Sept.The SBC Discusses Consumer Education Efforts and Forthcoming Rulemakings with CFPB Director Richard Cordray
AT THIS MORNING’S SENATE BANKING COMMITTEE HEARING, Richard Cordray, Director of the Consumer Financial Protection Bureau (CFPB), presented the CFPB Semi-Annual report to members and highlighted the Agency’s progress on key rulemakings.
In his opening remarks, Sen. Jeff Merkley (D-Ore.) noted the anniversary of Lehman Brother’s collapse and said consumer protection failures were at the heart of the 2008 financial crisis. He said consumer protections are about fairness and equal opportunity, which will ultimately help the US build a “vibrant, broad-based economy for the 21st century.” In closing, Merkley said the CFPB is “well on its way” to fulfilling its mission to protect consumers and praised the Agency’s work so far.
Ranking Member Richard Shelby (R-Ala.) highlighted the CFPB’s lack of accountability to Congress and criticized how the Agency is exercising its authority. Specifically, Shelby expressed concern over a statement in the Agency’s 1,100 page mortgage disclosure rule proposal that signaled the intent of the CFPB to exempt firms from a Dodd-Frank mandated disclosure requirement on the grounds that it would be difficult to implement and confusing to consumers. “This raises a fundamental question, how will the Bureau address statutes that it determines to be harmful to consumers,” he said. Shelby criticized the CFPB for its overly broad interpretation of its exemptive authority and warned Members that the CFPB’s actions in this case set a dangerous precedent.
In his opening statement, Cordray said the CFPB is using all of the tools at its disposal to protect consumers, highlighting the Agency’s forthcoming rulemakings aimed at the mortgage market, and its supervision of non-bank financial institutions. He also updated members on the CFPB’s ongoing consumer education programs including the “Know Before You Owe” campaign, the “AskCFPB” frequently asked questions online catalog, and the establishment of an online database of individual complaints about financial products. In closing, Cordray said the CFPB is a 21st-century Agency that promotes “transparency, accountability, fairness, and service to the public” and is engaging in evidence-based work on behalf of consumers.
Question and Answer
Merkley, Sen. Robert Menendez (D-N.J.) and Sen. Bob Corker (R-Tenn.) asked Cordray to explain the purpose of the CFPB’s database of complaints and identify which issues have generated the greatest number of complaints. Cordray said the intent of the database is to alert the Bureau and other consumers about abusive products or practices. So far, he said the Agency has received 72,297 complaints on a wide range of issues, adding that the comments are vetted.
Cordray said the CFPB has received the greatest amount of complaints on issues surrounding the mortgage market, including concerns about the ability to make payments and mortgage servicing. Cordray also said the CFPB has received numerous complaints about credit cards and student loans, but noted that the Agency has received fewer complaints about credit cards than it was anticipating.
Shelby asked Cordray to address the issue he discussed in his opening remarks, specifically asking if he believes the Bureau has exemptive powers under Dodd-Frank Section 1032(a). Cordray said it does. Following up, Shelby asked if Cordray believes that the CFPB has the authority to exempt and modify statutory requirements. Cordray said that the Truth in Lending Act grants the CFPB more explicit powers to exempt and modify laws due to the CFPB’s charge to “clarify and interpret the laws that Congress has provided it with.”
Shelby also asked Cordray if he shares the concern that the CFPB’s new mortgage rules will put smaller banks at a disadvantage. Cordray said he shares the same concerns as the Senator, but noted that the Bureau has taken steps to mitigate the compliance burdens of smaller banks by establishing a community bank advisory council and a credit union advisory council. Additionally, Cordray said the CFPB has the authority to exempt smaller institutions from rules that are unfairly burdensome, an authority they exercised recently when they exempted thousands of small institutions from the Agency’s new remittance rule.
Sen. Jack Reed (D-R.I.) asked Cordray to comment on the CFPB’s first enforcement action against the credit card operations of Capitol One Bank and describe the approach they took. Cordray said the enforcement action refunded $140 million to potential victims, and required additional penalties of $25 million to the CFPB and $30 million to Office of the Comptroller of the Currency (OCC). Additionally, the Bureau issued a compliance bulletin warning other institutions against deceptive marketing practices.
Cordray said the CFPB’s first enforcement action, and subsequent compliance bulletin, is part of its overall approach to alert all market participants about potential violations of the law and give said participants the ability to analyze their own practices. He also said the enforcement action highlights the CFPB’s ability to work closely with other regulatory agencies, like the OCC.
Sen. Mike Crapo (R-Idaho) asked Cordray to detail how the CFPB is analyzing the impact of the Qualified Mortgage (QM) and Qualified Residential Mortgage (QRM) rules on the cost and availability of mortgage credit. Cordray said the CFPB is working collaboratively with the Federal Housing Finance Agency and others to gain access to a wide range of housing data points and trends. He added that this issue is “eating up a lot of time and effort” at the CPFB, but they wanted to slow down the process to make sure they get it right, which is why they the QM Rule will not be finalized until January 2013.
Sen. Daniel Akaka (D-Hawaii) and Corker asked Cordray how the CFPB is increasing access to mainstream financial institutions for the under-banked and unbanked. Cordray said this issue is a “very urgent concern” for the CFPB, and in response to this problem, the CFPB has created the Office of Financial Empowerment to form the Bureau’s strategic response to this issue. However, he noted that solving this problem will require coordination with the Federal Deposit Insurance Corporation.
Menendez asked Cordray about the progress the Bureau is making in establishing national mortgage servicing standards. Cordray said the CFPB is making good progress, highlighting the rule proposal they recently issued, which he noted “will be finalized by January.” Cordray added that the proposed rule implements everything that Congress required them to do, but said “there may be room for further work in this area.”
For testimony and a webcast of the hearing, please click here.
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AT THIS MORNING’S SENATE BANKING COMMITTEE HEARING, Richard Cordray, Director of the Consumer Financial Protection Bureau (CFPB), presented the CFPB Semi-Annual report to members and highlighted the Agency’s progress on key rulemakings.
In his opening remarks, Sen. Jeff Merkley (D-Ore.) noted the anniversary of Lehman Brother’s collapse and said consumer protection failures were at the heart of the 2008 financial crisis. He said consumer protections are about fairness and equal opportunity, which will ultimately help the US build a “vibrant, broad-based economy for the 21st century.” In closing, Merkley said the CFPB is “well on its way” to fulfilling its mission to protect consumers and praised the Agency’s work so far.
Ranking Member Richard Shelby (R-Ala.) highlighted the CFPB’s lack of accountability to Congress and criticized how the Agency is exercising its authority. Specifically, Shelby expressed concern over a statement in the Agency’s 1,100 page mortgage disclosure rule proposal that signaled the intent of the CFPB to exempt firms from a Dodd-Frank mandated disclosure requirement on the grounds that it would be difficult to implement and confusing to consumers. “This raises a fundamental question, how will the Bureau address statutes that it determines to be harmful to consumers,” he said. Shelby criticized the CFPB for its overly broad interpretation of its exemptive authority and warned Members that the CFPB’s actions in this case set a dangerous precedent.
In his opening statement, Cordray said the CFPB is using all of the tools at its disposal to protect consumers, highlighting the Agency’s forthcoming rulemakings aimed at the mortgage market, and its supervision of non-bank financial institutions. He also updated members on the CFPB’s ongoing consumer education programs including the “Know Before You Owe” campaign, the “AskCFPB” frequently asked questions online catalog, and the establishment of an online database of individual complaints about financial products. In closing, Cordray said the CFPB is a 21st-century Agency that promotes “transparency, accountability, fairness, and service to the public” and is engaging in evidence-based work on behalf of consumers.
Question and Answer
Merkley, Sen. Robert Menendez (D-N.J.) and Sen. Bob Corker (R-Tenn.) asked Cordray to explain the purpose of the CFPB’s database of complaints and identify which issues have generated the greatest number of complaints. Cordray said the intent of the database is to alert the Bureau and other consumers about abusive products or practices. So far, he said the Agency has received 72,297 complaints on a wide range of issues, adding that the comments are vetted.
Cordray said the CFPB has received the greatest amount of complaints on issues surrounding the mortgage market, including concerns about the ability to make payments and mortgage servicing. Cordray also said the CFPB has received numerous complaints about credit cards and student loans, but noted that the Agency has received fewer complaints about credit cards than it was anticipating.
Shelby asked Cordray to address the issue he discussed in his opening remarks, specifically asking if he believes the Bureau has exemptive powers under Dodd-Frank Section 1032(a). Cordray said it does. Following up, Shelby asked if Cordray believes that the CFPB has the authority to exempt and modify statutory requirements. Cordray said that the Truth in Lending Act grants the CFPB more explicit powers to exempt and modify laws due to the CFPB’s charge to “clarify and interpret the laws that Congress has provided it with.”
Shelby also asked Cordray if he shares the concern that the CFPB’s new mortgage rules will put smaller banks at a disadvantage. Cordray said he shares the same concerns as the Senator, but noted that the Bureau has taken steps to mitigate the compliance burdens of smaller banks by establishing a community bank advisory council and a credit union advisory council. Additionally, Cordray said the CFPB has the authority to exempt smaller institutions from rules that are unfairly burdensome, an authority they exercised recently when they exempted thousands of small institutions from the Agency’s new remittance rule.
Sen. Jack Reed (D-R.I.) asked Cordray to comment on the CFPB’s first enforcement action against the credit card operations of Capitol One Bank and describe the approach they took. Cordray said the enforcement action refunded $140 million to potential victims, and required additional penalties of $25 million to the CFPB and $30 million to Office of the Comptroller of the Currency (OCC). Additionally, the Bureau issued a compliance bulletin warning other institutions against deceptive marketing practices.
Cordray said the CFPB’s first enforcement action, and subsequent compliance bulletin, is part of its overall approach to alert all market participants about potential violations of the law and give said participants the ability to analyze their own practices. He also said the enforcement action highlights the CFPB’s ability to work closely with other regulatory agencies, like the OCC.
Sen. Mike Crapo (R-Idaho) asked Cordray to detail how the CFPB is analyzing the impact of the Qualified Mortgage (QM) and Qualified Residential Mortgage (QRM) rules on the cost and availability of mortgage credit. Cordray said the CFPB is working collaboratively with the Federal Housing Finance Agency and others to gain access to a wide range of housing data points and trends. He added that this issue is “eating up a lot of time and effort” at the CPFB, but they wanted to slow down the process to make sure they get it right, which is why they the QM Rule will not be finalized until January 2013.
Sen. Daniel Akaka (D-Hawaii) and Corker asked Cordray how the CFPB is increasing access to mainstream financial institutions for the under-banked and unbanked. Cordray said this issue is a “very urgent concern” for the CFPB, and in response to this problem, the CFPB has created the Office of Financial Empowerment to form the Bureau’s strategic response to this issue. However, he noted that solving this problem will require coordination with the Federal Deposit Insurance Corporation.
Menendez asked Cordray about the progress the Bureau is making in establishing national mortgage servicing standards. Cordray said the CFPB is making good progress, highlighting the rule proposal they recently issued, which he noted “will be finalized by January.” Cordray added that the proposed rule implements everything that Congress required them to do, but said “there may be room for further work in this area.”
For testimony and a webcast of the hearing, please click here.