CFPB mulls first foray into consumer retirement funds

6 March 2013

The U.S. Consumer Financial Protection Bureau (CFPB) is considering a step into the world of consumer investments as it debates helping Americans manage their retirement savings.

The move – a first for the consumer protection agency – would see the $19.4 trillion worth of retirement savings currently held by Americans come under its regulatory reach. “That’s one of the things we’ve been exploring and are interested in in terms of whether and what authority we have,” Bureau director Richard Cordray confirmed to Bloomberg.

The CFPB explained that its top concern relating to retirement funds was the proliferation of financial scams that have the potential to lure in many retirees, particularly those from the Baby Boomer generation.

Currently, the country’s retirement savings business is dominated by a gaggle of companies – including JPMorgan Chase & Co and Fidelity Investments – that oversee and manage investments relating to individual retirement accounts and other tax-advantaged savings plans. Up to $3.5 million of the $19.4 trillion held in retirement assets was tied up in 401(k) plans as of the fourth quarter of last year, according to industry association The Investment Company Institute.

Whilst the main regulators of retirement saving funds are currently the Department of Labor and the Securities and Exchange Commission, the CFPB believes that it can spark the beginning of a coherent policy across the Government.

The increased regulatory reach the Bureau is mulling – which it has described as the ‘rollover moment’ thanks to the large number of Americans facing retirement over the coming decade – see it expanding into a role on investment savings and claiming jurisdiction over investments through its Office for Older Americans.

Director of financial regulation studies at research group The Cato Institute, Mark Calabria, confirmed to Bloomberg: “I could imagine the CFPB growing into a role on investment savings if it seems like the SEC is asleep at the wheel.”

Since its conception in 2011, the CFPB has been primarily focused on consumer credit products such as mortgages. It plans to shift its focus to short-term credit products such as payday lending and prepaid debit cards over the coming years, alongside its possible foray into retirement savings.



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