In three separate meetings with the Consumer Financial Protection Bureau, the Community Bankers Association of Illinois has learned new details about the Bureau and has offered suggestions to diminish its impact on community banks.
The first meeting between the association and the Bureau took place when Elizabeth Warren was acting director in 2011. The second and third took place when Director Richard Cordray met with CBAI in September and again on Dec. 5. These individual meetings with community bank associations are the second avenue the Bureau has used to reach out to community banks. The CFPB also has created a community bank advisory council, a committee of bankers from small institutions which advises the Bureau on industry trends and practices, and regulation. Robin Loftus, executive vice president of the $155 million Security Bank, Springfield, Ill., is chairman of that council.
The meeting in September yielded new information on tiered regulation. Cordray pointed to a need for regulation tailored to smaller banks. But he didn’t give any examples of where the Bureau would use tiered regulation in the future. “He did say that the Bureau is looking to write [tiered regulation] wherever possible,” said David Schroeder, CBAI vice president federal governmental relations.
CBAI leadership also advised Cordray that community banks would benefit from clear communication about the Bureau’s rules and enforcement, Schroeder said. Since the Dodd-Frank Act allows the Bureau to “ride-along” with the prudential regulator on community bank examinations, they are confused about the CFPB’s role writing rules for all banks but only examining those with more than $10 Billion in assets, Schroeder explained. The Bureau often refers to “institutions we supervise” in its rules, “we told them this is insufficient to remove confusion,” he said.
With regard to the Bureau “riding along” on a community bank examination, Schroeder said the Bureau doesn’t have the resources to spend time on community banks. “We asked Professor Warren about the ride-along clause in Dodd-Frank,” he said, speaking of CBAI’s meeting with her in 2011. “She said it is not in the numbers for the Bureau to visit community banks.” Warren said there are 80,000 non-bank companies and 8,000 banks in the United States. With so many and a limited budget, the vast majority of the Bureau’s staff will be looking at non-banks and the largest banks. “She told us that by virtue of numbers, the Bureau naturally will have to focus on those players,” Schroeder said.
CBAI leadership also recommended the Bureau seek positive consumer feedback of exemplary behavior by banks in addition to looking for examples of abuse. “We told them they can correct the perception that the Bureau is looking for ‘gotcha’ moments,” Schroeder said, speaking of the meeting in September. “We also told them that finding positive actors will inform their decision making process. Cordray thought it was an outstanding idea and said [the Bureau] will implement it in the future.”
At the meeting on Dec. 5, bankers focused on mortgage rules. While Cordray confirmed the qualified mortgage rule will be released by Jan. 21, 2013, he gave no indication of special treatment for community banks. The 15 community bankers present requested a safe harbor (rather than a rebuttable presumption) for community banks writing “qualified mortgages.” The bankers also advised that a balloon mortgage which is held in a bank’s portfolio should receive safe harbor protection as a “qualified mortgage.”
For CFPB Journal’s explanation of the difference between a safe harbor and a rebuttable presumption for “qualified mortgages,” click here.
For photos of CBAI’s meeting with Cordray and Warren, click here.