Federal agencies have opportunities to better protect consumers from unfair, deceptive, and abusive practices in the financial marketplace, and promote financial literacy.
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.
- Wartime veterans with limited means age 65 or older, and veterans with certain disabilities, are eligible for VA’s pension benefit. These veterans are among the most vulnerable to financial exploitation. Scams that target them include selling bad investment advice and charges for services that should be free. By including warnings to veterans on certain documents, such as electronic or paper applications, VA could better warn veterans of exploitation risk.
- 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 could work with state agencies to improve data on these abusive financial practices.
- Some companies that offer financial products and services—such as credit cards and loan servicing—may engage in practices that pose financial risks to consumers. For example, companies may obscure the costs of a product or use lending practices that can trap consumers in a cycle of debt. The CFPB is responsible for watching out for consumers and monitors complaints, analyzes market data, and conducts outreach to inform its regulations. However, while CFPB collects a wide range of market intelligence, it could better identify the most significant risks to consumers.
- 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.
- Reverse mortgages allow seniors to convert part of their home equity into payments from a lender while still living in their homes. Seniors run the risk of defaulting and losing their homes if they don't continue to pay taxes and meet other conditions. The Federal Housing Administration could do a better job evaluating the performance of its reverse mortgage program and overseeing the companies that service the loans.