CFPB Report June 13, 2014

CBA Comments on Remittance

On Friday, June 6, 2014, CBA and other trades filed a comment letter with the CFPB in response to the agency’s proposal to revise the regulation to implement Section 1073 of the Dodd-Frank Act, which created new requirements for remittance transfers. The CFPB proposed to institute a five-year extension on a temporary provision allowing federally insured financial institutions to estimate third-party fees and exchange rates when providing remittance transfers to accounts for which banks cannot determine exact amounts. The exemption, set to expire on July 21, 2015, would be extended until July 21, 2020 under the provision. According to the CFPB, some institutions are unable to provide precise disclosures of covered fees and rates. Preventing these institutions from estimating the fees would harm their ability to provide remittance transfers.


In the letter, CBA stated its support of the proposal to extend the temporary exception, which is essential to ensuring depository institutions may continue to send remittance transfers to the locations they currently service. CBA applauded the CFPB’s proactive approach to the proposed extension and its investment of time and resources in conducting industry outreach in advance of releasing the proposed rule.


Director Cordray Testifies Before Senate Banking Committee

On Wednesday, June 11, 2014, CFPB Director Richard Cordray testified before the Senate Committee on Banking, Housing, and Urban Affairs on the CFPB’s Semi-annual Report to Congress. The report details the Bureau’s activities from October 2013 through March 2014. In his opening statement, Director Cordray highlighted a number of enforcement actions including those against an online loan servicer, payday lender, indirect auto lender, and nonbank mortgage loan servicer. He noted: “Through our enforcement actions to date, we have aided in efforts to refund more than $3.8 billion to consumers who fell victim to various violations of consumer financial protection laws.” The testimony focused on a number of key issues including prepaid cards, student loans, data collection, arbitration, Operation Choke Point, and short-term credit products.


Director Cordray said the Bureau’s proposed rule for prepaid cards likely will not likely be released until the end of summer; he had previously indicated it would be released this month. Cordray also indicated the Bureau’s new authority over nonbank student loan servicers was giving the agency a much better insight into the student loan market. The Bureau is working on the second half of its arbitration study and plans to release it by the end of this year. Director Cordray allayed some concerns from Republicans on the panel about the Bureau’s joint work with the Federal Housing Finance Agency on the creation of a National Mortgage Database, saying it “will not include personally identifiable information, such as name, address, and Social Security number.” He also indicated the CFPB is not playing a role in Operation Choke Point, but remains interested in enforcing the law.


A detailed summary of the hearing can be found here.


CFPB Holds Field Hearing on Mobile Financial Services

On Thursday, June 12, 2014, the CFPB held a field hearing in New Orleans, LA focused on mobile financial services. The hearing raised opportunities and concerns posed by mobile banking and highlighted the potential benefits for underbanked consumers.


In his remarks, Director Cordray stated: “In this modern age where people can manage their money on the go, there is great potential to provide access to more consumers and allow them to take greater control of their financial lives. At the same time, using mobile devices for all sorts of banking services can make some transactions cheaper or faster or both. But we need to make sure that the legal and regulatory framework can keep up effectively, so that all consumers can remain protected whether they are opening their wallet or scanning the screen on their smartphone.”


He announced the CFPB’s Request for Information regarding mobile banking, explaining the Bureau is “exploring the ways mobile devices can give access to consumers who do not have easy means to obtain or use current financial products and services” and evaluating the ways in which mobile devices can offer everyone opportunities for real-time money management.


Director Cordray said the benefits of mobile banking include reaching the unbanked or underbanked, making banking cheaper for consumers, providing better access to rural areas, seniors, and disabled consumers, as well as helping consumers better manage their money. He also highlighted challenges with mobile banking, including customer service, security, and privacy.


Panelists included Daniel Dodd Ramirez, CFPB Assistant Director of Empowerment; Steve Street, CEO of Green Dot; Ed Sivack, Hope Enterprise Corporation; Josh Reich, CEO of Simple; Carolina Hernandez, Puentes New Orleans; Willie Gable, Pastor of Progressive Church, Center for Responsible Lending; and Joe Valenti, Director of Asset Building for the Center for American Progress.


House Financial Services Committee Votes on CFPB Bills

The House Financial Services Committee held a markup this week, which including a vote on several bills related to the CFPB and the Financial Stability Oversight Council. 10 of the 12 bills would make changes to the CFPB, and 12 bills received an affirmative vote from the Committee, though only a handful had bipartisan support. In her opening statement, the Committee’s Ranking Member, Maxine Waters (D-CA), expressed frustration with efforts to reform the Bureau: “I am particularly concerned to see such an egregious amount of time being spent on measures weakening the CFPB. This misuse of this Committee's time and resources is even more disheartening as the renewal of two major initiatives critical to helping small businesses, creating jobs and spurring economic growth continue to go unaddressed.”


Bills approved by the Committee: 

H.R. 4697: "Small-Cap Access to Capital Act" was agreed to with 32 ayes and 27 nays.

H.R. 2629, the "Fostering Innovation Act of 2013" was agreed to with 31 ayes and 28 nays.

H.R. 3389: "CFPB Slush Fund Elimination Act" was agreed to, as amended, with 31 ayes and 27 nays.

H.R. 4604: "CFPB Data Collection Security Act" was agreed to, as amended, with 32 ayes and 27 nays.

H.R. 4262: "Bureau Advisory Commission Transparency Act" was agreed to by a voice vote.

H.R. 4539: "Bureau Research Transparency Act" was agreed to, as amended, with 32 ayes and 27 nays.

H.R. 3770: "CFPB-IG Act of 2013" was agreed to with 39 ayes and 20 nays.

H.R. 4383: "Bureau of Consumer Financial Protection Small Business Advisory Board Act" was agreed to, as amended, by a voice vote.

H.R. 4804: "Bureau Examination Fairness Act was agreed to with 33 ayes and 26 nays.

H.R. 4662: the "Bureau Advisory Opinion Act" was agreed to, as amended, with 32 ayes and 27 nays.

H.R. 4811: "Bureau Guidance Transparency Act" was agreed to with 35 ayes and 24 nays.

H.R. 4809: a bill to reauthorize the Defense Production Act, to improve the Defense Production Act Committee, and for other purposes was agreed to by a voice vote.


CBA submitted a letter for the record on June 10, 2014, commending the Committee on its efforts to bring more transparency and opportunity for input to the CFPB.


House Financial Services Subcommittee Issues Additional CFPB Subpoenas

On Thursday, June 12, 2014, the House Financial Services Subcommittee on Oversight and Investigations met to consider the issuance of additional subpoenas in their investigation of discrimination allegations at the CFPB. The resolution, agreed to by a bipartisan voice vote, grants the Committee the authority to compel testimony from two individuals: Ali Naraghi, an Examiner with the CFPB’s Division of Supervision, Fair Lending and Enforcement for the Southeast region; and Kevin Williams, a former Quality Monitor in the Bureau’s Office of Consumer Response.


A Committee memo indicates the parties may have “knowledge pertinent to the Subcommittee’s investigation of allegations of improper actions at the CFPB relating to, among other matters, employee discrimination and retaliation.” Both Naraghi and Williams requested they be subpoenaed.

FDIC Pressured on Operation Choke Point Involvement

On Monday, June 9, 2014, House Oversight and Government Reform Committee Chairman Darrell Issa (R-CA) sent a letter to FDIC Chairman Martin Gruenberg regarding the agency’s pressure on banks to terminate relationships with legal businesses, in conjunction with the U.S. Department of Justice’s (DOJ) Operation Choke Point. In April 2014, FDIC Acting General Counsel Richard Osterman testified at a House Financial Services Committee hearing on federal financial regulatory policy. During the hearing, Osterman repeatedly disclaimed any substantive involvement by the FDIC with Operation Choke Point. However, documents provided to the Committee by the DOJ counter Osterman’s testimony.


“The Committee has obtained substantial evidence suggesting that as a result of coordinated actions by the FDIC and the Department of Justice, banks are terminating relationships with entirely legitimate and licensed businesses….,” Chairman Issa said in the letter. “Documents produced to the Committee by the Department of Justice call into question the sincerity and truthfulness of Osterman’s testimony. In fact, the FDIC has been intimately involved in Operation Choke Point since its inception."

OCC Announces Incoming to Top Examiner

On Wednesday, June 11, 2014, the OCC announced Jennifer Kelly will be the new Chief National Examiner and Senior Deputy Comptroller for Bank Supervision Policy. Kelly currently serves as a Senior Deputy Comptroller for Midsize and Community Bank Supervision. John Lyons, a 37-year veteran of the OCC and the examiner-in-charge of Citibank during the financial crisis is vacating the position.


"Her background will serve her well as she takes on responsibility for ensuring that our supervisory policies and guidance are up to the challenge of an evolving national bank system," Comptroller Thomas J. Curry said in a news release.

Senate Considers Senator Warren’s Student Loan Refinance Proposal

On Wednesday, June 11, 2014, the Senate ended debate on Senator Elizabeth Warren’s (D-MA) “Bank on Students Emergency Refinancing Act” (S. 2292). Following a week-long debate, two hearings, and a student loan executive order from President Barack Obama, the bill failed to garner sufficient support. The cloture vote failed 56-38; just short of the 60-vote threshold necessary to continue debate, and the possibility of a vote on the bill would only require simple majority for passage. Three Republicans voted in favor of cloture: Senators Bob Corker (R-TN), Susan Collins (R-ME), and Lisa Murkowski (R-AK).


“With this vote, we show the American people who we work for in the United States Senate: billionaires or students,” Senator Warren said.


The bill has not been voted down and could be brought back up for debate at any time. Democrats view the bill as a winning election year issue and will likely continue to point to this vote, and future votes, to increase their support at the polls this fall.

President Obama Announces Federal Student Loan Executive Order

On Monday, June 9, 2014, President Obama announced his Administration would take executive action to address the nation’s growing student loan debt and borrowers’ challenges with repayment. The Executive Order instructs the U.S. Department of Education to expand Pay as You Earn to borrowers in the Direct Loan program who had not previously been eligible. The new terms drop income driven payments to 10 percent and shorten the timeframe for loan forgiveness to 20 years. The executive order is expected to impact approximately 5 million borrowers.


The President also endorsed Senator Warren’s “Bank on Students Emergency Refinancing Act” (S. 2292). In addition to discussion of how to help borrowers manage payments, he emphasized his support for the tax known as the "Buffet Rule" to pay for the bill.


“So you’ve got a pretty straightforward bill here. And this week, Congress will vote on that bill. And I want Americans to pay attention to see where their lawmakers’ priorities lie here: lower tax bills for millionaires, or lower student loan bills for the middle class,” said President Obama in during his address