Before Dodd Frank

● State banking powers preempted

○ Marquette/Smiley and OCC preemption
● Baking regulators had fragmented authority over banks, but limited motivation
○ Fed, OCC, OTS, FDIC, NCUA
○ FTC Act and FDIC Act allowed prohibited "unfair or deceptive acts and
practices."
○ First call of duty is to make banks solvent, to ensure they are healthy. Good
regulation could conflict with this first duty. Consumer protection is a low priority,
because it could be that it benefits banks and pads their profits and makes them
"safer."
○ No regulator with both the authority AND motivation.
● Baking hula tots had limited authority over nonbank financial companies
○ Fed could write rules under HOEPA, TILA
○ Fed view of HOEPA, cautious of regulation and over regulation
● FTC had motivation, but limited authority over banks and nonbank FIs

Creation of CFBP in Dodd-Frank

● Independent agency within Treasury with primary responsibility for consumer protection
for consumer financial products and services
● Primary rule-making and enforcement authority for existing banking consumer protection
statutes
● Implementation of specific new rules, like duty to assess borrower's ability to repay.
● Supervisory authority for consumer protection for all large banks (assets>10B) and some
non-banks (mortgages, payday loans, etc.)
● Authority over all banks and most nonbank financial firms (not insurance, not auto loans)

CFPB Organic Rulemaking Authority

● Preventing unfair, deceptive or abusive acts and practices (UDAAP)

● CFpB has no authority to declare...unless materially interferes or takes advantage of a
lack of understanding, reasonable reliance by customers, etc.

Development of CFPB

● 700 employees, Director appointed

● Hired numerous researchers
● Philosophy
○ Market-based regulation
○ Empirically-informed
○ Behaviorally-informed

Accomplishments

● Know Before You Owe mortgage rules

● Major enforcement actions against credit card companies