HFS Subcommittee Discusses Consumer Credit Access Concerns
AT TODAY’S HOUSE FINANCIAL SERVICES SUBCOMMITTEE HEARING, lawmakers heard from market experts on proposed legislation concerning consumer credit access and protection. The hearing specifically focused on H.R. 6139, The Consumer Credit, Access, Innovation, and Modernization Act, sponsored by Rep. Blaine Luetkemeyer (R-Mo.), which would create a Federal charter for non-depository creditors.
Opening Statements
In her opening remarks, Chairman Shelley Moore Capito (R-W.Va.) stressed the need to address America’s inequalities concerning access to credit. Citing statistics from the Federal Deposit Insurance Corporation, she said a quarter of American households utilize traditional credit and expressed her support for the development of less traditional lending institutions to help bring diversity in financial products. She also criticized the difficulty of accessing credit across state lines.
Ranking Member Carolyn Maloney (D-N.Y.) expressed concern about the amount of personal debt in America today. She said there are “gaping holes” in non-depository lending regulation at the state level and praised the Consumer Financial Protection Bureau (CFPB) for beginning to exercise its regulatory authority in this area. Noting that consumers are turning to the internet and offshore financial entities, she stressed the need for a national regulatory standard for non-depositary lending institutions.
Luetkemeyer praised H.R. 6139 for allowing and encouraging the development of new and “badly needed” financial products without jeopardizing consumer protections. He stressed that the bill is not a “payday” bill, noting that it prohibits loans for less than 30 days.
Rep. Joe Baca (D-Calif.), pointing to high unemployment and foreclosure rates, expressed his concern with the limited credit availability for families “living paycheck to paycheck.” Mentioning his work with a previous proposal establishing federal charters for non-bank lenders to provide small dollar loans, he applauded H.R. 6139 for creating a “compromise” that regulates non-depository credit institutions.
Rep. Pete Sessions (R-Texas), present at the hearing to introduce witness Mary Jackson, said non-depositary and online lenders could be a “significant provider” of needed products to those lacking credit in America.
PANEL I
Testimony
In her opening statement, Grovetta Gardineer, Deputy Comptroller for Compliance Policy at the Office of the Comptroller of the Currency (OCC), outlined the OCC’s concerns with H.R. 6139. She said the bill would encourage the growth of National Consumer Credit Corporations (NCCC) which use “high risk, dangerous consumer credit products like payday loans and tax refund anticipation loans.” With NCCCs in operation many of the safety precautions put in place by Congress would be negated, she explained, undermining regulators’ past attempts to protect consumers without access to traditional bank products. More specifically, she said the proposed bill would encourage NCCC affiliation with risky “third-party vendors” which have poor compliance methods to originate these products. In closing, Gardineer said the bill could “blur” CFPB and OCC responsibilities together, adding confusion to consumer protections efforts.
In his opening statement, John Munn, Director at the State of Nebraska’s Department of Banking and Finance, who spoke on behalf of the Conference of State Bank Supervisors, expressed his opposition to H.R. 1909 and H.R. 6139 because both pieces of legislation create federal charters that do not meet the traditionally high standards required by Congress. He stated that the charters circumvent state authority while decreasing local accountability. “The legislation disrupts the balance of the state-federal relationship,” he said. In closing, Munn expressed support for legislation that would encourage information sharing among state and federal regulators to facilitate “regulatory collaboration and coordination.”
Question and Answer
Capito asked Gardineer if the OCC wants consumers to utilize the payday lending market. Gardineer said in the OCC’s past experiences, these types of products have often “brought harm” to consumers.
Maloney asked the panelists how they plan to address the current credit gap given their lack of support for the bill. Gardineer stated that the OCC is not focused on the credit gap but rather its unintended consequences. She said guidelines for non-depository lenders should be implemented in a prudent manner and added that the OCC is not asked to create products but to evaluate them. Munn said payday lenders in his state of Nebraska offer loans of varying sizes and recommended more emphasis be placed on financial literacy at a younger age to help address the credit gap.
Rep. John Carney (D-Del.) asked Gardineer if lenders should use more traditional banking loan products. Gardineer said she thinks the CFPB should issue a nationwide standard for credit lending.
Rep. David Scott (D-Ga.) asked what impacts the bill would have on regulatory overlap between the OCC and the CFPB. Gardineer said the bill would transfer regulatory authority over charted national credit associations to the OCC, which would conflict with the CFPB’s authority over consumer lending.
Rep. Michael Grimm (R-N.Y.) asked how state regulators are able to regulate online lending. Munn responded that state regulators cannot license online lenders but can respond to consumer complaints. Munn conceded that state regulators are limited in how they can regulate out of state or offshore companies. Grimm followed up by asking how H.R. 6139 would affect tax payers given that the lenders are not depositories. Gardineer stated that even though the lenders are not depositories, banks can have ownership over these companies.
Rep. Jim Renacci (R-Ohio), noting that up to 70 percent of unbanked and under-banked consumers are subprime and lack credit history, asked Gardineer how the financial institutions supervised by the OCC address consumers with low credit scores. Gardineer replied that a holistic approach is necessary and the CFPB can provide “robust guidelines to standards on a national scale.” She said lending standards require demonstration of ability to repay, and stressed the OCC’s objective to help customers rebuild credit.
Renacci explained that a bill he is currently sponsoring, H.R. 6125, would ensure that privileged research and information can be shared between regulators securely and safely. He asked Munn if he believed such legislation is necessary. Munn said it is necessary, noting that sharing information securely is “key” to effective regulation.
Rep. Ruben Hinojosa (D-Texas) asked Gardineer if she believed granting the OCC permission to approve charters for non-depository lending products was appropriate. She responded that the ability of the CFPB to issue national standards is highly important and that the availability of OCC resources to provide this oversight is a “risk [the OCC] has identified.”
Hinojosa asked Munn if he saw a compelling reason to establish a national charter for non-depositary lending institutions. Munn replied that he did not see a compelling need and said this bill would “gut state regulation.” He argued that state regulation of these institutions is more effective because the regulators have a smaller area to monitor and are able to receive more direct information.
Rep. Al Green (D-Texas) asked Munn how other states feel about pre-emption with regard to the bill. He said most states would oppose pre-emption.
PANEL II
Testimony
In her opening statement, Mary Jackson, Senior Vice President of Corporate Affairs at Cash America International, praised H.R. 6139 for providing greater access to innovative financial products otherwise unavailable to lower-income consumers. She criticized the current system, stating “we can’t offer the same choices to consumers with identical financial needs because they are separated by nothing more than a state line.” In closing, Jackson expressed support for the legislation because it would consolidate various state laws under one, uniform rule.
In her opening statement, Frances Bishop, who spoke on behalf of the National Pawnbrokers Association, criticized H.R. 1909 and H.R. 6139 stating that the bills would decrease the regulatory burden of non-depository charter holders, which would allow them to undercut smaller competitors. She also expressed concerns over the OCC’s ability to regulate non-depositories and said local interest rates and fees should be maintained by state authorities.
In his opening statement, John Berlau, Senior Fellow for Finance and Access to Capital at the Competitive Enterprise Institute, commended H.R. 6139 for extending “a healthy source of credit to underserved consumers and small businesses without putting a dime of taxpayer dollars at risk.” By reducing the cost of, and increasing access to credit the legislation “would work to the benefit of lower income consumers-currently priced out of mainstream financial instruments.” Berlau closed by stating that the legislation would address the reliance on “too big to fail” institutions.
In his testimony, G. Michael Flores, CEO of Bretton Woods, utilized his recent study concerning consumer credit needs to argue that increased and burdensome regulation has decreased the availability of consumer credit. He expressed concern about the growing class of ‘debanked’ middle-class consumers who left traditional banking due to increased fees and lack of availability of unsecured loans. Flores said a number of options banks used to provide credit are no longer viable and profitable due to “the poor economy and increased regulations.” While acknowledging that some alternative financial services providers have found more efficient and cost effective technology, he said these institutions typically offer only “low-dollar” products and cannot achieve economies of scale due to differing states’ regulations. He recommended bringing all alternative financial services providers under a single “tent of federal regulatory licensing and oversight.”
Kenneth Edwards, Vice President of Federal Affairs for the Center for Responsible Lending, voiced his opposition to H.R. 6139 due to the detrimental effects it would have on the authority of supervisory agencies and consumer credit protections in his testimony. He said the bill would “circumvent the CFPB’s carefully contemplated supervisory, enforcement, and rule making authority” by permitting the OCC to approve and regulate non-bank federal charters. Noting that these charters allow the evasion of state consumer protection laws, he expressed concern that non-depository charter holders will be able to offer dangerous financial products such as high cost payday loans. Finally, he said H.R. 6139 upsets important Truth in Lending Act (TILA) disclosure provisions by exempting credit companies from TILA’s annual percentage rate disclosure to all lenders for loans of one year or less.
For more information on this hearing please click here.
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AT TODAY’S HOUSE FINANCIAL SERVICES SUBCOMMITTEE HEARING, lawmakers heard from market experts on proposed legislation concerning consumer credit access and protection. The hearing specifically focused on H.R. 6139, The Consumer Credit, Access, Innovation, and Modernization Act, sponsored by Rep. Blaine Luetkemeyer (R-Mo.), which would create a Federal charter for non-depository creditors.
Opening Statements
In her opening remarks, Chairman Shelley Moore Capito (R-W.Va.) stressed the need to address America’s inequalities concerning access to credit. Citing statistics from the Federal Deposit Insurance Corporation, she said a quarter of American households utilize traditional credit and expressed her support for the development of less traditional lending institutions to help bring diversity in financial products. She also criticized the difficulty of accessing credit across state lines.
Ranking Member Carolyn Maloney (D-N.Y.) expressed concern about the amount of personal debt in America today. She said there are “gaping holes” in non-depository lending regulation at the state level and praised the Consumer Financial Protection Bureau (CFPB) for beginning to exercise its regulatory authority in this area. Noting that consumers are turning to the internet and offshore financial entities, she stressed the need for a national regulatory standard for non-depositary lending institutions.
Luetkemeyer praised H.R. 6139 for allowing and encouraging the development of new and “badly needed” financial products without jeopardizing consumer protections. He stressed that the bill is not a “payday” bill, noting that it prohibits loans for less than 30 days.
Rep. Joe Baca (D-Calif.), pointing to high unemployment and foreclosure rates, expressed his concern with the limited credit availability for families “living paycheck to paycheck.” Mentioning his work with a previous proposal establishing federal charters for non-bank lenders to provide small dollar loans, he applauded H.R. 6139 for creating a “compromise” that regulates non-depository credit institutions.
Rep. Pete Sessions (R-Texas), present at the hearing to introduce witness Mary Jackson, said non-depositary and online lenders could be a “significant provider” of needed products to those lacking credit in America.
PANEL I
Testimony
In her opening statement, Grovetta Gardineer, Deputy Comptroller for Compliance Policy at the Office of the Comptroller of the Currency (OCC), outlined the OCC’s concerns with H.R. 6139. She said the bill would encourage the growth of National Consumer Credit Corporations (NCCC) which use “high risk, dangerous consumer credit products like payday loans and tax refund anticipation loans.” With NCCCs in operation many of the safety precautions put in place by Congress would be negated, she explained, undermining regulators’ past attempts to protect consumers without access to traditional bank products. More specifically, she said the proposed bill would encourage NCCC affiliation with risky “third-party vendors” which have poor compliance methods to originate these products. In closing, Gardineer said the bill could “blur” CFPB and OCC responsibilities together, adding confusion to consumer protections efforts.
In his opening statement, John Munn, Director at the State of Nebraska’s Department of Banking and Finance, who spoke on behalf of the Conference of State Bank Supervisors, expressed his opposition to H.R. 1909 and H.R. 6139 because both pieces of legislation create federal charters that do not meet the traditionally high standards required by Congress. He stated that the charters circumvent state authority while decreasing local accountability. “The legislation disrupts the balance of the state-federal relationship,” he said. In closing, Munn expressed support for legislation that would encourage information sharing among state and federal regulators to facilitate “regulatory collaboration and coordination.”
Question and Answer
Capito asked Gardineer if the OCC wants consumers to utilize the payday lending market. Gardineer said in the OCC’s past experiences, these types of products have often “brought harm” to consumers.
Maloney asked the panelists how they plan to address the current credit gap given their lack of support for the bill. Gardineer stated that the OCC is not focused on the credit gap but rather its unintended consequences. She said guidelines for non-depository lenders should be implemented in a prudent manner and added that the OCC is not asked to create products but to evaluate them. Munn said payday lenders in his state of Nebraska offer loans of varying sizes and recommended more emphasis be placed on financial literacy at a younger age to help address the credit gap.
Rep. John Carney (D-Del.) asked Gardineer if lenders should use more traditional banking loan products. Gardineer said she thinks the CFPB should issue a nationwide standard for credit lending.
Rep. David Scott (D-Ga.) asked what impacts the bill would have on regulatory overlap between the OCC and the CFPB. Gardineer said the bill would transfer regulatory authority over charted national credit associations to the OCC, which would conflict with the CFPB’s authority over consumer lending.
Rep. Michael Grimm (R-N.Y.) asked how state regulators are able to regulate online lending. Munn responded that state regulators cannot license online lenders but can respond to consumer complaints. Munn conceded that state regulators are limited in how they can regulate out of state or offshore companies. Grimm followed up by asking how H.R. 6139 would affect tax payers given that the lenders are not depositories. Gardineer stated that even though the lenders are not depositories, banks can have ownership over these companies.
Rep. Jim Renacci (R-Ohio), noting that up to 70 percent of unbanked and under-banked consumers are subprime and lack credit history, asked Gardineer how the financial institutions supervised by the OCC address consumers with low credit scores. Gardineer replied that a holistic approach is necessary and the CFPB can provide “robust guidelines to standards on a national scale.” She said lending standards require demonstration of ability to repay, and stressed the OCC’s objective to help customers rebuild credit.
Renacci explained that a bill he is currently sponsoring, H.R. 6125, would ensure that privileged research and information can be shared between regulators securely and safely. He asked Munn if he believed such legislation is necessary. Munn said it is necessary, noting that sharing information securely is “key” to effective regulation.
Rep. Ruben Hinojosa (D-Texas) asked Gardineer if she believed granting the OCC permission to approve charters for non-depository lending products was appropriate. She responded that the ability of the CFPB to issue national standards is highly important and that the availability of OCC resources to provide this oversight is a “risk [the OCC] has identified.”
Hinojosa asked Munn if he saw a compelling reason to establish a national charter for non-depositary lending institutions. Munn replied that he did not see a compelling need and said this bill would “gut state regulation.” He argued that state regulation of these institutions is more effective because the regulators have a smaller area to monitor and are able to receive more direct information.
Rep. Al Green (D-Texas) asked Munn how other states feel about pre-emption with regard to the bill. He said most states would oppose pre-emption.
PANEL II
Testimony
In her opening statement, Mary Jackson, Senior Vice President of Corporate Affairs at Cash America International, praised H.R. 6139 for providing greater access to innovative financial products otherwise unavailable to lower-income consumers. She criticized the current system, stating “we can’t offer the same choices to consumers with identical financial needs because they are separated by nothing more than a state line.” In closing, Jackson expressed support for the legislation because it would consolidate various state laws under one, uniform rule.
In her opening statement, Frances Bishop, who spoke on behalf of the National Pawnbrokers Association, criticized H.R. 1909 and H.R. 6139 stating that the bills would decrease the regulatory burden of non-depository charter holders, which would allow them to undercut smaller competitors. She also expressed concerns over the OCC’s ability to regulate non-depositories and said local interest rates and fees should be maintained by state authorities.
In his opening statement, John Berlau, Senior Fellow for Finance and Access to Capital at the Competitive Enterprise Institute, commended H.R. 6139 for extending “a healthy source of credit to underserved consumers and small businesses without putting a dime of taxpayer dollars at risk.” By reducing the cost of, and increasing access to credit the legislation “would work to the benefit of lower income consumers-currently priced out of mainstream financial instruments.” Berlau closed by stating that the legislation would address the reliance on “too big to fail” institutions.
In his testimony, G. Michael Flores, CEO of Bretton Woods, utilized his recent study concerning consumer credit needs to argue that increased and burdensome regulation has decreased the availability of consumer credit. He expressed concern about the growing class of ‘debanked’ middle-class consumers who left traditional banking due to increased fees and lack of availability of unsecured loans. Flores said a number of options banks used to provide credit are no longer viable and profitable due to “the poor economy and increased regulations.” While acknowledging that some alternative financial services providers have found more efficient and cost effective technology, he said these institutions typically offer only “low-dollar” products and cannot achieve economies of scale due to differing states’ regulations. He recommended bringing all alternative financial services providers under a single “tent of federal regulatory licensing and oversight.”
Kenneth Edwards, Vice President of Federal Affairs for the Center for Responsible Lending, voiced his opposition to H.R. 6139 due to the detrimental effects it would have on the authority of supervisory agencies and consumer credit protections in his testimony. He said the bill would “circumvent the CFPB’s carefully contemplated supervisory, enforcement, and rule making authority” by permitting the OCC to approve and regulate non-bank federal charters. Noting that these charters allow the evasion of state consumer protection laws, he expressed concern that non-depository charter holders will be able to offer dangerous financial products such as high cost payday loans. Finally, he said H.R. 6139 upsets important Truth in Lending Act (TILA) disclosure provisions by exempting credit companies from TILA’s annual percentage rate disclosure to all lenders for loans of one year or less.
For more information on this hearing please click here.