When you think about government agencies like the Environmental Protection Agency or the Food and Drug Administration, you probably think their activities are overseen by Congress—that is, we the voters elect members of Congress to monitor different departments of the federal government.
But there’s one federal agency that doesn’t operate like that. It’s called the Consumer Financial Protection Bureau, or CFPB.
Created by the Dodd-Frank financial law in 2010, the CFPB claims to hold banks and lenders accountable and protect Americans from predatory lending practices—keeping the borrowing process fair. It sounds reasonable, but the law gave them too much power.
Unlike most government entities, the agency receives its budget automatically every year and doesn’t have to answer to Congress. Its director is also a White House appointee and can only be fired by the president.
But how does this affect you?
Well the CFPB is one of the government’s most active rule-makers, churning out countless mandates to regulate the borrowing process. It targets numerous financial services—including mortgages, credit cards, car loans, and short-term loans.
The agency is especially focused on punishing American banks and piling on thousands of regulations that cost billions of dollars in compliance. And since the CFPB doesn’t have anyone to answer to, it can levy fines and penalties onto whomever they want.
This huge cost makes it harder for banks to lend money to individuals and small businesses in need, preventing them from surviving and thriving. If a small business can’t secure a loan, for example, it can’t expand and hire more employees—hurting people who need jobs.
Since the passage of the Dodd-Frank financial law, only three new community banks have opened a year, compared to a historical average of 100 per year. On top of that, over 1,200 U.S. banks have gone out of business since 2010. This leaves individuals and small businesses with fewer options.
Keep that in mind the next time you need a loan. It might be the CFPB holding you back.