and transparency in all kinds of financial products. The CFPB constantly monitor new financial products in the market and identify new risks that are posed to the consumers. It finds out the hazards that consumers will face when applying loans from different lenders.
Up to date, the CFBP has carried out three know before you owe campaigns on three different types of loans including credit scores, mortgages, student loans and credit cards. These three campaigns aim to help consumers understand the agreement of the loan that they are applying. Consumers can visit the CFPB website to read tips on how to make smart decision when obtaining a loan. The financial education provided by CFPB is written in a way that is easier to understand compared to long agreement. It provides answers to frequently asked questions about affording a college. The CFPB has also take the effort to educate consumers about virtual currencies like Bitcoin.