AARP Hearing Center
Background
Federal, state, and local consumer protection agencies all have a role in safeguarding consumers against fraud, deception, and unfair practices. But they need sufficient resources and authority to carry out their responsibilities. Consumer participation in administrative, legislative, and judicial processes is often valuable for these purposes.
Federal regulation: In 2010, following the housing market collapse and the resulting financial crisis, Congress enacted the Dodd-Frank Wall Street Reform and Consumer Protection Act. The act restructured the financial services regulatory system and enacted important consumer protections. One goal was to ensure that financial institutions manage risk properly and minimize the chance of collapse. Another was to promote consumer protection. A major change resulting from the law was consolidating most federal consumer protection laws under a new regulator, the Consumer Financial Protection Bureau (CFPB).
Historically, the bureau has played an important role in protecting consumers from unfair, deceptive, and abusive financial practices. It has regulated consumer financial products and services other than securities and insurance, enforced federal consumer protection laws, and supervised banks and nonbanks. Examples of nonbank financial companies are payday lenders, check cashers, car-title lenders, prepaid card issuers, nonbank subsidiaries of banks, debt collectors, and mortgage brokers, originators, and servicers. In addition, the CFPB has assisted certain populations, including older Americans, students, and military service members, who are often specific targets of abuses. The CFPB also has in the past played an important role in educating consumers about their rights and publishing a database of consumer complaints, which totaled more than 2.7 million in 2024 alone. The bureau has pursued responses from the companies involved, collecting over $12.4 billion in fines through enforcement actions in support of more than 31 million consumers.
When the CFPB was created, Congress provided a funding stream that did not require annual congressional approval through the appropriations process. Instead, the CFPB director could request quarterly transfers of money from the Federal Reserve so long as the total annual request didn’t exceed 12% of the Federal Reserve’s operating expense (around $800 million in 2025). Over the years funding requests varied, but most agency directors typically requested much, but not all, of the maximum allowed under law.
However, in 2025, Congress enacted legislation that lowered the funding cap for the CFPB to 6.5%, effectively cutting its annual transfer authority in half. Following this reduction, the Bureau laid off the majority of its workforce and rolled back several key consumer financial protection rules. In response, consumer advocates have increasingly shifted their efforts toward strengthening consumer rights and protections at the state and local levels.
State and local regulation: State and local governments also play an active role in protecting consumers. State laws align with and complement federal laws in areas such as antitrust, unfair trade practices, and financial services policies. Many state agencies, consumer affairs offices, and attorneys general have been particularly active in protecting consumer rights. They have important oversight roles in areas such as nonbank and insurance products. In addition, they have played an important role in developing innovative advances in consumer health, safety, and financial regulations. In many cases, state initiatives provide a model for needed improvements in federal regulation. When federal law preempts stronger state laws, consumers lose out on potentially more robust consumer protections. Local governments likewise can help protect consumers. They can also use powers such as zoning and licensing to do so.
Nonbank regulation: Nonbanks have offered an increasing share of financial products and services over time. Nonbanks potentially offer additional competition and choices for consumers. However, they have created new challenges for regulators. This is because products offered by banks are generally subject to greater levels of regulation. Moreover, consumers may not be aware that the consumer protections they would expect from a financial product or service do not apply. This leaves them vulnerable to harmful practices that are not permissible for a bank. Financial companies have sometimes used nonbank status to evade consumer protection and civil rights laws.
Protections for vulnerable consumers: People with diminished capacity are among the most vulnerable targets for financial exploitation and abuse (see also Elder Abuse and Scams and Fraud). They may be especially vulnerable to abusive financial products or foreclosure. For example, forward and reverse mortgage borrowers with diminished capacity who cannot keep up with required paperwork or payments can lose their homes to foreclosure.
In some cases, financial service providers are the first people to recognize signs of cognitive decline. The ability to work with numbers and manage money are among the first skills that noticeably decline for those with diminished capacity. As a result, policymakers at the federal level and some states have put in place mandatory reporting laws. Many states require financial institutions, among others, to report suspected cases of elder financial exploitation to law enforcement and Adult Protective Services. Financial institutions that do so in good faith are then shielded from liability for having made the report.
The Financial Crime Enforcement Network (FinCEN), a bureau of the Department of the Treasury, requires financial institutions to file confidential suspicious activity reports (SARs) when certain criteria are met. They have the option to indicate when the suspicious activity involves elder financial exploitation. FinCEN “encourages,” but does not require, financial institutions to check this box when elder financial exploitation is suspected. Law enforcement agencies can use this information to identify, investigate, and prosecute elder financial abuse. FinCEN has created a public SARs statistics database. It contains information on how often financial institutions file SARs without revealing any confidential information. FinCEN and the CFPB have also published papers on suspected financial exploitation based on SARs reports.
FINANCIAL SERVICES REGULATION: Policy
FINANCIAL SERVICES REGULATION: Policy
Consumer protections
Laws and regulations should promote consumer financial protection. Policymakers should enhance protections against unfair, deceptive, or abusive practices. Consumers should have access to remedies for violations of law. Consumer protection laws and regulations should apply to all types of monetary transfers.
The marketplace for consumer financial products should be transparent.
To ensure consumer privacy rights, policymakers should prohibit the dissemination of consumers’ confidential financial information without their permission (see also Data Privacy and Data Security). Exceptions should be made for:
- authorized law enforcement agencies,
- Adult Protective Services agencies (see also Elder Abuse), or
- financial regulators investigating elder financial exploitation, fraud, or abuse.
Financial institutions, including banks and insurance companies, should be required to act as a fiduciary when providing financial advice to individuals. That is, they should make recommendations based on what is best for the individual consumer rather than their own interest or compensation.
At a minimum, those who sell insurance products should be held to a suitability standard to ensure that recommended products are suitable for the individual’s financial situation (see also Insurance). Policymakers should seek to increase these standards beyond suitability.
Financial professionals should avoid conflicts of interest. When they cannot avoid conflicts of interest, they should disclose and mitigate them.
Transparency and disclosures: Consumer financial products should be required to be transparent about critical product and service features, including with respect to fees, interest rates, repayment terms, risk, and the collection, sharing, use, and sale of personal data (see also Transparency and accountability).
Disclosures provided for various financial products should be uniform and appropriate. This applies regardless of whether the product is offered by a bank, insurance company, brokerage firm, or other financial services company. Customers using electronic financial services have access to the same information and disclosures they could view on paper offers and statements.
The methods that third-party rating agencies use to assess risk should be transparent and free of conflicts of interest. The same should be true of accounting and legal professionals in the financial sector.
The Freedom of Information Act’s exemption of federal records pertaining to the financial services industry should be repealed or sharply narrowed, with protections added to ensure the privacy of sensitive consumer data.
Anticoercion requirements for banks: Banks should be prevented from using their role as lenders to pressure consumers into purchasing nonbanking products.
Roles in financial services regulation
Federal legislation should provide a minimum level of consumer protection. It should preserve states’ ability to provide additional protections to consumers.
State and local governments should:
- enhance consumer protection laws and regulations, and
- expand and fully fund outreach and education programs.
Regulation
Regulators should ensure robust consumer protection standards and oversight in the financial marketplace. Rulemaking should be open, clear, and transparent.
Regulators should ensure that banks involved in other financial functions maintain the fundamental safety and soundness of traditional banking activities. They should also ensure that customer deposits remain secure.
Consumers should receive the same robust consumer protections regardless of the type of institution providing the product, bank or nonbank.
Regulatory agencies should receive adequate funding to carry out their missions. Regulators should carefully consider whether to charge covered industries fees to support the cost of regulation. They should avoid unintended consequences that can result from doing so, such as higher costs to consumers or potential regulatory capture.
Regulators appointed to banking agencies should have demonstrated expertise in financial services regulation. They should be free from conflicts of interest that could impair their judgment (see also Ethics and Accountability).
Regulators should conduct oversight and enforcement as new financial products and services enter the marketplace. They should assess and address any risks to consumer financial well-being.
Insured and uninsured operations need to be clearly separated. Depositors’ funds must be protected from inappropriate risk. Regulators must adequately supervise any nontraditional activities. Regulators should receive enhanced access to information about market developments and activities to detect and correct problems that pose systemic threats. They should also help prevent or mitigate the effects of an individual institution’s failure.
If appropriate, criminal prosecution should be pursued when a financial institution fails. Civil actions should be pursued against organizations and individuals that hide or distort information about an institution’s health. Civil actions are also appropriate when the solvency of a financial institution is undermined.
The deposit insurance ceiling should consider an individual’s needs, major events, and many older consumers’ reliance on current deposit insurance levels to protect their savings. Nondeposit products should clearly state that they are not insured by the Federal Deposit Insurance Corporation or another banking agency.
The Consumer Financial Protection Bureau (CFPB)
Congress should ensure that the CFPB is a strong and independent consumer protection regulator. The CFPB should:
- particularly focus on populations most at risk of financial exploitation, including older adults.
- maintain its sole director structure.
- conduct strong oversight and enforcement of consumer protection laws, including with respect to nonbank lenders, alternative financial services providers, and debt collectors.
- ensure access to redress for consumers who are harmed by a financial product service, including through class access lawsuits (see also Private Enforcement of Legal Rights). Pre-dispute mandatory binding arbitration clauses should be prohibited (see also Pre-Dispute Mandatory Binding Arbitration).
- provide financial education and resources to the public, including materials tailored to older adults and their caregivers.
The CFPB should continue to collect, analyze, and publish consumer complaints to improve the financial marketplace. In doing so, it should:
- expand categories of demographic information collected in complaints.
- explore requiring complainants to disclose whether they are older adults while protecting their privacy. CFPB defines older adults as age 62 and older based on the Dodd-Frank Act requirements.
- encourage complainants to report other demographic information to enable more complete analysis of complaint data while protecting individual privacy. This includes details such as age, race, ethnicity, sex, gender identity, sexual orientation, and location.
Protections for vulnerable consumers
Policymakers and financial institutions should protect consumers with diminished capacity and others at risk of financial exploitation.
Policymakers should work with financial institutions to create and enforce effective processes and procedures to facilitate the reporting of suspected financial exploitation. Financial institutions should be mandatory reporters of suspected financial abuse to Adult Protective Services and law enforcement.
Federal policymakers should:
- require financial institutions to indicate in confidential suspicious activity reports (SARs) when there is suspected elder financial exploitation; and
- explore other mechanisms to make more widely available the insights contained in SARs related to elder exploitation, but only to the extent it does not compromise consumer confidentiality or impede criminal investigations and prosecutions.
Financial institutions should train their employees to prevent financial exploitation and recognize and respond, as appropriate, to suspected cases of it (see also Elder Abuse and Scams and Fraud). They should report suspected cases of financial exploitation to Adult Protective Services and law enforcement.