Sara Routhier, Managing Editor and Outreach Director, has professional experience as an educator, SEO specialist, and content marketer. She has over five years of experience in the insurance industry. As a researcher, data nerd, writer, and editor she strives to curate educational, enlightening articles that provide you with the must-know facts and best-kept secrets within the overwhelming world o...

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Joel Ohman is the CEO of a private equity-backed digital media company. He is a CERTIFIED FINANCIAL PLANNER™, author, angel investor, and serial entrepreneur who loves creating new things, whether books or businesses. He has also previously served as the founder and resident CFP® of a national insurance agency, Real Time Health Quotes. He also has an MBA from the University of South Florida. ...

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Reviewed by Joel Ohman
Founder, CFP® Joel Ohman

UPDATED: Jan 2, 2013

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The Consumer Financial Protection Bureau (CFPB) is a federal agency that works to improve consumer financial decisions by making effective rules, enforcing laws, and empowering consumers to take control of their finances.

The CFPB started operation on July 21, 2011 and was created as a response to the economic recession as a part of the Dodd-Frank Wall Street Reform and Consumer Protections Act of 2010. It is funded by the United States Federal Reserve and is affiliated with the U.S. Treasury Department.

The bureau has jurisdiction over banks, credit unions, personal loan lenders, mortgage servicers, debt collectors, and many other financial institutions.

The three main efforts of the bureau are to educate, enforce, and study:

  • Educate: In a democratic society, information should be free flowing and easy to access. Financial information about mortgages, debt collection, and personal loans should be accessible to all interested consumer parties. Consumers should be allowed to educate themselves about their financial obligations and decisions. Without an informed consumer base, there is more room for illegal financial actions to occur.
  • Enforce: When financial consumers are the victims of illegal activity, the CFPB steps in. The CFPB takes comments, complaints, and requests for more information from multiple mediums. Once a complaint is submitted, the bureau reviews it and routes the information to the financial company that is in question.  The CFPB will receive a response from the financial institution and pass the information back to the consumer. If illegal activity has occurred, the bureau will step in to correct the situation for the consumer. This entire complaint process is reviewed, recorded, and analyzed for future use.
  • Study: Since the organization is still in its infancy, studying how the lending world operates as well as the reactions of consumers is vital to the organization’s livelihood. The information provided to the CFPB by consumers is recorded and analyzed in later studies. Reports are published several times a year for both consumer and financial institution education.

Of the bureau’s many duties, one of the most important is the CFPB’s oversight of personal loans and their impact on consumers.

Although all forms of lending is susceptible to fraud, personal loans are more susceptible to fraud due to their simplistic and easy-to-access nature. Many lending institutions offer personal loans via websites and through online applications. While legitimate companies institute protection for consumers, there are illegal lending companies posting predatory offers. These companies can lure in borrowers with guarantees of high financial limits and low interest rates. But when the loan is released, sometimes the hidden print can entrap a borrower into an unmanageable cycle of debt.

If consumers are not protected from fake personal loans, and if the illegal companies are not threatened and shut down, consumers are more likely to face fraud and repayment issues.

The CFPB was created to protect and educate the general public. It does not offer an easy way out of debt, but it does provide the necessary information for consumers to protect their financial lives.