Consumer Financial Protection

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.

For example:

• Financial literacy. Financial literacy is the ability to make informed decisions and take effective actions regarding money, and it is essential to helping ensure the financial health and stability of individuals and families. Financial literacy is particularly important for older adults and people with disabilities. The Financial Literacy and Education Improvement Act established the Financial Literacy and Education Commission—which comprises the heads of 24 federal agencies and entities—to improve financial literacy and education through coordinated federal efforts. There are a number of federal financial literacy programs and resources, but many lack data on the outcomes of their efforts. 
   
• Blockchain finance. Blockchain allows users to conduct and record tamper-resistant financial transactions that multiple parties make without a central authority, such as a bank. Blockchain-related financial products and services have grown substantially in recent years. For example, crypto assets reached a peak market capitalization of nearly $3 trillion in November 2021. Federal regulators lacked an ongoing formal coordination mechanism for addressing blockchain risks in a timely manner. As of October 2024, federal regulators have partially addressed the recommendation by establishing such a coordination mechanism for identifying blockchain-related risks. However, they have not yet developed processes for responding to those risks that cross regulatory jurisdictions within agreed-upon timeframes.
• Financial technology. 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. 
• Consumer scores. 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.

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