Structure

Independent bureau at the Federal Reserve.

Director

Appointed by President, Confirmed by Senate, 5-year term.

Funding

Certain percentage of Federal Reserve's budget; additional funding may be made available through Congressional appropriations, at the option of the CFPB Director.

Three categories of regulatory duties

  1. Rulemaking
  2. Supervision (routine, on-going examination and monitoring for risks and new developments, as well as on-going compliance)
  3. Enforcement

Rulemaking

  • Two different sources of rulemaking authority:
  1. "organic" authority: to prohibit unfair, deceptive or abusive practices with respect to consumer financial products and services
  2. authority under existing federal consumer financial statutes (for example: Truth in Lending Act)
  • Authority covers both banks and non-bank providers (subject to a few exemptions, see below).

Supervision

  • Authority over depositories with more than $10 billion in assets.
  • For smaller depositories, can require reports, and send its examiners along on some examinations conducted by the banking regulators.
  • Authority over non-bank providers subject to certain exemptions. One such exemption will be smaller providers – size is to be determined.
    • Note: Non-bank mortgage-related lenders and payday lenders are explicitly included, regardless of size.

Enforcement

  • Primary enforcement authority over all "large depositories" – i.e., those with more than $10 billion in assets.
  • Exclusive enforcement authority over non-banks that are either:
    1. Payday lenders
    2. Providers of mortgage-related services
    3. "Larger market participants" (to be defined by rule)
    4. Bad apples in the market
  • Any gaps in CFPB's non-bank enforcement authority will be filled by the FTC.

Exemptions (from rulemaking, supervision and enforcement)

Some partial exemptions, including merchants and auto dealers.

State Law and Law Enforcement

Generally:

  • CFPB rules do not preempt state law – except to the extent state laws conflict and are less protective of consumers.
  • States can enforce CFPB rules, but must provide notice to CFPB, which can intervene.

As to National Banks and Thrifts:

  • The law rolls back the more aggressive preemption efforts of the OCC and OTS since 2004. Should make it more difficult for the prudential regulators to preempt state laws as applied to national banks and thrifts.
  • States can enforce CFPB rules as to national banks and thrifts, and can enforce other federal consumer financial laws as provided therein.
  • Overturns Supreme Court decision in Watters v. Wachovia (so that state-chartered national bank operating subsidiaries do not get the benefit of preemption).
  • Reinforces the Supreme Court decision in Cuomo v. Clearing House such that states can enforce non-preempted state laws against national banks and thrifts.

Transition

  • Substantive rulemaking authority (both "organic" and under existing statutes) begins on the Transfer Date, which is TBD but between 6-12 months out (with possible 6 month extension)
  • In the meantime, Treasury has authorities of the agency that are immediately effective (includes organizational issues, rules relating to scope, e.g., defining "larger participant")

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