There’s a New Sheriff in Town
One of my treasured childhood memories is of the summertime, when my father would come home from the bank for lunch and turn on a rerun episode of his favorite TV sitcom, The Andy Griffith Show. To my delight, within the past couple of years, my children have discovered these reruns, presumably while looking for something to occupy their time when avoiding homework during an imposed video game moratorium. They have displayed the same genetic disposition toward this television classic and, within a short period of time, watched all episodes ever created before moving on to its equally folksy spin-off, Gomer Pyle, USMC. Everyone in my house agrees, though, that there is no better television character, past or present, than the lovable yet laughable Barney Fife.
In one of our favorite episodes, “Goodbye, Sheriff Taylor,” which originally aired on November 3, 1964, as the 10th episode of season five, Sheriff Andy Taylor of Mayberry is contemplating a job in nearby Raleigh, and during his deliberation he lets Barney serve as sheriff for a day in order to see whether he can handle the responsibilities. Needless to say, Barney’s experience in and preparedness for the position do not match his enthusiasm for the responsibilities of the job, and the experiment fails miserably, ending with a hopeless traffic jam in the middle of Mayberry.
The Biden administration is just over 90 days old, but its banking regulators are already exhibiting the same level of unbound enthusiasm for their newfound authority as Deputy Fife did. Things kicked off in March, when the Federal Deposit Insurance Corporation (FDIC) released its “Strategic Plan to Reinforce Diversity, Equity and Inclusion within the Agency and Among the Financial Institutions It Supervises,” followed soon thereafter by the FDIC’s “Financial Institution Diversity Self-Assessment Announcement” through FIL-17-2021. These signaled a renewed focus within the agency on monitoring and policing financial institution diversity and enforcing related reporting requirements for banks.
The Consumer Financial Protection Bureau (CFPB) quickly followed suit with a series of administrative pronouncements of its own. On March 3, 2021, it released a notice of proposed rulemaking to delay the mandatory compliance date for the General Qualified Mortgage rule adopted by the CFPB at the end of the Trump administration, which was meant to address the impending phase-out of the GSE Patch, and signaled a desire to reconsider this regulation altogether. Soon thereafter, on March 9, 2021, the CFPB issued an interpretive rule clarifying that the prohibition against sex discrimination under the Equal Credit Opportunity Act and Regulation B includes sexual orientation discrimination, based on the Supreme Court case of Bostock v. Clayton County, Georgia, 140 S.Ct. 1731 (2020), which applied Title VII of the Civil Rights Act, a different law entirely.
Then, on March 11, 2021, the CFPB rescinded one of its own policy statements, originally issued on January 24, 2020, regarding the prohibition on abusive acts or practices, which was adopted during the Trump administration. That policy statement attempted to establish more of a cost-benefit standard for enforcement regarding abusive acts or practices, and stated that the CFPB would decline to seek civil money penalties in certain circumstances where the financial institution made a good-faith effort to comply with the standard. That was followed by a statement from Acting Director Dave Uejio, warning banks that the CFPB will carefully monitor any offset of overdrafts against Economic Impact Payments made by the federal government to consumers under the American Rescue Plan, despite the fact that the legislation itself had no such prohibition.
Finally, the CFPB, through a series of statements, warnings, proposed rules, and interim final rules, warned mortgage servicers to avoid foreclosures and evictions; suggested a pre-foreclosure review period applicable to all mortgage servicers (not just federally backed mortgage loans), which would generally prohibit the beginning of mortgage foreclosure procedures until after December 31, 2021; and required debt collectors to provide written notice to tenants of their rights under the Centers for Disease Control and Prevention (CDC) eviction moratorium, despite the fact that some recent federal court decisions have found it to be either unconstitutional or outside the statutory authority of the CDC. See Terkel v. Centers for Disease Control and Prevention, No. 6:20-cv-00564, 2021 U.S. Dist. LEXIS 35570, 2021 WL 742877 (E.D. Tex. Feb. 25, 2021); see also Skyworks, Ltd. v. Centers for Disease Control and Prevention, No. 5:20-cv-2407, 2021 U.S. Dist. LEXIS 44633, 2021 WL 911720 (N.D. Ohio Mar. 10, 2021).
Like good ole Barney, the new banking regulators of the Biden administration are eager to show the American public that the “new sheriff” is up to the task, and that its vigorous pursuit of the administration’s agenda will bring much-needed law and order to banking outlaws that look to exploit the downtrodden during the trying days of this pandemic. Whether or not this enthusiasm is necessary to serve the greater good is a question beyond my expertise, but one cannot help but wonder if community banks have reason to worry that this newfound enthusiasm for consumer rights, and the compliance burdens resulting from it, may end with a “traffic-jam” in the credit markets for those same consumers that the regulations are intended to help. It is a common community bank complaint, much older than the story of Barney Fife, but one that is often forgotten by the powers-that-be.