In a statement submitted to the House Committee on Small Business for its August 1 hearing, the American Bankers Association criticized the Consumer Financial Protection Bureau for its lackluster compliance with the Small Business Regulatory Enforcement Fairness Act. The act required that the CFPB conduct a panel review before combining TILA and RESPA mortgage disclosures. Richard Cordray, the Bureau’s director, appeared at the hearing to testify on the CFPB’s implementation of a small business panel review process prior to producing the combined disclosures.
A small business panel review is required by the SBREF Act, as amended by the Dodd-Frank Act, whenever the CFPB expects a rule will have significant economic impact on a substantial number of small banks. Dodd Frank requires the CFPB to form and chair a panel alongside representatives of the Small Business Administration and the Office of Management and Budget. The panel meets with representatives of small banks to be affected by the new requirements. These small entity representatives are known as SERs.
While the CFPB did conduct a small business panel review, the ABA took issues with the “unnecessarily limited” two weeks the CFPB gave SERs to prepare for the meeting on the TILA/RESPA proposal. SERs were also given a meager week to provide written comment after the panel convened. “Small business men and women work long hours and have many demands on their time. A two-week preparation period is simply inadequate… The Bureau should allow several months after small bank representatives are identified and before a panel is officially convened,” the ABA said. “SERs must be afforded adequate time to consider the proposals, to provide detailed and specific feedback, and to reach consensus on alternative approaches to achieve the desired regulatory goal.”
The ABA believes the CFPB diminished the SERs ability to react to proposals and the panel report “reflects the rushed timetable.” In particular, ABA believes further consideration was needed to determine what constitutes an application. Application triggers early disclosures and banks then have statutory liability for inaccuracies in those disclosures. Rather than weigh in on this important compliance issue, the panel only suggested the Bureau “solicit public comment,” a suggestion ABA believes falls short of Dodd-Frank’s requirement that the panel offer any alternatives which accomplish the objective while minimizing the cost of credit for small entities.
The panel report showed reluctance by the SERs to advocate for small entities by offering recommendations for specific steps to reduce regulatory cost, according to ABA. In its report on the RESPA/TILA integration, the panel said it “recognizes that statutory requirements limit the discretion of the CFPB.” However, a closer look at the Bureau’s RESPA/TILA discussion shows it has “considerable discretion.” The new requirement for precise and final fee disclosures in advance of settlement is not found in the original RESPA/TILA statutes.
The ABA believes the CFPB, rather than the panel or the SERs, should be required to gather costs from vendors for the systems and software needed to comply with its rules. The panel report lacked this kind of concrete data. If the Bureau has “no real information or data” on compliance cost, then it is not likely to reduce compliance cost brought on by its rules, ABA argued. “The Bureau – whose access is far superior to that of small entities – should have an affirmative duty to obtain this information…We believe that the panel should have insisted that the Bureau provide specific information on its [cost expectations]. Then the SERs could have reacted to this information.”