CFPB Report - March 6, 2015

CFPB, Debt Collection, Financial Education, Preemption
March 6, 2015

CFPB Director Testifies Before House Financial Services Committee
On Tuesday, March 3, 2015, CFPB Director Richard Cordray testified before the House Financial Services Committee (HFSC) and provided the Bureau's Semiannual Report to Congress. In his opening statement, Director Cordray summarized the Bureau's activities for the previous six months including highlighting enforcement actions, some regulatory relief efforts for smaller financial institutions, and rulemaking underway. Well over half of the Committee's 60 members were present. Throughout the hearing, members of the Committee focused their questions on anticipated rulemaking from the Bureau, such as prepaid cards, payday lending, overdraft protection, Home Mortgage Disclosure Act (HMDA) expansion, small business data collection, debt collection, and pre-dispute arbitration clauses. The Committee sought additional clarity on existing policies: TILA/RESPA, Operation Chokepoint, automotive lending, and the Bureau's advisory opinion process.

"True consumer protection requires access to competitive, transparent and innovative markets vigorously policed for force, fraud and deception. True consumer protection empowers consumers and respects their economic freedoms to make important informed choices free from government interference and fiat," said Chairman Jeb Hensarling (R-TX) in his opening statement.

"Any serious conversation about what contributes to the wealth gap in this country must include a frank discussion about the wealth stripping effects associated with certain financial products such as predatory auto-loans, payday loans and check cashing stores that exploit the lack of financial sophistication among economically disadvantaged population," said Congressman Lacy Clay (D-MO), the Ranking Member of the Financial Institutions and Consumer Credit Subcommittee, in his opening statement.

For more information, view CBA's detailed summary of the hearing.

 

House Republicans Introduce Legislation to Modify CFPB Governance
Immediately following testimony of CFPB Director Cordray before Congress on Wednesday, March 4, 2015, Republican Members of the House Financial Services Committee introduced three separate bills aimed at modifying the governance structure of the Bureau.

  • Rep. Randy Neugebauer (R-TX), the Ranking Member of the Financial Institutions and Consumer Credit Subcommittee, introduced a bill (HR 1266) which would replace the Bureau's single Director with a bipartisan, five-member commission.
  • Rep. Sean Duffy (R-WI), the Ranking Member of the Oversight Subcommittee, introduced a bill (H.R. 1261) aimed at bringing the Bureau under Congressional appropriations.
  • Rep. Duffy also introduced a bill (HR 1263) seeking to strengthen the veto authority of the Financial Stability Oversight Council (FSOC) of regulations issued by the CFPB.

Similar legislation was introduced last Congress, but was combined into a single bill. Separating the legislation into three bills may improve the chances of bipartisan support for at least one of the bills.

 

President's Advisory Council Seeks to Improve Financial Capability of Young Americans
On Tuesday, March 3, 2015, the President's Advisory Council held its third public meeting to advise the President and the Secretary of the U.S. Department of the Treasury on ways to promote the financial capability of young Americans and addressed the role of cities and communities in promoting financial empowerment. Participants included Treasury Secretary Jack Lew, Education Secretary Arne Duncan, CFPB Director Cordray, Amias Gerety, Counselor to the Secretary for Financial Institutions at the Treasury Department, and John Rogers, Jr., Council chair.

In his prepared remarks, Director Cordray described the Bureau's relevant initiatives including partnership with the Department of Education on the financial aid shopping sheet, its "Paying for College" website, and the "Safe Student Account Scorecard."

Notably, the Council discussed initiatives of three CBA members – Citi, Regions, and Visa – and focused on the following themes:

  • The importance of private/public partnerships and the great progress being made by financial institutions;
  • How the multitude of fragmented financial education organizations creates a barrier to financial education because the public often does not know which one to choose. To solve this challenge, the Council stressed the need for coordination among the organizations; and
  • While teachers understand the importance of financial literacy, 80 percent are uncomfortable with financial literacy.

 

Secretary Lew testifies on President's FY16 Treasury Budget
On Tuesday, March 3, 2015, the Senate Appropriations Subcommittee on Financial Services and General Government held a hearing on the President's Fiscal Year 2016 budget for the Department of Treasury, featuring testimony from Secretary Lew. In the question and answer period, Subcommittee Chairman John Boozman (R-AR), when asking what the Administration is doing to reduce the compliance costs affecting community banks, referenced a Harvard study on the state of the community banking sector. Secretary Lew cited current accommodations for smaller institutions while warning against dismantling financial reforms made in response to the crisis. Sen. Jerry Moran (R-KS) also expressed serious concern about the regulatory burden on community banks. In response to a question from Sen. Chris Coon's (D-DE) on the regulatory burden impacting banks as they exceed the $50 billion asset threshold, Secretary Lew stated regulatory flexibility exists, and said, "It's not a hard line where everything happens to an institution if they pass the $50 billion threshold."

On Wednesday, March 4, 2015, Secretary Lew appeared before the House Appropriations Subcommittee on Financial Services and General Government. In his opening statement, Subcommittee Chairman Ander Crenshaw (R-FL) expressed concern about the Financial Stability Oversight Council (FSOC) determination process. Specifically, Chairman Crenshaw asked Secretary Lew whether FSOC prioritizes identifying and communicating risks to institutions before applying a systemically important financial institution (SIFI) designation. In his response, Secretary Lew reminded the Subcommittee FSOC was necessary since no agency previously had authority to identify systemic risk across the economy. The Dodd-Frank Act mandates FSOC to make designations when systemic risk is found, and "it doesn't say you can do things to prevent it," he added.

Rep. Tom Graves (R-GA) expressed concern about the Treasury Department's part in Operation Chokepoint, stating the Federal Government has no role in picking winners and losers of legal businesses. Additionally, Rep. Graves inquired about the cumulative effects of regulation, to which Secretary Lew said Treasury constantly review the cumulative impact of regulation. Further, he stated while it is now more costly to take risky positions, regulations make the financial system safer, adding he doesn't "subscribe to a theory that [regulations] cause lessening of economic growth."

 

FTC, NY AG Announce Joint Debt Collection Lawsuits
On Thursday, February 26, 2015, the Federal Trade Commission (FTC) and the New York State Attorney General announced joint lawsuits to cease certain practices of two debt collection operations based in upstate New York. The complaints allege the defendants unlawfully used threats and abusive language, including falsely threatening consumers would be arrested, to collect more than $45 million in supposed debts. The FTC and the State of New York are also seeking monetary relief to provide refunds to consumers.

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