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CFPB Report November 15, 2013
CFPB Hosts Auto Forum
On Thursday, November 14, 2013, the CFPB hosted an auto forum focused primarily on the dealer reserve compensation system used for indirect lending. In his remarks, Director Richard Cordray recognized the need for greater dialogue on the issue. Assistant Director Patrice Ficklin added the CFPB continues to have fair lending concerns with the current system and sees disparities ranging up to 30 basis points, representing “significant harm to consumers.” The Bureau emphasized the need for improved disclosures for consumers and additional guidance for the industry. The CFPB also stressed “flat fee” compensation is not the only alternative to dealer reserve, citing other possible alternatives, including compensation based on a percentage of the amount financed, as well as a hybrid approach in which the percentage varies based on the duration of the loan. CBA will continue to monitor this issue and keep members informed.
Director Cordray Testifies Before the Senate Banking Committee
On Tuesday, November 12, 2013, the Senate Banking Committee held a hearing entitled, “The Consumer Financial Protection Bureau’s Semi-Annual Report to Congress.” Director Cordray spoke to the CFPB’s efforts over the last year and provided insight for the Bureau’s upcoming work. Chairman Johnson (D-SD), in his opening statement, mentioned the Bureau’s work on products such as mortgages, student loans, credit cards, and deposit accounts, and discussed why it is necessary for the Bureau to collect financial data, and inquired about the Bureau’s role in housing finance reform. Other topics discussed included QM compliance, data collection, indirect automotive lending, the regulatory process, annual privacy notice legislation, prepaid card legislation, examinations/supervision, student loans, and the consumer complaint database. For additional details, a hearing summary is available.
CFPB Premiers Housing Counseling Tool
On Friday, November 8, 2013, the CFPB issued a tool to help consumers locate housing counseling agencies to answer questions or address concerns with regard to mortgage loans. Under the Home Ownership and Equity Protection Act (HOEPA) rules issued in January, lenders must provide a list of housing counseling agencies to consumers who apply for a mortgage. Lenders may either use this tool or generate their own lists using the same HUD data the CFPB uses to build its list. The CFPB also has issued an interpretive rule for lenders who choose to build their own lists.
“Consumers need and deserve the best guidance when making the decision to purchase a home,” said Director Cordray in a press release. “Buying a home may easily be the largest investment a consumer makes, and we want to make it easier for them to find a housing counselor that is a good fit for them.”
The CFPB recognizes lenders may not be able to provide their own lists prior to the January 10, 2014 effective date. In those situations, the Bureau suggests lenders direct borrowers to the CFPB’s new tool in the interim while lenders build their own systems. The CFPB said it would not raise supervisory or enforcement concerns for lenders who do so.
Assistant Director of Financial Empowerment to Depart CFPB
Clifford Rosenthal, the CFPB’s Assistant Director of Financial Empowerment since May of 2012, will leave the Bureau in March of 2014. In an online forum, on Monday, October 28, 2013, Jacqueline Wilkes, Outreach Specialist for Financial Empowerment said, “While Cliff remains actively engaged in the job, the lengthy nature of the federal hiring process means that the CFPB is now asking potential applicants to consider applying for the position.” The position has not yet been posted on the CFPB website.
Final Revision Published on Interagency Q&A Regarding Community Reinvestment
On Friday, November 1, 2013 the Federal Reserve announced it will expand its “stress-testing” program to 30 banks in 2014, up from 18 in 2013. The banks will test three scenarios ranging from a baseline of economic activity to a severe global market shock. All banks with more than $50 billion in assets will be examined to ensure they have enough capital to continue operating if the economy experiences another severe downturn.
Federal Reserve Governor, Daniel Tarullo, said, “The capital planning and stress testing program has been an integral component of the Federal Reserve’s broader supervisory and regulatory efforts to make the financial system stronger and safer since the financial crisis.”
Senate Banking Committee Holds Confirmation Hearing for Fed Chairman
On Thursday, November 14, 2014, Janet Yellen appeared before the Senate Banking Committee on her nomination to Chairman of the Board of Governors of the Federal Reserve System. Yellen currently serves as the Federal Reserve Vice-Chairman. While the Committee appeared favorable to her confirmation, Yellen received numerous questions on the issues of monetary policy, too big to fail (TBTF), the Section 716 swaps push out provision, the Volcker Rule, Office of Financial Research Report on Asset Managers, Commodities, and Insurance Company Accounting Standards. In his opening statement, Chairman Johnson (D-SD) touted Yellen’s credentials and shared his support for her nomination:
“Dr. Yellen has proven through her extensive and impressive record in public service and academia that she is most qualified to be the next Chair of the Federal Reserve. We need her expertise at the helm of the Fed as our nation continues to recover from the Great Recession, completes Wall Street Reform rulemakings, and continues to enhance the stability of our financial sector. I am excited to cast my vote to confirm her as the first woman to serve as Chair of the Federal Reserve, and when we vote on the nomination, I urge my colleagues to do the same.”
In addition to monetary policy, TBTF was a major topic of conversation. Senator Sherrod Brown (D-OH) asked what more could be done to address TBTF, and even the playing field between larger and smaller banks. This line of questioning was bolstered by a Government Accountability Office report released the same morning that analyzed whether some financial institutions receive more favorable interest rates because of an implicit federal government guarantee.
Yellen could receive a confirmation vote from the Committee as early as next week, after which a confirmation vote by the U.S. Senate is required to finalize the process.
Settlement Reached in Mt. Holly Disparate Impact Case
Several news and industry outlets, including American Banker on Thursday, November, 14, 2013,reported a settlement has been reached in Township of Mount Holly v. Mt. Holly Gardens Citizens in Action, Inc., a case concerning disparate impact claims under the Fair Housing Act. The settlement effectively ends the scheduled review of the case by the U.S. Supreme Court, which was due to hear oral arguments in the matter on December 4, 2013. The court is now expected to dismiss the case.
OCC Issues Consultant Guidelines
On Tuesday, November 12, 2013, the OCC issued a bulletin proving guidance and standards for determining whether a supervised entity is required to retain a consultant, and the benchmarks to determine consultant qualifications. Under the guidance, the OCC requires banks to disclose any potential conflicts of interest, including former employees working for the consultant and any financial or business ties. The OCC also asks banks to document disciplinary actions taken against the consultant and resources required to complete assignments.
Comptroller of the Currency, Thomas Curry, said in a statement, “While consultants can provide knowledge, expertise, and additional resources, we must take care to ensure they maintain independence and are subject to appropriate oversight.”