Exactly Five Years Into the CFPB Era. . .

The fifth anniversary can be a large milestone and something to really celebrate, but for the fifth anniversary of The Consumer Financial Protection Bureau (CFPB), which came on Thursday, July 21, the celebration may be premature. Some critics even wonder whether the Bureau as it stands now will be around to celebrate next year.

From the Bureau’s initiation, the stated purpose of the CFPB has been protecting consumers in the financial marketplace. According to a recent post from the Bureau, “Since we opened our doors, we’ve focused on making the financial marketplace work for consumers. We’ve listened to your complaints about problems with your financial companies, created new consumer protections for financial products and services, and held bad actors accountable for breaking the law.”

In the report, the CFPB shares what they believe to be the largest accomplishments since their origination in 2011. Included in this list is $11 billion in relief given to 27 million consumers in legal actions (encompassing in that figure action taken against mortgage companies for wrongly foreclosing on consumers’ homes), handling approximately one million consumer complaints, implementing new rules for the mortgage market such as “Know Before You Owe” and “Ability to Repay,” and most recently attempting to put new consumer protections in place like banning arbitration clauses.

“There were a lot of consumer protection laws out there but the problem was there was nobody really to enforce them,” says Senator Elizabeth Warren (D-Massachusetts) in a CFPB video interview. “The idea behind the Consumer Financial Protection Bureau was to draw together all of those laws and put them into once place and to say this agency has the tools to watch out for the American consumer to level the playing field and will be held responsible for doing that.”

“In a few short years we’ve been working to protect people against financial predators, make sure these markets are safe for consumers, and see they are treated fairly, which is what everyone of us deserves.”

Richard Cordray, Director, CFPB

Not everyone is singing the same tune as Warren, though. Earlier this year, Congress proposed changes for how the Bureau is funded, moving for annual appropriations, as well as changes for the CFPB leadership, calling for a bipartisan commission instead of a single director. Additionally, the Government Accountability Office (GAO) found some problems with the CFPB’s internal controls and accounting procedures, according to a report from the GAO released earlier this year.

“During its audit of the Consumer Financial Protection Bureau’s (CFPB) fiscal years 2015 and 2014 financial statements, GAO identified deficiencies in CFPB’s internal control over accounting for property, equipment, and software that collectively constituted a significant deficiency in CFPB’s internal control over financial reporting,” the GAO reported.

These are not the biggest issues facing the CFPB this year, though. The Bureau is also struggling with accusations from the New Jersey-based lender PHH Corp. which is currently trying to overturn a $109 million penalty issued by the CFPB in June 2015 over alleged violations of the Real Estate Settlement Procedures Act (RESPA). This is a landmark case because it is the first time in the now five-year history of the CFPB that a company has judicially challenged a penalty handed down by the Bureau. Rulings in the PHH case over the Bureau’s constitutionality will be determined this fall.

The petition from PHH reads, “Never before has so much authority been consolidated in the hands of one individual shielded from the president’s control and Congress’s power of the purse.”

Despite controversy surrounding the CFPB, consumers and those in the mortgage industry stand behind the work the Bureau is doing. “The CFPB’s record of strong leadership stands by itself and should not be hampered by congressional efforts that would cripple its ability to ensure a safer and more accountable financial system,” said Joe Valenti, Director of Consumer Finance at the Center for American Progress, in a post celebrating the CFPB’s work over the duration of its existence.

Still others feel there is more work that could be done to increase regulations through the CFPB. A survey of 1,000 likely voters jointly conducted in late June by the Center for Responsible Lending (CRL) and Americans for Financial Reform (AFR) indicated that members of both parties think financial regulation should be tougher. More than half of respondents in each party concurred: 52 percent of Republicans, 68 percent of Independents, and 84 percent of Democrats all said they believe that more financial regulation is necessary.

As the CFPB begins a new year, plans for progression are the mission of the Bureau. They state that will continue to work on protecting consumers in the financial marketplace and empowering them to make informed financial decisions.

Director for the CFPB, Richard Cordray, said in a video interview, “In a few short years we’ve been working to protect people against financial predators, make sure these markets are safe for consumers, and see they are treated fairly, which is what everyone of us deserves.”

But are these actions congruent with where the where the mortgage industry stands now, five years after the Bureau’s launch? Tom Booker, Managing Director of The Collingwood Group, said, “At the five year mark, the cost to originate has sky rocketed to over $7,000 per loan, the products available to mortgage lenders that address, high debt to income ratios, imperfect credit and difficult to document incomes are difficult to access for most consumers. The compensation schemes for brokers which needed attention, have created a disincentive to loan originators, the front line for borrowers to work on difficult loans to get approved.”

Booker continues on to describe how his balanced assessment is that the law of unintended consequences best describes the impact on the mortgage business at this juncture. He doesn't believe the goal was to raise costs, to discourage loan offers, or impede access to loan products that could allow more credit worthy Americans access to home ownership. He says that the CFPB has the best of intentions, but not with the intended direction or outcome thus far.