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CBA Recommendations for CFPB Semi-Annual Testimony
CBA Letter of CFPB Semi-Annual Testimony
WASHINGTON – The Consumer Bankers Association wrote the House Financial Services Committee in advance of the Consumer Financial Protection Bureau’s semi-annual report to Congress. In the letter, CBA makes several legislative and regulatory recommendations to ensure consumers continue having access to highly-regulated financial products.
“It has been 10 years since the Dodd-Frank Act passed Congress and nine years since the CFPB opened its doors,” CBA President and CEO Richard Hunt wrote. “Today’s banking industry is vibrant and strong, working diligently to meet the credit needs of the consumers and communities they serve. As financial markets evolve, regulation must be reviewed to ensure it is reflective of current market conditions and consumers have continued access to safe and affordable financial services products.
“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.”
CBA’s letter is available here and the recommendations are discussed below:
- Bipartisan Commission at the CFPB: Since its inception, the CFPB has been the center of political and legal debates its leadership structure. This hearing comes as the Supreme Court is preparing to hear arguments next month regarding a challenge to the structure of the CFPB and whether its single director leadership model is constitutional. CBA is concerned the Seila Law v. CFPB case could result in a Supreme Court ruling that would create a governance structure where the director is removable at-will; inviting increased political turmoil at the Bureau, further undermining the mission and operations of the CFPB. A sensible remedy for the question at issue in the Seila case is for Congress to swiftly pass legislation to ensure the CFPB’s independence and constitutionality 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.
- Enforcement and Supervision: Director Kraninger has emphasized the need to use all the CFPB’s tools to prevent consumer harm. This includes properly educating consumers and establishing clear regulations in addition to ensuring compliance through supervision and holding bad actors accountable through enforcement. A directive to utilize all of the Bureau’s facilities marks a departure from how the CFPB has historically emphasized the enforcement process as a regulatory tool and focused a large portion of industry interaction through enforcement actions. CBA appreciates Director Kraninger’s charge to use all four of the Bureau’s tools that allow the financial services industry to serve customers while ensuring consumers are protected. However, CBA members continue to raise concerns that the new directive has not worked its way throughout the Bureau, as many CFPB examiners continue to present new issues on previously settled matters of law, lookback periods, and issues remediated by other government agencies through their supervision processes. Additionally, it has been brought to our attention that self-reported issues are receiving unbalanced and overly punitive penalties. As the Bureau has stated, regulators should encourage financial institutions to “self-report, self-examine and provide restitution where appropriate.” The CFPB's response to self-reported issues needs to be consistent with this belief, within the scope of previous regulatory actions. Anything to the contrary would be counterproductive to furthering a well-regulated, consumer-focused banking system.
- Small-Dollar Bank Lending: The CFPB issued a proposed rule last year to revise its controversial November 2017 small-dollar loan rule. According to the 2019 proposal, the CFPB believes provisions in the 2017 rule would decrease consumer access to credit and competition in credit markets. CBA agrees with the Bureau’s assessment of the 2017 rule and applaud the proposal that will help depository institutions offer short term credit products.
- Cost Benefit Analysis: The Dodd-Frank Act’s standards for rulemaking require the Bureau to consider, among other things, “the potential benefits and costs to consumers and covered persons, including the potential reduction of access by consumer to consumer financial products or services resulting from such rule.” CBA believes these objectives are best met through a robust public comment process, firm adherence to formal rulemaking and practical implementation after a final rule is issued. Under this framework, the Bureau should base new regulations on real-world data and rigorous economic cost-benefit analysis, as required by the Dodd-Frank Act.
- Financial Innovation: Financial services innovation benefits consumers and can greatly expand access to credit for all consumers. The Bureau’s finalized innovation policies within the Office of Innovation are vital steps. The recently finalized changes to the No-action letter process has opened the door for more financial institutions to innovate to better serve and protect their customers. CBA remains concerned about the data aggregators and the consumer data security. We recognize the importance of customers having the ability to choose which apps to share their financial information with and urge the CFPB to take a more proactive role in making sure consumers are educated about how to manage their data security and privacy.
- Qualified Mortgage: CBA applauds the Bureau’s recent decision to propose an amendment to the Qualified Mortgage (QM) rule. The Bureau’s position is consistent with a coalition representing the mortgage industry, relevant trades and consumer and civil rights groups. Mortgage loans are evaluated using a wide range of factors which provide a multidimensional measurement of risk. Borrowers with a history of successfully managing larger debt burdens should not be precluded from the home loan market due to a single, simplistic measurement. CBA looks forward to working with the Bureau on this issue to ensure a smooth transition and to create a safer and more inclusive mortgage market for all consumers.
- Debt Collection: CBA urges 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.
- Consumer Advisory Boards: The Dodd Frank Act established various advisory boards at the Bureau to “provide information on emerging practices in the consumer financial products or services industry.” Financial institutions are often the experts on emerging consumer financial practices, products and services, yet their voice is quite muted on these boards. Similarly, CBA applauds the efforts of the Taskforce on Federal Consumer Financial Law to conduct an objective, holistic review of consumer financial laws and eliminate outdated, redundant and wasteful red tape. CBA looks forward to working with the Director on this promising initiative.
In addition to the items outlined above, CBA’s letter also addresses remittance, the Home Mortgage Disclosure Act (HMDA), CFPB complaint database, Section 1071 small business rulemaking, Truth in Lending / Real Estate Settlement Procedures Act (TRID) assessments.
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.