CBA Submits Comments to House, Senate Committees in Advance of Mulvaney Testimony

April 9, 2018

WASHINGTON – The Consumer Bankers Association (CBA) submitted comments to the House Financial Services Committee and the Senate Banking Committee in advance of hearings on the semi-annual report from Consumer Financial Protection Bureau (CFPB) Acting Director Mick Mulvaney.

“CBA supports Acting Director Mick Mulvaney’s goal of bringing greater accountability to the agency.  It is crucial that appropriate checks and balances are in place given the scope and importance of this agency.  It is also important to insulate the Bureau from future political shifts that could reduce its ability to act impartially to ensure a fair and competitive marketplace,” CBA President and CEO Richard Hunt wrote to the committees. “The retail banking industry is best able to serve its customers when there is a stable and even-handed regulatory framework that produces clear and reasonable rules of the road. We encourage the CFPB to include industry and other relevant stakeholder input into their supervision, enforcement and rulemaking decisions making to prevent unintended effects on financial consumers.”

CBA’s letter touched on several areas of interest for the retail banking industry, including the need for a bipartisan, Senate-confirmed commission leading the CFPB as opposed to a single director.

A full copy of CBA’s letter to the Banking Committee is available here and the Financial Services Committee here.

An overview of the top priorities outlined in the letter is below:

 

  • Bipartisan Commission at the Consumer Financial Protection Bureau: It is vital for a regulator to provide certainty to the industry it regulates, and ensure some constancy and predictability in leadership from one presidential administration to the next.  At no agency is this more important than at the CFPB. The CFPB has such a wide reach, it impacts nearly every American consumer.  That is why CBA strongly supports the Financial Product Safety Commission Act of 2018 (H.R. 5266) to transition the leadership structure at the CFPB from a sole director to a bipartisan, five-member commission.  A bipartisan commission at the CFPB would help provide certainty, establish clear and consistent rules of the road, and best protect consumers for generations to come. 

 

  • CFPB Requests for Information Process:
    • Enforcement and Supervision: The CFPB has historically used the enforcement process as a regulatory tool.  Former Director Richard Cordray stated on numerous occasions that companies should draw their understanding of the compliance and legal requirements of federal law by studying consent orders and other enforcement actions by the CFPB.  The result is not in the best interest of either industry or consumers.
    • Rulemaking: CBA is strongly supportive of clear and rational regulations that promote the industry’s ability to comply and provides consumers with access to credit.  We believe these twin objectives would be best served by a robust public comment process, a firm adherence to the formal rulemaking process, and a flexible implementation process following the issuance of a final rule.  Under this framework, we would stress the need to avoid policy-based rulemaking and to base new regulations on real-world data and rigorous economic cost-benefit analysis.
    • Consumer Complaint Database: The CFPB has gone far beyond its statutory authority of establishing the Database, by publishing the data, adding unverified narratives, and now proposing a subjective consumer survey on resolution satisfaction that has no proven benefit.  In addition to an annual report required by Congress, the CFPB releases “Monthly Complaint Reports” including complaint data on company performance, complaint volume, state and local information, and product trends.  The CFPB has never taken any steps to determine if consumers use these published reports or benefit from them in any way. Instead, these reports seem intended to tarnish banks and other financial institutions’ reputation, without verification and regardless of actual legal wrongdoing.  Such action puts into question the objectivity of the data and thus its usefulness to consumers and regulators.

 

  • Rulemaking:
    • Small-Dollar Bank Loans: We are encouraged by the CFPB’s announcement earlier this year that it will review the small-dollar rule for possible amendment.  CBA urges the Bureau to revoke the rule; implement a structure that will not be overly prescriptive such that it will leave consumers with few, if any, short-term liquidity options; and allow depository institutions to enter the small dollar lending market.   
    • Home Mortgage Disclosure Act: Given the sensitive nature of the expanded HMDA data and the risk of re-identification, CBA strongly believes the new data fields should not be made public unless in aggregate form.  In that same vein, CBA appreciates Acting Director Mulvaney’s commitment to reconsider elements of the rule and pursue a non-punitive approach to the new collection efforts in the meantime.  
    • Debt Collection: As the CFPB has indicated it is moving forward with releasing a proposed rule under the Fair Debt Collection Practices Act, we urge the CFPB to work with industry and Congress to establish debt collection regulations for third-party debt collectors that strike the right balance between consumer protection and consumer engagement.
    • Section 1071 of Dodd-Frank Act: Section 1071 of the Dodd-Frank Act amends the Equal Credit Opportunity Act to require data collection on business loan applications to help monitor compliance with fair lending laws. CBA members anticipate a chilling of small business lending and compliance complications due to the complex new data collection requirements under Section 1071 of the Dodd-Frank Act.  In order to prevent a reduction in small business lending and an increase in costly litigation that could occur from the misuse of the information collected, CBA recommends the repeal of Section 1071.
  • Student Lending:
    • Separation of Ombudsman and Office of Students Role: For the past several years, the Student Loan Ombudsman has also led the Office of Students.  These are incompatible roles as they create a conflict of interest.  An ombudsman should be impartial and serve in a confidential capacity, while a division head at the agency is a policy maker, enacting rules or recommending enforcement by the agency.  CBA strongly recommends the Bureau separate the positions.
    • Know-Before-You-Owe for Federal Student Loans: The CFPB should focus its resources on preventing federal loan repayment issues before they start by empowering student loan borrowers to make educated financial decisions and avoid too much debt.  CBA supports a “know-before-you-owe” initiative – similar to the CFPB’s work on mortgage disclosures – for federal student loans. The CFPB should work with the Department of Education to provide federal student loan borrowers the same kind of concise, meaningful information about their future obligations before they owe as do private lenders.

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About the Consumer Bankers Association

The Consumer Bankers Association represents America’s retail banks above $10 billion in assets. We advance legislation and promote policies geared toward creating a stronger industry and economy. Established in 1919, CBA’s corporate member institutions account for 1.6 million jobs in America, extend roughly $3 trillion in consumer loans, and provide $270 billion in small business loans. Follow us on Twitter @consumerbankers.