Representatives from the two largest trade associations representing the banking industry recently testified before Congress expressing concerns about the Consumer Financial Protection Bureau. On July 19, Albert C. Kelly, Jr., of the $1.3 billion SpiritBank in Bristow, Okla., testified on behalf of the American Bankers Association before the U.S. Senate’s Committee on Banking, Housing and Urban Affairs. On July 28, the Independent Community Bankers of America submitted written testimony to the U.S. House of Representative’s Small Business Subcommittee on Investigations, Oversight and Regulations.
Kelly advocated for structural changes to the CFPB designed to increase the Bureau’s accountability, encouraged it to focus on gaps in existing regulatory supervision, and urged it to improve consistency in the application of consumer protection standards.
“There are several features of the Bureau that make improved accountability imperative,” Kelly testified. “In addition to the weakening of any connection between the Bureau’s mission and safety and soundness concerns, Dodd-Frank gave the Bureau expansive new quasi-legislative powers and discretion to re-write the rules of the consumer financial services industry based on its own initiative and conclusions about the needs of consumers. The prerogative of Congress to decide the direction and parameters of the consumer financial product market has essentially been delegated to the Bureau. The resulting practically boundless grant of agency discretion is exacerbated by giving the head of the Bureau sole authority to make decision that could fundamentally alter the financial choices available to customers.
“Furthermore,” Kelly continued, “the proliferation and fragmentation of enforcement authority that Dodd-Frank has distributed among the Attorneys General in every state and the prudential regulators unleashes countless competing interpretations and second-guessing of the supposed baseline ‘rules of the market.’ This will result in complicating and conflicting standards.”
Kelly said the ABA believes a “board or commission” should be created to oversee the Bureau’s director. “Having only one Senate-confirmed director vests too much power in one person,” he said.
Next, Kelly said the Bureau should direct its resources “to the glaring gap in regulatory oversight – a failure to supervise and pursue available enforcement remedies against non-bank lenders committing predatory practices or other consumer protection violations.” He said “ABA sees value in Section 1016 (c)(6) of the Dodd-Frank Act requiring the Bureau to report on actions taken with respect to covered persons which are not credit unions or depository institutions.”
Kelly concluded by making three recommendations designed to bring uniformity to consumer protection standards:
- Adopt statutory language prohibiting states from imposing additional consumer protection requirements without meeting the same cost benefit, credit access and burden reduction objectives that Dodd-Frank imposes on the Bureau;
- Adopt statutory language precluding prudential regulators or enforcement authorities from establishing rules, guidance, supervisory expectations or prosecutorial actions that extend obligations with respect to consumer financial products or services beyond requirements contained in Bureau rules; and
- Adopt statutory language limiting State Attorneys General from seeking remedies of any conduct by a covered person occurring prior to the last exam report date of any exam by the Bureau or a prudential regulator.
ICBA in its testimony said it is concerned about the potential impact of the CFPB on community banks’ ability to provide credit to small businesses.
“While we are pleased the Dodd-Frank Act allows community banks with less than $10 billion in assets to continue to be examined by their primary regulators, ICBA remains concerned about CFPB regulations, to which community banks will be subject. ICBA strongly opposed provisions in the Dodd-Frank Act that excluded the prudential banking regulators from the CFPB rule-writing process. Bank regulators are in the best position to balance the safety and soundness of banking operations with the need to protect consumers from unfair and harmful practices and provide them with the information they need to make informed financial decisions,” the trade group said.
Like the ABA, ICBA seeks structural changes which would put the CFPB under the supervision of a commission. ICBA said it supports the Consumer Financial Protection Safety and Soundness Improvement Act (H.R. 1315) which calls for CFPB to be governed by a five-member commission rather than a single director. “ICBA has pressed for a commission structure from the very beginning of the CFPB debate,” the group said. “Commission governance would allow for a variety of views and expertise on issues before the CFPB and thus build in a system of checks and balances that would be absent in a single director form of governance. It would help ensure the actions of the CFPB are measured and non-partisan and would result in balanced, high quality rules and effective consumer protection.”
ICBA also said the legislation would strengthen prudential regulatory review of CFPB rules “by reforming the voting requirement for a Financial Stability Oversight Commission veto from a two-thirds vote to a simple majority, excluding the CFPB Director, and change the standard to allow for a veto of a rule that “is inconsistent with the safe and sound operations of United States financial institutions.”