Yes. Dodd-Frank, the act that created the CFPB, mandates that the fines are deposited into what's called the Consumer Financial Civil Penalty Fund[1].
Money in that fund can be used for only two purposes by law:
1) Compensating victims of the wrongdoing
2) General consumer education & financial literacy programs
The key here is that #1 takes priority by law; #2 only kicks in if the victims are unknown or in a few other edge cases that would make compensation difficult. Victim compensation must always come first. If that drains the fund, #2 never happens[2].
I agree with the others in this thread who have serious problems with regulatory agencies that "self-fund" by using fines to keep the lights on. CFPB doesn't do this -- it cannot do this, even if it wanted to -- and that's what makes it different.
You might remember the debate in Congress over this bill. I was younger then, but still distinctly remember opponents of DF calling for precisely this kind of model during hearings. They were against CFPB receiving operations funding, and frankly I'm glad they didn't prevail. Nobody's issuing excess fines just to keep their jobs for the next fiscal year or levying themselves raises, and consumers get their money back in full. It just seems so reasonable, doesn't it?
>I agree with the others in this thread who have serious problems with regulatory agencies that "self-fund" by using fines to keep the lights on. CFPB doesn't do this
So one of the agencies most likely to go after major corporations don't do this. But the police that go after the little people can? Seems... rigged.
I completely agree that's its the wrong way to do it no matter if you're a regulatory or law enforcement agency. If I had my way, they would all operate like the CFPB.
And this is why I don't understand the opponents who want to tear it down. I understand why some might disagree with the bureau for philosophical reasons, but if we're going to have it, let's do it right.
I don't know about this fine, but the vast majority of bank fines are usually "consumer relief." Banks usually are in a position to where the actual financial impact of the fine is a very small fraction of the headline number.
"Goldman Sachs buys a home loan at 50 percent off. It then modifies the mortgage for the borrower to perhaps 60 percent of face value. The modification gets referred to the overseer of the mortgage settlement, proving that Goldman did lower the cost for the homeowner. And as homeowners begin to make modified payments, the bank can resell the now-performing loans, or just take in the revenue stream. If this works, Goldman makes at least a 10 percent profit on the deal, while satisfying the consumer relief terms of the settlement."[1]
The above glosses over the notion of it working by saying "if it works," but for the most part, it does.
it's a CFPD fine.. so it goes into their Civil Penalty Fund, and it's required to be used for victim compensation, and where that's not practical, the remaining funds are used for consumer education and financial literacy programs.
By law, those are the only things the CFPD can spend this money on.
Which is why these fines will continue. Everyone hates the banks so the regulators can just keep fining them for everything indefinitely, when they run out of ideas they find some new problems with the 2008 mortgages again.
This a good analysis. It sums everything up without the bullshit.
The only thing I would correct in your "Financial Corruption Process Map" is the step after #3:
.
3.5 "big fish" start buying up politicians and lobbying firms to legalize more and more "bad behavior"
4. Megabank acts legally to do something "reprehensible" since they lobbied to legalize it.
4.5 financial collapse. scandal...then the hand wringing begins by walking corpses in Washington.
I object to most of the roughly 50% of my income that is taken from me and can't say I've ever been called a freeloader... That's an interesting point of view you have there; "either don't be a US citizen or never complain about tax policy".
"Conscientious objection" to taxes means you wouldn't pay taxes, it doesn't mean you just complain about it. You can't do that and stay a US Citizen and not go to jail.
I guess I just don't care enough to ruin my life over it. It's a pretty interesting thing to think about, actually. To think that a bloody revolution was sparked over much less than what we put up with today... It's almost like Stockholm Syndrome.
That revolution was fought because there was no representation in the body that levied the taxes. We do have representation in the body that levies taxes now.
New York has nothing to do with the CFPD. The CFPD's civil penalty fund is legally mandated to use all money for two things only: victim compensation, and consumer education and financial literacy programs.
The GAO has audited the CFPD, and verified the funds are being spent in accordance with the law.
NY State is not the federal government. This is like asking what the US's military is like and having someone describe the Illinois National Guard.
Long story short, this all going into the Civil Penalty Fund:
In accordance with the Dodd-Frank Act and the Bureau's Civil Penalty Fund rule, the Fund can only be used for two purposes: to compensate eligible harmed consumers and, to the extent that victim payments are not practicable, to provide funding for consumer education and financial literacy programs.
The situation you outline above is illegal under Dodd-Frank, the act that created the bureau.
Those who designed the agency were worried about precisely this kind of perverse incentive structure & required that it distribute all penalties back to consumers.
