CFPB Strikes Out Where It Is Most Needed

Can the Consumer Financial Protection Bureau (CFPB), a Federal Government agency, protect unsophisticated consumers transacting in complex markets? It can but it doesn’t. I will illustrate with one of the most complicated financial instruments a consumer is likely to encounter: a HECM reverse mortgage. That HECM borrowers must be 62 or older, which is past the intellectual peak of many, magnifies the challenge of protecting them. As the role of HECMs in retirement plans rises in importance, the need for protection increases with it.

The CFPB’s Approach to HECM Reverse Mortgages

What the CFPB does now is to explain how HECMs work, with a special emphasis on their very complex legal structure. This is important and the CFPB does it well. What the CFPB doesn’t do well, or at all, is to guide consumers in navigating the market to avoid overpaying and to select the most advantageous options.