The Consumer Financial Protection Bureau (CFPB) was created with a clear mandate to defend American consumers from abusive, unfair, and unreasonable financial practices. Once the Bureau would start functioning, consumers would be protected from big Wall Street corporations, credit card companies, mortgage lenders who take advantage of the consumer in one fashion or another. The companies would be obligated to follow the law and appropriate procedures and rules. The agency also was intended to conduct research on consumer behavior and to work to eliminate discrimination and other unfair treatment in consumer finance transactions.
This Bureau was created by Congress in July of 2010 as a feature of the Dodd-Frank Wall Street Reform and Consumer Protection Act. This legislation was called for by President Obama more than a year earlier. Once created and signed by the President the Bureau was set to function to protect consumers.
The problem with the functioning of this Bureau is that the Republicans in congress decided to weaken the Agency by cutting its funding by 60% and by sitting on the President's appointment of a director. In effect, this consumer watchdog agency was prevented from coming into being.
The President finally appointed former Ohio Attorney General Richard Cordray as the director of the agency to serve as a watchdog for the American people. The appointment was somewhat controversial because it was a "recess appointment" made while the Congress was on vacation. In any case Cordray was appointed and he went right to work in the beginning of 2012.
Part of Richard Cordray’s job will be to increase oversight of mortgage brokers, which has already started with new underwriting standards mandated by the Dodd-Frank financial reform legislation. His appointment will finally allow the CFPB to start regulating non-depository firms (non-bank lenders), which up to now it could not. “And that could have a big impact,” says Guy Cecala, CEO and Publisher of Inside Mortgage Finance. “A lot of these firms – ranging from mortgage brokers to large lenders like PHH – have effectively escaped regulation in the past. Now they will not only have to submit to reporting but also lending regulations previously only extended to depository institutions.”