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CBA Letter on SBC CFPB Kraninger Semi-annual July 2020
July 28, 2020
The Honorable Mike Crapo
Committee on Banking, Housing and Urban Affairs
534 Dirksen Senate Office Building
Washington, D.C. 20510
The Honorable Sherrod Brown
Committee on Banking, Housing and Urban Affairs
534 Dirksen Senate Office Building
Washington, D.C. 20510
Dear Chairman Crapo and Ranking Member Brown:
The Consumer Bankers Association (CBA) submits the following comments for the hearing entitled, “The Consumer Financial Protection Bureau’s Semi-Annual Report to Congress.” We appreciate the Senate Committee on Banking, Housing and Urban Affairs’ continued oversight of the Consumer Financial Protection Bureau (CFPB or Bureau) and its activities to safeguard consumers. CBA is the voice of the retail banking industry whose products and services provide access to credit for millions of consumers and small businesses. Our members operate in all 50 states, serve more than 150 million Americans and collectively hold two-thirds of the country’s total depository assets.
It has been ten years since the Dodd-Frank Act passed Congress and nine years since the CFPB opened its doors with “the purpose of providing a single point of accountability for enforcing federal consumer financial laws and protecting consumers in the financial marketplace.” Today’s banking industry is vibrant and strong, working diligently to meet the credit needs of the consumers and communities they serve, especially during these trying times. In this letter, we offer legislative and regulatory suggestions for the purpose of ensuring consumers continue to have access to highly regulated financial products that enable them to achieve their financial goals.
Bipartisan Commission at the Consumer Financial Protection Bureau
Since its inception, the CFPB has been the center of political and legal debates about the legitimacy of its leadership structure. In fact, this hearing comes just weeks after the Supreme Court ruled, that the single CFPB Director can be fired at the will of the President. This ruling ensures future political turmoil at the Bureau as the Director is now entirely accountable to the current occupant of the White House, and unavoidably undermines the mission and operations of the CFPB. Now is the time for Congress to act to ensure the CFPB’s independence by replacing the single director structure with a five-person, bipartisan commission, as originally intended by the House when it first passed the Dodd-Frank Wall Street Reform and Consumer Protection Act in 2010.
The CFPB director is responsible for leading the CFPB and is the chief decisionmaker over all rulemakings, enforcement and supervisory actions that affect millions of Americans’ everyday financial lives. An at-will Director, removable every four years, or sooner, leaves financial instructions with few assurances that the rules they are complying with today would remain in place. When regulatory stability is constantly subjected to changing political dynamics, the consumer suffers from financial institutions’ inability to rely upon a consistent regulatory environment that is the basis for innovation and product development.
Replacing the sole director model with a bipartisan, Senate confirmed, five-person commission would depoliticize the CFPB while increasing stability, accountability and transparency for all consumers and industry stakeholders. Unpredictable political shifts make it difficult for the financial services industry to plan for the future, which will inevitably stifle innovation, limit access to credit, and raise prices for consumers, who likewise can no longer rely on a nonpartisan decisionmaker in control over the financial products that affect their everyday lives. It is crucial that appropriate checks and balances are in place given the scope and importance of the CFPB. It is also important to insulate the Bureau from political shifts with each new director that could reduce its ability to impartially ensure a fair and competitive marketplace.
In response to the unprecedented COVID-19 pandemic, the Bureau developed a novel program to supervise financial institutions’ response to the crisis, “Prioritized Assessments.” These new supervisory tools are designed to allow the Bureau to collect data and insight quickly and efficiently on the expansive financial institution responses to COVID-19. CBA encourages the Bureau to continue to be reasonable in their requests, understanding the nation’s financial institutions are currently doing much to help protect consumers during extremely challenging times.
Financial services innovation benefits consumers by promoting financial security, inclusion, and well-being. New and innovative financial products and services can greatly expand access to credit for all consumers, while providing improved access to important financial information, and increased customer safeguards. Congress recognized the great utility financial services innovation has for consumer protection in Title X of Dodd-Frank when it charged the CFPB with ensuring “markets for consumer financial products and services operate transparently and efficiently to facilitate access and innovation”.
The Bureau’s finalized innovation policies within the Office of Innovation are vital steps in ensuring that financial institutions can best serve their customers with innovative products and services that require a flexible and accessible regulatory environment. The Bureau’s no-action letter (NAL) and compliance assistance sandbox (CAS) programs have opened the door for more financial institutions to innovate to better serve and protect their customers, as well as bring new, financially underserved customers into the fold. For instance, in July of this year, the Bureau approved a Compliance Assistance Statement of Terms Template to help employers create automatic savings programs for their employees to encourage emergency savings. Innovative initiatives like this are exactly what the Bureau’s innovative policies were intended to do, and we are encouraged by their use throughout this pandemic to serve customers. CBA also encourages the Bureau to finalize the Advisory Opinion process. This will provide more certainty and clarity to certain rules.
CBA recognizes the important role debt collection plays in proper functioning consumer credit markets, reducing credit losses from non-repayment and promoting overall access to affordable consumer credit. We support the Bureau’s goals of updating the Fair Debt Collection Practices Act (FDCPA), modernizing its communication standards, and generally enhancing consumer protections.
As the Bureau has acknowledged, the FDCPA is limited to third-party debt collectors and does not provide a valid legal basis for regulating creditors enforcing loan agreements. Congress enacted the FDCPA to establish ethical guidelines consumer debt collection by third-party debt collectors. As such, CBA strongly opposes placing FDCPA-like restrictions and requirements directly on creditors outside FDCPA authority. They are unwarranted and incongruent with the lender-borrower relationship, which is usually a long standing one motivated by strong business incentives on the part of creditors to help borrowers successfully repay their debt obligations.
Given the challenges the debt market will continue to face as a result of COVID-19, we encourage the Bureau to think cautiously about the implementation period of any new rules surrounding the FDCPA to best protect consumers working with their debt during this time. We similarly encourage the Bureau to be wary of limiting borrower’s communications with their creditors, as financial institutions need to communicate the various relief and recovery options available to their customers during this time. We strongly urge Congress and the CFPB to work with industry to establish debt collection regulations for third-party debt collectors that strike the right balance between consumer protection and consumer engagement.
Small Dollar Rule
CBA appreciates the Bureaus recent action to finalize the Small Dollar rule. As Banks evaluate potentially reentering this market, CBA encourages the CFPB to provide clarity into what products and offers would be appropriate to help all consumers have access to credit. During these turbulent economic times, consumers will need access to highly regulated short-term credit options. Certainty amongst all regulators will help eliminate obstacles to the development of helpful loan products.
Home Mortgage Disclosure Act
Our members are dedicated to responsibly and fairly serving the housing needs of their communities and are committed to the purposes of the HMDA, which are to: “1. help determine whether financial institutions are serving the housing needs of their communities; 2. assist public officials in distributing public-sector investment so as to attract private investment to areas where it is needed; and 3. assist in identifying possible discriminatory lending patterns and enforcing antidiscrimination statutes.”
The Dodd-Frank Act mandated expanding the information collected under Regulation C, HMDA’s governing regulation. In 2015, then-Director Cordray used the Bureau’s discretionary authority to increase the number of loan-level HMDA data fields reported and publicly disclosed, further increasing the complexity and costs of HMDA reporting beyond those fields mandated by Dodd-Frank. This new data set, collected for the first time in 2018, was reported to the government on March 1, 2019.
Expanded data collection and reporting poses serious risk to consumer privacy by introducing even more sensitive loan data into the public domain. Specifically, the expanded set of publicly available HMDA data provides ample data scraping opportunities for companies to piece together information related to the loan and borrower to “re-identify” the consumer and engage in unsolicited targeted marketing. There is no mechanism for consumers or lenders to opt-out or protect disclosure of this sensitive personal and financial information from entering the public domain.
CBA has long been concerned about the sensitive nature of HMDA data and believes the discretionary data fields added by the CFPB in 2015 pose privacy risks to consumers while also mandating extraordinarily high annual compliance costs. CBA applauds the CFPB’s decision to revisit the 2015 Rule to closely review the data fields that will be collected, stored and ultimately made available to the public. CBA encourages the CFPB to eliminate those discretionary data fields that are not required by statute, that are unduly onerous to collect and report, that provide present marginal value in furthering HMDA’s objectives, and that create or contribute risk of consumer re-identification.
CBA supports recent initiatives to make the CFPB complaint database more usable for the public and industry. Efforts to clearly disclose unverified complaints are a helpful first step in level-setting data contained in the database. Further, encouraging consumers to work with their financial institution prior to submitting a complaint will lead to more consumer issues being resolved in a timely and efficient manner. Establishing tools to contextualize complaint data and recognizing the massive amount of inquiries that financial institutions ably and efficiently redress each day will leave consumers informed and better position financial institutions to combat consumer issues.
All these issues are even more vital now that the Bureau reports record-high complaint volumes, largely as a result of COVID-19. Many of the complaints inflating the record numbers are not actually due to a financial institution’s behavior, yet still are reported as such. However, financial institutions have maintained their response rates during this crisis and will continue to redress customer issues when they arise.
Financial institutions have strong incentives to maintain deep, well-informed, mutually satisfactory relationships with customers. Our members have robust complaint management procedures regardless of the CFPB’s database to ensure that disputes are resolved as quickly and easily as possible to keep the customer happy with their financial services provider. Furthermore, federal regulatory agencies already regularly examine every depository institution to ensure their strong and effective complaint management systems are functioning properly.
CBA urges the Bureau to continue to review consumer complaint data for accuracy and validity before publication to protect consumer privacy and prevent dissemination of misleading information.
Improving the financial lives of consumers is a goal that unites lawmakers, regulators and industry. Achievement of this shared goal occurs when there is a stable and even-handed regulatory framework that produces clear and reasonable rules of the road to protect consumers and allow for a robust financial services market.
The Supreme Court decision on Seila Law v. CFPB will have dramatic and lasting ramifications on the future of the Bureau. Regulatory stability and transparency will not be realized until the Bureau’s governance structure allows for the debate and deliberation of multiple stakeholders with diverse experiences and expertise. Congress should immediately pass legislation to create a bipartisan commission of five, Senate-confirmed commissioners that would provide a balanced and deliberative approach to supervision, regulation, and enforcement of rules and regulations that oversee the financial services sector and provide consumers needed safeguards.
CBA stands ready to work with Congress and the CFPB to implement the suggested legislative and regulatory improvements to the Bureau, and we appreciate the opportunity to submit this statement for the record.
President and CEO
Consumer Bankers Association
 Dodd-Frank Wall Street Reform and Consumer Protection Act, H.R. 4173, 111th Cong. § 4103 (2010).
 12 U.S.C. § 5511(b)(5) (2012).
 CFPB Bulletin 2013-11 “Home Mortgage Disclosure Act (HMDA) and Regulation C – Compliance Management; CFPB HMDA Resubmission Schedule and Guidelines; and HMDA Enforcement” (October 9, 2013) http://files.consumerfinance.gov/f/201310_cfpb_hmda_compliance-bulletin_fair-lending.pdf
 If a consumer wishes to purchase a home, he/she must provide confidential financial data that lenders in turn must report for HMDA purposes; most of which the CFPB releases to the public.