In a letter to 70 Senators on August 17, Consumer Financial Protection Bureau Director Richard Cordray said the bureau is committed to regulation tailored for community banks where possible. Cordray’s letter came in response to a letter from the same Senators, which included Democratic nominee for Vice President, Virginia Sen. Tim Kaine, which called the CFPB to exempt community banks from rules as allowed by the Dodd-Frank Act.
“We believe the CFPB has robust tailoring authority,” the Senators wrote, “and ask that you act accordingly to prevent any unintended consequences that negatively impact community banks and credit unions or unnecessarily limit their ability to serve consumers.”
Dodd Frank, the Senators noted, “explicitly grants the CFPB the authority to tailor regulations in Section 1022(b)(3)(A) by allowing the CFPB to ‘exempt a class’ of entity from its regulatory requirements.”
Cordray responded that Dodd-Frank, in Section 1021, also requires the bureau to “ensure that all consumers have access to markets for consumer financial products and services, and that such markets are fair, transparent, and competitive,” he said. The bureau must enforce consumer protection laws “consistently, without regard to the status of a…depository institution, in order to promote fair competition.”
The bureau has fulfilled its obligation under Dodd-Frank to tailor regulation, Cordray said. As part of the bureau’s commitment to achieving tailored and effective regulations, the bureau has:
● expanded the legal safe harbor for small creditors under its mortgage rules. A community bank has a broader safe harbor for qualified mortgage loans than do larger creditors;
● allowed certain community banks that qualify as rural lenders — under the bureau’s mortgage rules for rural and underserved areas — special treatment for escrow accounts and balloon payments; also allowed community banks to received qualified mortgage status for mortgages with balloon payments for a two-year transition period;
● expanded the rural and underserved exemption of its mortgage rules to apply to more community banks; among other exemptions. (Read Cordray’s letter and the rest of the examples he provided here.)
“As I have expressed in the past,” Cordray said, “the bureau recognizes that community banks and credit unions did not cause the financial crisis. For that reason, the bureau is committed to ensuring that the regulations we promulgate are well-tailored and effective,” he said.