RSSRichard Cordray, President Obama’s nominee for director of the Consumer Financial Protection Bureau, cleared the first hurdle on Oct. 6 as the Senate Banking Committee voted along partisan lines to approve his nomination.
He’ll need 60 votes in the full Senate, and 44 Republican senators have already vowed to oppose any nominee unless the CFPB is restructured.
“I can’t imagine anybody’s going to be confirmed as head of the consumer protection agency until an appropriate check and balance is put in place,” Sen. Bob Corker (R-Tenn.) told National Public Radio.
Earlier in the week, members of the Senate Subcommittee on Financial Institutions and Consumer Protection met “to examine how increased oversight and transparency of financial products can create jobs and support financial stability,” according to a press release from subcommittee chairman Sen. Sherrod Brown (D-Ohio).
Several academics and a credit union CEO were among those who testified at the Oct. 4 hearing, titled “Consumer Protection and Middle Class Wealth Building in an Age of Growing Household Debt.”
Many of them spoke about practices outside of community banking –such as predatory lending, “robo-signing” leading to foreclosures, and debt collection abuses. However, they also brought up concerns that affect mainstream financial institutions: credit card disclosures, checking account disclosures, overdraft protection programs and the reordering of transactions related to overdrafts.
The financial crisis has reduced the amount of outstanding consumer debt by about 4.2 percent since the beginning of 2008, according to Federal Reserve data cited by law professor Robert Lawless, University of Illinois College of Law. However, private household debt – which includes mortgages – has increased 220 percent in the past 25 years and 374percent in the past 50 years in the United States, he said.
“Compared to other countries, Americans are a deeply indebted people,” Lawless testified. Americans had total household debt of $44,041 for every man, woman and child in the nation, according to recent data from the Organization for Economic Cooperation and Development (OECD).
Lawless described abuses in reverse mortgages, mortgage servicing, and debt collection as “just a few of the current problems that demonstrate how a comprehensive federal regulator can help protect consumers.”
G. Michael Flores, CEO of Bretton Woods, Inc., said his firm is in the initial stages of a new study on the impact to the middle class’s access to bank payments and credit facilities. The company has completed studies over the last decade on overdraft issues and the emergence of prepaid cards.
Flores explained that banks have not been able to devise what he called a 21st century business model because of the squeeze on net interest margins and declining fee income sources due to regulation.
“Banks cannot profitably originate and underwrite individual small dollar loans. Our analysis indicates that $1,500 in the breakeven point using data from the FDIC Small Dollar Loan Program,” according to his written testimony.
Addressing the issue of small-dollar loans, Douglas Fecher, president and CEO of Wright-Patterson Federal Credit Union in Fairborn, Ohio, spoke of the need to reign in the unregulated.
“There are abuses going on that need to be curtailed. We have a branch near a pawn shop and a payday lender, and the only one that is regulated is us. The CFPB needs to address that fact,” he said.
Susan Weinstock, project director at The Pew Charitable Trusts, explained the Pew Health Group’s Safe Checking in the Electronic Age Project. The group studied 250 checking accounts offered by the 10 largest banks and concluded that consumers need a clearer disclosure of checking account fees and terms; they need a complete disclosure of all overdraft options; and “transaction reordering” should be prohibited.
Also testifying at the hearing were:
- Atif Mian, associate professor of economics and finance, Haas School of Business and Department of Economics, University of California, Berkeley;
- Katherine Porter, professor of law, University of California-Irvine School of Law;
- Ray Boshara, senior advisor, Federal Reserve Bank of St. Louis; and
- Ida Rademacher, vice president, Corporation for Enterprise Development.
