Ed's Blog

We oppose latest effort to weaken CFPB, other bank regulators

By Ed Mierzwinski
Consumer Program Director

Today, the House Financial Services Committee holds its latest cattle-call markup of a package of industry-backed bills designed to weaken consumer, taxpayer, depositor and investor protections. The PIRG-backed Americans for Financial Reform sent up a letter opposing 7 of the 10 bills on the agenda. Excerpt:

"These bills all move in the direction of less accountability for Wall Street, which is a move in precisely the wrong direction. The financial crisis of 2008 – and continuing examples of financial sector malfeasance and irresponsibility since then -- have made the need for more vigorous regulation painfully clear. Instead of working to eliminate consumer, investor, and systemic protections, the committee should focus on completing the job of strengthening them. This would increase the safety and stability of our economy and make financial markets work better for the public. It is also consistent with the views of the American public. Polls show that an overwhelming majority of the public, on a bipartisan basis, wants more accountability and oversight for Wall Street, not less."

We signed a letter, with AFR and several other leading groups, opposing one of the bills, which while purportedly designed on behalf of small banks and credit unions, simply hobbles the regulators. The goal of  HR 2896, the TAILOR (Taking Account of Institutions with Low Operation Risk) Act is not really to help the small institutions, it is actually to weaken the broad authority regulators have to protect the public. It is designed to add redundant busywork to the Consumer Financial Protection Bureau's efforts to close loopholes and protect the public from exploitation of the kinds of loopholes that led to the Great Crash of 2008 and the subsequent economic downturn.  By the way, CFPB and other regulators (Federal Reserve, OCC, FDIC) are already required to "tailor" regulations for small or rural banks and credit unions. Download the letter from U.S. PIRG and other Americans for Financial Reform coalition members. Excerpt:

"The undersigned consumer groups oppose the Taking Account of Institutions with Low Operation Risk Act of 2015 (H.R. 2896) and amendments that will put consumers at risk from dangerous products or practices and undermine the established notice and comment process in place for financial regulations. If adopted, the TAILOR Act could allow financial institutions to justify and exploit potentially dangerous loopholes, create confusion in the marketplace and cause unnecessary delays in the adoption of important consumer protections. Prudential and consumer regulators already have broad discretion in the application of their rulemakings. The proposal, review and comment process is the appropriate means through which particular accommodations should be considered, as they have been throughout the development of regulations under Dodd-Frank. We urge you to vote no on H.R. 2896 and any amendments.

HR 2896 purports to simply require regulators to ‘tailor’ rules to the specific risks of financial institutions. But regulators have already taken extensive actions to adjust and modify their regulations to be appropriate for particular institutions and financial products, and are already required to consider such issues through the notice and comment process. Since an appropriately 'tailored' approach to regulation is already in place, the main effect of H.R. 2896 would be to add numerous new 'cost benefit' type requirements that would block needed regulatory actions in the future and force banking regulators to conduct a burdensome and time-consuming re-analysis of every single consumer and financial protection they had passed under the Dodd-Frank Act, the CARD Act, and other recent consumer protection laws."

 When reporters ask me my recommendations about banks, my answer is simple: "Bank at a credit union, not at a bank. If you absolutely cannot find a credit union to join (you'd be surprised how easy it is to qualify for membership), then bank at a small community bank." Most consumer advocates say the same thing. Yet, for whatever unfathomable reason, credit union and small bank lobbyists persist in attacks on the CFPB and, indeed, all regulation. Their enmity goes back way before the CFPB was even proposed.

In a speech before the Credit Union National Association last week, CFPB director Richard Cordray expressed his views on the conundrum:

"It is time for credit unions, and CUNA, to wake up and smell the coffee: the Consumer Financial Protection Bureau is not your enemy; on the contrary, it is an important new friend and ally. Some of you may have smiled and elbowed your neighbor when you just heard me say that. But it is the truth, and it is high time we all had the courage to face the truth and adjust our views to accommodate it."

Also in that speech, Director Cordray outlined the innumerable actions that the CFPB has already taken to assist small banks and credit unions and "tailor" its regulations to help them,  because the smaller institutions pose less risk and operate differently than the mega-banks:

"As I noted earlier, we recognize that smaller creditors, including most credit unions, operate differently from larger financial institutions. And we continue to look at, learn about, and act upon the challenges faced by smaller creditors that are striving to maintain their traditions of flexible yet responsible lending. It is an invaluable service to consumers, especially those in America’s smaller communities and rural areas, such as the part of Ohio where I grew up and still live with my family today. So when you raise concerns, we will listen. For example, last September, after we received comments and feedback from credit unions and others that the lines we had drawn were too narrow for small creditors, the Bureau finalized a rule to broaden the definitions of “small creditor” and “rural area.” We raised the loan origination limit for small-creditor status for first-lien mortgage loans fourfold, from 500 to 2,000 per year. And loans held in portfolio by smaller creditors and their affiliates do not now even count toward the limit. It also adds a grace period so that any creditor who exceeded this limit would not have its status adjusted until April 1 of the next year. Small creditor provisions already covered about 95 percent of all credit unions."

The idea of the CFPB needs no defense, only more defenders.

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