The prevalence of new and more complex financial products—and their availability to the public—have raised challenges for the federal agencies that are responsible for protecting consumers.
The Consumer Financial Protection Bureau (CFPB), which was created in 2010, has primary authority over many consumer financial products, such as mortgages, credit cards, loan servicing, and debt collection. But other federal agencies also play key roles in consumer financial protection for the products, services, and entities under their jurisdictions.
There are a number of ways that these federal agencies could improve financial protections for consumers.
Companies increasingly use numeric scores to predict how consumers will behave. These scores are based on hundreds of pieces of information about a person's purchases and personal characteristics. Scores are used, for example, to target ads or provide individualized pricing. Unlike traditional credit scores, these scores may not be subject to consumer protection laws that seek to assure fair and transparent treatment. Congress could play an important role in establishing appropriate consumer protections related to numeric scores, such as ensuring consumers are informed of their uses and potential effects.
CFPB’s efforts to oversee and enforce fair lending laws help protect U.S. consumers from potential discrimination in credit markets. In 2018 and 2019, CFPB reorganized its fair lending activities, including its enforcement and examination of fair lending practices. CFPB should assess the outcomes of this reorganization to address any challenges or unintended consequences.
Franchising is when business owners pay a fee to use a larger business's brand name and business model. The Federal Trade Commission (FTC) protects franchise owners from unfair and deceptive practices on the part of the larger business ("the franchisor"). However, franchise owners may not know that FTC can help, or may fear retaliation. FTC should take steps to improve outreach about its complaint process, including its anonymous complaint option.
Elder financial exploitation—the illegal or improper use of an older adult's funds or property—has society-wide repercussions. Federal agencies have been working to increase public awareness of elder financial exploitation, but there is limited information on the nature and extent of the problem. The Department of Health and Human Services should work with state agencies to improve data on these abusive financial practices.
Financial technology products and services (such as marketplace lending and digital payments) offer various benefits, including increased access to financial services, lower costs, increased speed of service, and convenience. However, they also pose potential risks, including data security and privacy. Federal regulatory agencies face challenges in adequately protecting consumers in the face of this rapidly changing financial marketplace.