The Consumer Financial Protection Bureau (CFPB), Week in Review: June 17 - June 21, 2013
Partnership between CFPB and City of Boston Allows Residents Easier Access to Bureau
On June 18th, the CFPB and City of Boston unveiled a partnership aimed at providing residents instant access to the CFPB by dialing the Mayor’s 24 hour Constituent Service non-emergency hotline. The non-emergency hotline has previously served as a one stop shop for consumers to ask questions about various city services. With this partnership, residents will now be able call that same number with a concern regarding a consumer financial product and be directly transferred to the CFPB.
U.S. Chamber of Commerce Criticizes Data Collection by CFPB
In a June 18th letter, the U.S. Chamber of Commerce chastised the CFPB for its lack of transparency in collecting data from financial institutions as to consumers’ financial transactions.1 Specifically, the Chamber claimed that the CFPB violated Dodd Frank by (1) collecting this information prior to issuing an order or regulation and (2) failing to implement safeguards to ensure that the CFPB is not collecting consumers’ personally identifiable information.2 The Chamber warned that this voluminous data collection not only imposes burdensome, continuing costs (due to the ongoing nature of the production), but “threatens companies with reputational damage, and perhaps litigation exposure, because of significant questions about the Bureau’s ability to maintain the confidentiality of this information as well as the Bureau’s legal authority to require companies to provide it.” The Chamber urged the CFPB to adopt security measures commensurate “to those employed by the federal bank regulatory agencies and other similar government agencies” before resuming collection of sensitive financial records.
Republicans on House Oversight and Investigations Subcommittee Question CFPB Oversight and Accountability
On June 18th, the Republican Majority of the House Committee on Financial Services issued a press release that stated “The Oversight and Investigations Subcommittee highlighted the Consumer Financial Protection Bureau’s radical structure at a hearing today, and members continued to express concern that the agency operates without basic oversight and accountability…In the end, this single director can disregard advice and manage as he wishes. He has little accountability to the administration, and even less to Congress; his budget is secure. As a result, it should come as no surprise that the Bureau has operated with less transparency and less concern for fiscal discipline than is appropriate for a steward of taxpayer funds,” said Subcommittee Chairman Patrick McHenry (R-NC). 3
The press release reiterated the Republicans’ longstanding concern that the CFPB’s power is vested in a single director, its appropriations are outside the scope of congressional authority and its budget is outside the control of the administration. “As a result of this lack of accountability, certain expenditures have been called into question, such as the $55 million that has been set aside for renovating the CFPB headquarters building just steps from the White House. Incidentally, $55 million is more than the entire annual construction and acquisition budget for GSA for the totality of federal buildings,” the release stated.
Democrat Ranking Member of the Subcommittee Rep. Al Green (D-TX) and the Full Committee Ranking Member Rep. Maxine Waters (D-CA) both criticized their Republican colleagues for preventing CFPB Director Cordray from testifying at the hearing. Instead, the witness called to the Subcommittee hearing was CFPB Chief Financial Officer Stephen Agostini who testified that the CFPB hired 300 new employees in the 2013 fiscal year and intended to hire at least 300 additional personnel in the next two fiscal years.
At the hearing, the Subcommittee also raised concerns regarding the amount of travel expenses incurred by CFPB employees in the first half of the 2013 fiscal year ($5.9 million), and that the CFPB is not required to follow Office of Management and Budget guidelines, rules and regulations. Further, the Subcommittee criticized the CFPB for failing to participate in the Office of Personnel Management employee viewpoint survey, given that its own annual survey reflected that only 35.6% of employees agreed or strongly agreed with the statement that the CFPB takes steps “to deal with a poor performer who cannot or will not improve.”
CFPB Updates Trial Disclosure Policy
On June 19th, the CFPB updated its trial disclosures policy. The CFPB had previously urged companies to develop “consumer friendly” disclosure forms, by exempting test disclosures from existing regulations for a limited period. The CFPB revised its proposed policy to encourage (1) iterative testing during disclosure trials; (2) additional consumer safeguards; (3) collaboration between companies; (4) pre-submission consultation with the CFPB; (5) innovative delivery methods and (6) privacy protection. The CFPB also invited comments for 30 days on Section A of the revised policy. The Office of Management and Budget will then decide whether to approve the proposed policy.
Director Cordray Addresses Exchequer Club
In June 19th remarks before the Exchequer Club, CFPB Director Richard Cordray maintained that delaying the January 10, 2014 implementation date for the CFPB’s mortgage rules is off the table, and warned industry that “we fully expect all institutions to be in compliance by next January.” Director Cordray defended the ambitious timeline for implementation by noting that “Congress established an outside deadline for the effective date of the rules it directed us to write, and we set the effective date to reflect that deadline.”4
Brushing off pervasive industry concerns that one year is an inadequate period for banks and non-depositary institutions to design and implement robust compliance programs tailored to the new rules, Director Cordray insisted that the mortgage rules were promulgated only after soliciting and “paying close attention to” input from both large financial institutions and community banks. Director Cordray also claimed the CFPB’s regulatory implementation project takes “affirmative steps to help the industry understand our rules.” Among other things, Director Cordray explained that the CFPB is (1) working with prudential regulators to streamline examination guidelines; (2) publishing plain-language compliance guides and (3) distributing a readiness guide that features a checklist of tasks to complete before January 10, 2014.
Letter from Congress Expresses Concerns about CFPB Auto Lending Guidance
In a June 20th letter, Rep. Spencer Bachus (R-AL), joined by 34 House Republicans, raised concerns about recent CFPB auto lending guidance on dealer markup and compensation policies that allegedly contribute to prohibitive pricing disparities. Specifically, on March 21st, the CFPB issued Bulletin 2013-02 purporting to prohibit auto lenders from allowing dealer markups of interest rates, which it contends impermissibly leads to pricing discrimination in violation of the Equal Credit Opportunity Act (ECOA). 5 The CFPB proposed that rather than compensating the dealers with a percentage of the mark up, the auto lenders institute a flat fee structure. However, Rep. Bachus and the other 34 House Republicans said in their letter, “The controls strike us as onerous and unrealistic, and restricting consumer choice is highly problematic. We request that the CFPB forward all studies, analysis, and information it relied upon in developing its guidance document.”
2 Section 1022(c)(4)(B)(ii) of Dodd Frank provides that “in order to gather the information…the Bureau may….. require covered persons and service providers participating in consumer financial services markets to file with the Bureau, under oath or otherwise, in such form and within such reasonable period of time as the Bureau may prescribe by rule or order…….as necessary for the Bureau to fulfill the monitoring, assessment, and reporting responsibilities imposed by Congress.
Section 1022(c)(4)(c) provides that “the Bureau may not use its authorities under this paragraph to obtain records from covered persons and service providers participating in consumer financial services markets for purposes of gathering or analyzing the personally identifiable financial information of consumers.”
5The CFPB targeted the auto lenders, because under Dodd Frank, the CFPB has no direct supervisory authority over auto dealers.