Mar.Director of the CFPB Delivers Semi -Annual Report to HFSC
At a House Financial Services Committee hearing on March 29, Richard Cordray, Director of the Consumer Financial Protection Bureau (CFPB), delivered the first semi-annual report on the recent activities of the CFPB to Congress.
In his opening remarks, Chairman Spencer Bachus (R-Ala.) expressed concern with Cordray’s “unfettered discretion to identify financial products and services deemed to be unfair, deceptive and abusive, under a highly subjective standard that has no legally defined content.” He said members on both sides of the aisle support consumer protections, but members also understand the need for “oversight of a government bureaucracy.” Bachus also criticized President Obama’s recess appointment of Cordray, which “cast a legal cloud of uncertainty over the legitimacy of the Bureau.” In closing, Bachus highlighted two pieces of legislation, H.R. 1315 and H.R. 4014, that he said will make the agency more accountable without hampering its ability to protect consumers.
Ranking Member Barney Frank (D-Mass.) dismissed criticism of the Bureau’s lack of accountability, which Frank said is occurring because critics have “nothing firm to complain about.” Further, he said the CFPB has been in existence for a considerable period of time and has had “no problems.” In closing, Frank praised the work of the CFPB and urged Cordray to continue protecting consumers.
In his opening statement, Cordray said the CFPB’s mission is of “critical importance” to consumers as they navigate the “dangers and pitfalls” of today’s financial products. He made it clear that the CFPB will focus on making sure the costs and risks of financial products are transparent, and banks, and their nonbank competitors, receive the “evenhanded oversight” necessary to promote fair markets.
“People can make their own decisions, and nobody can or should try to do that for them,” he said, but it is the American way for responsible businesses to be straightforward and upfront with their customers, giving them all the information they need to make informed decisions.”
In closing, Cordray said the CFPB will “make it clear that violating the law has consequences,” but pledged to cooperate with financial institutions when possible.
Question and Answer
The question and answer session was disjointed due to several breaks for floor votes, prompting several members to submit questions for the record.
Bachus, Vice Chairman Jeb Hensarling (R-Texas), Rep. Lynn Westmoreland (R-Ga.) and Rep. Sean Duffy (R-Wis.) engaged Cordray on his interpretation of the word ‘abusive,’ questioning whether he believes its definition is clear or subjective. Cordray said the term ‘abusive’ is clearly defined in the Dodd-Frank Act, which also contains several criteria for determining whether a service or product is abusive. However, Cordray acknowledged that some of the criteria used to determine if a product is abusive is “situational” and requires judgment.
Rep. Maxine Waters (D-Calif.) asked if the CFPB plans to introduce servicer standards in light of the recent State Attorneys General Servicer Settlement with the nation’s five largest servicers. Cordray said it is a “top priority” of the CFPB to develop servicer standards. He said the Servicer Settlement was an “important step forward” in establishing some standards for the industry, but the standards will only cover the institutions that signed the agreement. Cordray added that the CFPB is currently working as part of an interagency group of regulators to create a set of standards that will “level the playing field and apply across the industry.”
Waters also asked Cordray to comment on the mortgage servicing consent order process initiated by the Office of the Comptroller of the Currency (OCC) and the Fed, which allows the services to hire their own auditors to investigate their foreclosure practices. Cordray said the CFPB is currently taking complaints on foreclosure practices and other mortgage servicing issues, but thinks the oversight of this process by the Fed and the OCC is sufficient.
Rep. Gary Miller (R-Calif.) asked Cordray if he shares Miller’s concern about the practice of lenders training their own originators. Cordray said training your own staff is “cost effective,” but it raises questions about whether the training is adequate and free of corporate distortions. Cordray said he would send Miller a complete list of things the CFPB is doing to address the issue.
Miller also asked Cordray to comment on the CFPB’s expected rule on loan origination compensation, which is expected to be released in the next six months. Miller expressed concern with the Fed’s version of the rule, which he says is causing buyers to lose their home purchases and deposits because of “legitimate discrepancies in closing costs.” Cordray was cautious because of a pending rulemaking, but said he is looking into the issue, as well as the rule’s unintended effects on pension arrangements and bonus arrangements.
Rep. Shelley Moore Capito (R-W. Va.) asked what steps the CFPB is taking to eliminate “outdated and burdensome” regulation. Cordray said the CFPB has launched an initiative to review and streamline regulations that it has inherited from other regulations. He added that the CFPB has requested that stakeholders identify and alert the Bureau about regulations they feel are outdated.
Capito and Rep. Brad Sherman (D-Calif.) asked about the Fed’s Qualified Mortgage (QM) proposal, which the CFPB inherited late last year, specifically asking Cordray which of the two alternatives in the proposal he prefers or whether he will draft an entirely new proposal. Cordray was cautious because of the pending rulemaking, but said the CFPB is receiving a lot of input from industry stakeholders and regulators and expects to release its QM rule by the middle of the year. Cordray also said that in the process of working on this rulemaking, the Bureau has come to the conclusion that the rule will need to have “bright lines” to reduce legal objections. Additionally, Cordray said the CFPB is very sensitive to credit availability concerns with the QM proposal and is working to ensure their rule addresses those concerns.
Rep. David Scott (D-Ga.) asked Cordray to identify which financial services product received the most complaints. Cordray said it is “hard to determine trends yet,” but acknowledged that the “highest pace of complaints” is related to mortgage servicing, especially foreclosure practices. He added that there has also been a significant amount of complaints about credit card practices and student loans.
Rep. Blaine Luetkemeyer (R-Mo.) asked if the CFPB performs a cost/benefit analysis before it issues a rule proposal. Cordray said the CFPB does “extensive” analysis of the costs and benefits of all their rulemakings, the results of which are published alongside the rulemaking.
Rep. Jim Renacci (R-Ohio) expressed his concern about the CFPB’s inclusion of enforcement lawyers during the examination process. Cordray said he has had a number of conversations on this subject with the industry and other regulatory agencies. He said the CPFB is trying to integrate its examinations and enforcement teams, to ensure that the examination process achieves the best results.
For testimony and a webcast of the hearing, please click here.
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At a House Financial Services Committee hearing on March 29, Richard Cordray, Director of the Consumer Financial Protection Bureau (CFPB), delivered the first semi-annual report on the recent activities of the CFPB to Congress.
In his opening remarks, Chairman Spencer Bachus (R-Ala.) expressed concern with Cordray’s “unfettered discretion to identify financial products and services deemed to be unfair, deceptive and abusive, under a highly subjective standard that has no legally defined content.” He said members on both sides of the aisle support consumer protections, but members also understand the need for “oversight of a government bureaucracy.” Bachus also criticized President Obama’s recess appointment of Cordray, which “cast a legal cloud of uncertainty over the legitimacy of the Bureau.” In closing, Bachus highlighted two pieces of legislation, H.R. 1315 and H.R. 4014, that he said will make the agency more accountable without hampering its ability to protect consumers.
Ranking Member Barney Frank (D-Mass.) dismissed criticism of the Bureau’s lack of accountability, which Frank said is occurring because critics have “nothing firm to complain about.” Further, he said the CFPB has been in existence for a considerable period of time and has had “no problems.” In closing, Frank praised the work of the CFPB and urged Cordray to continue protecting consumers.
In his opening statement, Cordray said the CFPB’s mission is of “critical importance” to consumers as they navigate the “dangers and pitfalls” of today’s financial products. He made it clear that the CFPB will focus on making sure the costs and risks of financial products are transparent, and banks, and their nonbank competitors, receive the “evenhanded oversight” necessary to promote fair markets.
“People can make their own decisions, and nobody can or should try to do that for them,” he said, but it is the American way for responsible businesses to be straightforward and upfront with their customers, giving them all the information they need to make informed decisions.”
In closing, Cordray said the CFPB will “make it clear that violating the law has consequences,” but pledged to cooperate with financial institutions when possible.
Question and Answer
The question and answer session was disjointed due to several breaks for floor votes, prompting several members to submit questions for the record.
Bachus, Vice Chairman Jeb Hensarling (R-Texas), Rep. Lynn Westmoreland (R-Ga.) and Rep. Sean Duffy (R-Wis.) engaged Cordray on his interpretation of the word ‘abusive,’ questioning whether he believes its definition is clear or subjective. Cordray said the term ‘abusive’ is clearly defined in the Dodd-Frank Act, which also contains several criteria for determining whether a service or product is abusive. However, Cordray acknowledged that some of the criteria used to determine if a product is abusive is “situational” and requires judgment.
Rep. Maxine Waters (D-Calif.) asked if the CFPB plans to introduce servicer standards in light of the recent State Attorneys General Servicer Settlement with the nation’s five largest servicers. Cordray said it is a “top priority” of the CFPB to develop servicer standards. He said the Servicer Settlement was an “important step forward” in establishing some standards for the industry, but the standards will only cover the institutions that signed the agreement. Cordray added that the CFPB is currently working as part of an interagency group of regulators to create a set of standards that will “level the playing field and apply across the industry.”
Waters also asked Cordray to comment on the mortgage servicing consent order process initiated by the Office of the Comptroller of the Currency (OCC) and the Fed, which allows the services to hire their own auditors to investigate their foreclosure practices. Cordray said the CFPB is currently taking complaints on foreclosure practices and other mortgage servicing issues, but thinks the oversight of this process by the Fed and the OCC is sufficient.
Rep. Gary Miller (R-Calif.) asked Cordray if he shares Miller’s concern about the practice of lenders training their own originators. Cordray said training your own staff is “cost effective,” but it raises questions about whether the training is adequate and free of corporate distortions. Cordray said he would send Miller a complete list of things the CFPB is doing to address the issue.
Miller also asked Cordray to comment on the CFPB’s expected rule on loan origination compensation, which is expected to be released in the next six months. Miller expressed concern with the Fed’s version of the rule, which he says is causing buyers to lose their home purchases and deposits because of “legitimate discrepancies in closing costs.” Cordray was cautious because of a pending rulemaking, but said he is looking into the issue, as well as the rule’s unintended effects on pension arrangements and bonus arrangements.
Rep. Shelley Moore Capito (R-W. Va.) asked what steps the CFPB is taking to eliminate “outdated and burdensome” regulation. Cordray said the CFPB has launched an initiative to review and streamline regulations that it has inherited from other regulations. He added that the CFPB has requested that stakeholders identify and alert the Bureau about regulations they feel are outdated.
Capito and Rep. Brad Sherman (D-Calif.) asked about the Fed’s Qualified Mortgage (QM) proposal, which the CFPB inherited late last year, specifically asking Cordray which of the two alternatives in the proposal he prefers or whether he will draft an entirely new proposal. Cordray was cautious because of the pending rulemaking, but said the CFPB is receiving a lot of input from industry stakeholders and regulators and expects to release its QM rule by the middle of the year. Cordray also said that in the process of working on this rulemaking, the Bureau has come to the conclusion that the rule will need to have “bright lines” to reduce legal objections. Additionally, Cordray said the CFPB is very sensitive to credit availability concerns with the QM proposal and is working to ensure their rule addresses those concerns.
Rep. David Scott (D-Ga.) asked Cordray to identify which financial services product received the most complaints. Cordray said it is “hard to determine trends yet,” but acknowledged that the “highest pace of complaints” is related to mortgage servicing, especially foreclosure practices. He added that there has also been a significant amount of complaints about credit card practices and student loans.
Rep. Blaine Luetkemeyer (R-Mo.) asked if the CFPB performs a cost/benefit analysis before it issues a rule proposal. Cordray said the CFPB does “extensive” analysis of the costs and benefits of all their rulemakings, the results of which are published alongside the rulemaking.
Rep. Jim Renacci (R-Ohio) expressed his concern about the CFPB’s inclusion of enforcement lawyers during the examination process. Cordray said he has had a number of conversations on this subject with the industry and other regulatory agencies. He said the CPFB is trying to integrate its examinations and enforcement teams, to ensure that the examination process achieves the best results.
For testimony and a webcast of the hearing, please click here.