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CFPB Report June 20, 2014
OIG of the Federal Reserve Board and CFPB issues Work Plan
On Monday, June 16, 2014 the Office of the Inspector General (OIG) of the Federal Reserve Board and CFPB issued a Work Plan outlining audits and evaluations it is conducting or plans to conduct in the near future. The following is a list of the items relevant to the CFPB, divided into Ongoing Projects and Planned Projects.
CFPB: Ongoing Projects
- Audit of a CFPB Cloud Provider (Second quarter 2014)
- Audit of the CFPB's Activities under the Government Performance and Results Act (GPRA) (Second quarter 2014)
- Audit of the CFPB's Cloud Computing Environment (Second quarter 2014)
- Evaluation of the CFPB's Headquarters Renovation Project (Second quarter 2014)
- Evaluation of the CFPB's Hiring Process (Second quarter 2014)
- Evaluation of Auditable Activities at the CFPB (Third quarter 2014)
- Evaluation of the CFPB's Compliance with Section 1100G of the Dodd-Frank Act (Third quarter 2014)
- Joint Evaluation of Coordination between the CFPB and Other Regulatory Agencies (Third quarter 2014)
- Audit of the CFPB's Contract Management Process (Fourth quarter 2014)
- Audit of the CFPB's Diversity and Inclusion Processes (Fourth quarter 2014)
- Audit of the CFPB's Public Consumer Complaint Database (Fourth quarter 2014)
- Audit of the CFPB's Space-Planning Activities (First quarter 2015)
CFPB: Planned Projects
- Audit of the CFPB's Distribution of Civil Penalty Funds
- Audit of the CFPB's Pay and Compensation Program
- Audit of the CFPB's Travel Card Program
- CFPB Security Control Reviews
- 2014 Audit of the CFPB's Information Security Program
CFPB Holds First Series of TILA/RESPA Webinars
On Tuesday, June 17, 2014, the CFPB held the first in a series of webinars addressing implementation of the Truth in Lending Act (TILA) and the Real Estate Settlement Procedures Act (RESPA) Integrated Disclosure rules. The presentation was broken into five sections: 1) the loan estimate; 2) closing disclosure; 3) new disclosure timing requirements; 4) new tolerance levels; and 5) pre-disclosure restrictions. Notably, the CFPB indicated the Bureau is revising the “Special Information Booklet,” formerly the RESPA Settlement Costs Booklet, and expects to release the final version “well in advance” of the effective date.
The next webinar will consider consumer compliance questions to help ensure consistent disclosure from the Bureau.
Director Cordray Testifies on CFPB Semiannual Report before House Committee
On Wednesday, June 18, 2014, the House Financial Services Committee (HFSC) heard testimony from CFPB Director Richard Cordray on the Bureau’s Semiannual Report to Congress. Director Cordray spoke on this topic on June 10, 2014 before the Senate Banking Committee. Chaired by Rep. Jeb Hensarling (R-TX), the hearing before the HFSC was considerably longer as its members sought answers to politically-charged issues and raised policy considerations for the Bureau on indirect automotive lending, issuance of advisory opinions, prepaid card disclosures, and rulemaking under the Military Lending Act.
“Protecting consumers within interstate commerce is a vitally important mission of the Federal government. And properly designed, the CFPB is capable of great good on behalf of consumers. It is also capable of great harm,” Chairman Hensarling said in his opening statement. Ranking Member Maxine Waters (D-CA) stated: “Mr. Director, since you were last here in January, Republicans have been hard at work – drafting and passing burdensome legislation that would gut your agency and its ability to stand up for our nation’s consumers. In the past six months, Republicans have advanced a number of these harmful measures through this committee – and this House – that would undermine the CFPB’s ability to protect consumers from deceptive marketing, unlawful debt collection, lending discrimination, illegal fees and other prohibited activity.”
Read CBA’s full summary of the hearing here.
House Financial Services Hears CFPB Discrimination Allegations
On Wednesday, June 18, 2014, the House Financial Services Subcommittee on Oversight and Investigations held a hearing entitled: “Allegations of Discrimination and Retaliation within the Consumer Financial Protection Bureau,” the Subcommittee’s third hearing on the subject. The Subcommittee aimed to address allegations of discrimination and retaliation of Ali Naraghi, CFPB Examiner in Enforcement and Fair Lending, and Kevin Williams, former CFPB Quality Monitor in the Office of Consumer Response. Both witnesses indicated an environment of retaliation, intimidation, and discrimination at the CFPB, with Naraghi recalling a manager referred to him as a “f-ing foreigner” and Williams stating his unit was called the “plantation.”
While all members denounced discrimination at governmental agencies and workplaces in general, Republicans focused their questioning on specifics of the discrimination, allegations of faulty exam procedures, and breaches of personally identifiable information at the CFPB call centers. Democrats, on the other hand, focused largely on hearing both sides of the story and pressing the witnesses on what they wanted Congress to do about the alleged discrimination. A full summary of the hearing can be found here.
Merchant Groups Challenge Visa/Mastercard Settlement
On June 16, 2014, merchant groups filed an appellants brief in the U.S. Court of Appeals for the Second Circuit challenging the District Court’s approval of an antitrust settlement of more than $7 billion between Visa and Mastercard regarding interchange fees. The merchant groups claimed the district court judge erred in approving the settlement, arguing it released the parties from future antitrust suits, lacked class cohesion, and prohibited members from pursuing individualized claims due to a lack of an opt out provision.
According to the National Retail Federation’s Senior Vice President and General Counsel, Mallory Duncan: “The truth is that there is no settlement with the retail industry, only an agreement with a handful of merchants who do not represent the industry as a whole. Given that the judge knew this backroom deal was opposed by a broad range of small and large retailers alike and allows these fees to continue to skyrocket, it clearly should never have been approved. This is a serious mistake the appellate court needs to correct.”
Deputy Treasury Secretary Concerned About Student Loan Servicing
On Tuesday, June 17, 2014, Sarah Bloom Raskin, Deputy Secretary of the Treasury, made comments likening student loan servicing to the mortgage servicing issues borrowers encountered as a result of the financial crisis.
“If you think back to the financial crisis and the role that mortgage servicing played in sort of the exacerbation of the crisis, I think you see some really interesting similarities that raise a lot of questions,” Raskin said at a Wall Street Journal conference in Washington, D.C. “The servicing piece in particular on the mortgage side was one that was really not well suited for a crisis situation.”
Raskin had highlighted general concerns about student loan debt in March. Parallels for mortgage servicing and student loan servicing have also been raised by the CFPB.
FSSCC Names First Executive Director
On Tuesday, June 17, 2014, the Financial Services Sector Coordinating Council (FSSCC) appointed Greg Garcia, formerly of the U.S. Department of Homeland Security (DHS), as its full-time Executive Director. Garcia worked at DHS and is a member of the National Institute of Standards and Technology (NIST) Privacy Advisory Board. In a media release, FSSCC Council Chairman, Charles Blauner said Garcia has “extensive experience in both the public and private sectors,” which supported their choice to fill the first ever Executive Director position.
Senate Banking Committee Considers Nomination of New HUD Administrator
On Tuesday, June 17, 2014, the Senate Banking Committee held a confirmation hearing for Mayor Julián Castro to serve as Secretary of the U.S. Department of Housing and Urban Development, and Ms. Laura Wertheimer, to be Inspector General of the Federal Housing Finance Agency. Committee Chairman Tim Johnson (D-SD) and Ranking Member Mike Crapo (R-ID) presided over debate on issues including government sponsored enterprise reform, and Federal Housing Administration solvency, and eminent domain.
“Mayor Castro will bring both direct experience with and an appreciation of the important role that HUD programs play for families, communities, and taxpayers to the role of HUD Secretary,” said Chairman Johnson in his opening statement. Ranking Member Crapo focused his opening statement on fiscal issues, saying, “Mayor Castro, two of the critical issues that this committee has spent extensive time addressing in this Congress are among those I want to bring to your attention today: the future of housing finance reform and the fiscal solvency of the Federal Housing Administration. We need to know what your approach will be on both of these issues and whether you'll be advocating on behalf of them.”
While testimony from the two witnesses was generally well received, Republicans differed with Castro on whether it is appropriate for the government to use eminent domain to write down principal on underwater mortgages. Both nominees are expected to be confirmed by the Senate given recent changes to the rules which now require a simple majority vote.
CFPB Holds First Public Meeting of the Consumer Advisory Board
On June 18, 2014, the CFPB convened a meeting of its Consumer Advisory Board in Reno, NV to obtain a broad industry view six months after the implementation of the CFPB’s new mortgage rules. CFPB Deputy Director Steve Antonakes and Acting Mortgage Director Abhishek Agarwal lead the discussion. Although Board members indicated it was too early to ascribe any cause and effect to the new rules, they were able to share some initial observations. Consumer advocates shared they are seeing problems with nonbank mortgage servicers, an issue the CFPB has raised in the past. They also noted a decrease in lending activity amongst first-time homebuyers and low-income borrowers. Others noted a dramatic increase in compliance costs associated with the new rules, and ongoing regulatory uncertainty as additional rules are considered, such as credit risk retention and Home Mortgage Disclosure Act (HMDA)-plus. Overall, the Board seemed pleased with the CFPB’s roll-out of the mortgage rules, with some members asking for great CFPB enforcement activity related to “sloppy” mortgage servicing.