CBA Letter on CFPB Semi-Annual Hearings

Nick Simpson

 

CBA Recommends Legislative, Regulatory Changes to
Improve CFPB, Consumer Protections

 

WASHINGTON, D.C. – Consumer Bankers Association President and CEO Richard Hunt wrote the chairs and ranking members of the House Financial Services and Senate Banking committees related to hearings on the Consumer Financial Protection Bureau’s semi-annual report to Congress. In the letter, CBA recommends ways to improve the CFPB to help consumers.

 

“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,” Hunt wrote.

 

CBA’s letter noted the current dispute over the CFPB’s leadership structure has added increased instability, noting pending legal challenges which could decide the constitutionality of the Bureau’s leadership structure. A change in director affects the entire CFPB and consumer finance laws. The potential of a court ruling that could install a removable at-will director would bring increased confusion.

 

Hunt added, “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. A bipartisan commission of five, Senate-confirmed commissioners 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.”

 

A full copy of the letter is available here.

 

In the letter, CBA suggested several legislative and regulatory changes, discussed below:

 

  • Bipartisan Commission at the Consumer Financial Protection Bureau: The CFPB director is currently a single officer responsible for leading the CFPB and is the chief decisionmaker on rulemakings, enforcement and supervisory actions that affect millions of Americans’ everyday financial lives. A change in the position affects the entire CFPB and laws that affect all Americans. The potential of a court ruling that could install removeable at-will director would bring increased confusion to financial services providers who have been asking that Congress inject stability and transparency into the Bureau. The American people overwhelmingly favor a bipartisan commission at the Bureau. A Morning Consult poll found that by a margin of three to one, registered voters support a bipartisan commission over a sole director. Additionally, two dozen trade associations representing thousands of banks, credit unions, financial institutions and businesses of all sizes support this urgently needed.

 

  • Small-Dollar Bank Lending: CBA appreciates the Bureau’s interest in revisiting the rule to ensure consumers have options in the marketplace for small-dollar credit needs. We agree with the Bureau’s assessment of the 2017 rule and applaud the proposal that will help depository institutions offer short-term credit products. In the 2017 rule, the Bureau expansively defined “covered loans” — i.e., the loans subject to the final rule’s restrictions — without regard to the loan’s amount or duration. Consequently, the 2017 rule captures many loans that are not, in fact, short-term, small-dollar loans, including some wealth management products. Because we expect the rulemaking will likely identify other problems with the final rule, we also urge the Bureau to grant an immediate extension of the compliance date for the entire final rule. Without an immediate extension, banks will expend resources unnecessarily to achieve compliance with a rule the Bureau is reconsidering and may materially change. Further, the Bureau should exempt traditional consumer loan products, which do not raise consumer protection concerns, and which this rulemaking was not intended to address.

 

  • Enforcement and Supervision: We appreciate Director Kraninger’s charge to use all four of the Bureau’s tools to better allow the financial services industry to serve customers while ensure consumers are protected. Sound supervision can prevent consumer harm while still allowing financial institutions the flexibility to develop new products and services to better serve customers. Examiners need to streamline procedures and work with other regulators to create an efficient supervisory regime that protects consumer interests and establishes clear rules of the road for financial institutions. We strongly encourage the CFPB to ensure coordination with other regulatory agencies remain a high priority and do more to streamline exam processes.

 

  • Remittance: CBA appreciates the Bureau’s willingness to work with industry participants to find a solution to this impending problem. Bank-provided remittance transfers are an important service for bank customers. Without action by the Bureau, the temporary exception expiration will have the perverse effect of reducing consumer choice, forcing bank customers to use less convenient or more expensive services, and leave some consumers without alternative means of sending transfers that they send today through their banks. CBA requests the Bureau recognize the distinct segment of the remittance transfer market that is served by banks and utilize its existing authority to permit banks to provide estimated disclosures so that they can continue providing remittance transfer services to their customers with the same worldwide reach their customers are accustomed to today.

 

  • No-Action Letters & the Office of Innovation’s Project Sandbox: CBA strongly supports the Bureau’s finalized innovation policies and creation of ACFIN and believes the regulatory framework is absolutely necessary to the Bureau’s commitment to increase innovation while better protecting consumers.

 

  • Debt-Collection: CBA recognizes the important role the collection of debt plays in the proper functioning of the consumer credit markets, as it reduces creditors’ losses from non-repayment and promotes the availability and affordability of 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. Congress clearly enacted the FDCPA to establish ethical guidelines for the collection of consumer debt by third-party debt-collectors, and it never intended nor designed the Act to cover the collection practices of creditors. CBA strongly opposes placing FDCPA-like restrictions and requirements on creditors. They are unwarranted and incongruent with the lender-borrower relationship.

 

  • Home Mortgage Disclosure Act: 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. We applaud 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.

 

  • Section 1071 Small Business Rulemaking: CBA strongly supports a cautionary approach to rulemaking under Section 1071 of the Dodd-Frank Act, which amends the Equal Credit Opportunity Act (ECOA) to require financial institutions to compile, maintain, and report information concerning credit applications made by women-owned, minority-owned, and small businesses. CBA and its member institutions strongly believe the CFPB should keep top of mind that although Section 1071 mandates this rule, it is not as simple as data collection efforts undertaken on other lending products such as residential mortgages. We cannot stress enough the importance of well-balanced rules under Section 1071 in order to avoid overly burdensome data collection requirements that could stifle small business lending, greatly increase compliance costs for small business lenders, and open the door to costly litigation.

 

  • Qualified Mortgage: CBA appreciates the Bureau’s reconsideration of the Qualified Mortgage (QM) rules in a data-driven way. We agree current underwriting policies and maintaining a customer’s ability to replay should be closely reviewed as the Bureau considers updating this rule. CBA and its member institutions strongly believe the Bureau should be extremely careful not to disrupt the mortgage market or limit a credit-worthy borrower’s access to mortgage credit with the expiration of the QM Patch. The current version of QM rules needlessly restrict access to credit for qualified borrowers. We encourage the Bureau to review its current definition of QM and the accompanying Appendix Q to identify a more reasonable method of providing mortgage access to qualified customers.

 

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About the Consumer Bankers Association:

The Consumer Bankers Association represents America’s leading retail banks. We promote policies to create a stronger industry and economy. Established in 1919, CBA’s corporate member institutions account for 1.7 million jobs in America, extend roughly $4 trillion in consumer loans and provide $275 billion in small business loans annually. Follow us on Twitter @consumerbankers