Consumer Financial Protection Act

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Adam Hayes
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Adam Hayes, Ph.D., CFA, is a financial writer with 15+ years Wall Street experience as a derivatives trader. Besides his extensive derivative trading expertise, Adam is an expert in economics and behavioral finance. Adam received his master's in economics from The New School for Social Research and his Ph.D. from the University of Wisconsin-Madison in sociology. He is a CFA charterholder as well as holding FINRA Series 7, 55 & 63 licenses. He currently researches and teaches economic sociology and the social studies of finance at the Hebrew University in Jerusalem.

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Updated March 18, 2023
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Michelle P. Scott
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Reviewed by Michelle P. Scott
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Michelle P. Scott is a New York attorney with extensive experience?in tax, corporate, financial, and nonprofit law, and public policy. As General Counsel, private practitioner, and Congressional counsel, she has advised financial institutions, businesses, charities, individuals, and public officials, and written and lectured extensively.

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What Is the Consumer Financial Protection Act?

The Consumer Financial Protection Act of 2010 is an amendment to the National Bank Act designed to identify and explain the standards that apply to national banks. The Consumer Financial Protection Act aims to increase oversight and clarify the consumer finance laws governing financial transactions to protect consumers in these transactions.

The act, known as the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010, resulted in the creation of the Consumer Financial Protection Bureau (CFPB) to centralize the regulation of various financial products and services.

Key Takeaways

  • The Consumer Financial Protection Act of 2010 is an amendment to the National Bank Act.
  • Its role is to increase oversight and help to protect consumers with financial transactions.
  • The act resulted in the creation of the Consumer Financial Protection Bureau (CFPB).
  • The CFPB's role is to centralize the regulation of various financial services and products.
  • This bureau has been historically unpopular with Republicans in Congress.

Understanding the Consumer Financial Protection Act

After the housing market collapse of the late 2000s, which many blamed, at least partly, on "predatory" lending practices, the Consumer Financial Protection Bureau was established in 2011 to create more oversight of various financial processes. The agency strives to consolidate or resolve discrepancies between federal and state financial laws. CFPB's primary goal is to protect consumers from fraudulent and/or overly aggressive behavior from banks and other financial institutions.

Under its first director, Richard Cordray, the CFPB was aggressive in actions against financial companies in its first five years. It handled nearly one million consumer complaints; its enforcement actions returned almost $12 billion to 29 million consumers, and it enacted new financial regulations.

Consumer Financial Protection Act Legal Actions

Examples of the agency's legal actions include suing credit card companies for engaging in unfair, deceptive, and abusive practices, prosecuting banks for charging overdraft fees to consumers who had not agreed to overdraft services, and bringing lawsuits against payday lenders.

However, Republicans generally do not like the agency and want to dismantle it. Abolishing the CFPB was a significant part of the 2016 Republican Party Platform. In the platform, the authors stated that the CFPB was a "rogue agency" with a director with dictatorial powers, and its actions have been unfair to local and regional banks while favoring big banks.

The authors also complained that the agency has funding outside the appropriation process and uses its slush fund to steer settlements to politically favored groups. Republicans in the House and Senate have proposed bills to weaken the agency by challenging its funding, leadership structure, oversight, and data collection.

Since its formation, actions taken by the CFPB have helped return billions of dollars to millions of consumers.

Special Considerations

In Nov. 2017, former President Trump appointed the head of the Office of Management and Budget, Mick Mulvaney, as interim director of the CFPB. After taking office, Mulvaney refused to request funding for the agency, reconsidered payday lending resolutions drafted by Cordray, and scaled back ongoing investigations—including one into the Equifax data breach.

On Jan. 20, 2021, President Joe Biden nominated Rohit Chopra, a commissioner on the Federal Trade Commission, to be the director of the CFPB. Chopra was confirmed as director in September 2021.

Is the Consumer Protection Act Part of Dodd Frank?

The original act was called the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010. Many people refer to it as Dodd-Frank.

Who Does the Consumer Financial Protection Bureau Protect?

The Consumer Financial Protection Bureau (CFPB) works to make finances more clear for consumers and supervises banks, lenders, and other financial institutions.

Are Federal Laws Regulated by the Consumer Financial Protection Bureau?

The CFBP enforces financial laws that affect consumers, implements changes to the law, and provides support for consumers.

The Bottom Line

The Consumer Financial Protection Act was part of the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010. The act created the Consumer Financial Protection Bureau, which works to make sure consumers are educated about financial products and services and have an advocate if they need help.

Article Sources
Investopedia requires writers to use primary sources to support their work. These include white papers, government data, original reporting, and interviews with industry experts. We also reference original research from other reputable publishers where appropriate. You can learn more about the standards we follow in producing accurate, unbiased content in our editorial policy.

  1. Consumer Financial Protection Bureau. "Building the CFPB."

  2. Consumer Financial Protection Bureau. "Six Years Serving You."

  3. GOP. "Republican Platform 2016," Page 3.

  4. Consumer Financial Protection Bureau. "Enforcement by the Numbers."

  5. Consumer Financial Protection Bureau. "Jan. 17, 2018 Funding Request Letter to the Federal Reserve Board."

  6. Consumer Financial Protection Bureau. "Consumer Financial Protection Bureau Issues Final Rule on Small Dollar Lending."

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