House CFPB Hearing Discussion Toggles Between Rulemaking and Legislation


CFPB Director Kathy Kraninger testified before the House Financial Services Committee on how the bureau is working with consumers, industry stakeholders and Congress.

7/30/2020 14:00

Consumer Financial Protection Bureau Director Kathy Kraninger testified before the House Financial Services Committee Thursday in the hearing, “Protecting Consumers During the Pandemic? An Examination of the Consumer Financial Protection Bureau,” focused on the bureau’s semiannual report to Congress, legislative proposals, and the potential impact of the U.S. Supreme Court’s June decision on the bureau’s leadership structure.

ACA International appreciates that Congress and financial regulators continue to hold these hearings and focus on issues impacting the accounts receivable management industry that are an equal focus of ACA’s advocacy efforts.

The semiannual report focuses on activity from Sept. 30, 2020, to March 31, 2020, and a summary since the committee’s last hearing with Kraninger in February 2019.

“Since the first days of the pandemic, the bureau has taken swift action to protect consumers and ensure financial institutions have the direction and flexibility to work with their customers in need,” Kraninger said in her testimony. “The bureau also has taken a number of actions to provide guidance to the financial industry to ensure their resources are aimed at assisting consumers in need.”

Following is an overview of some of the topics discussed during the hearing:

Debt Collection

The bureau’s final debt collection rule is due in October 2020.

ACA submitted a letter in advance of the hearing focused on advocacy efforts to urge the CFPB to finalize key aspects of its Notice of Proposed Rulemaking (NPRM) to implement the Fair Debt Collection Practices Act (FDCPA), which will allow for more timely and efficient two-way communication with consumers. Ranking Member of the committee U.S. Rep. Patrick McHenry, R-N.C., submitted the letter for the hearing record.

“Responsible debt collection is an important part of maintaining access to credit for consumers. Ensuring good access is more important now than ever,” U.S. Rep. Scott Tipton, R-Colo., said during the hearing. “The technology has changed dramatically since the last time the debt collection rules were updated and the CFPB has proposed common-sense reforms allowing mandatory disclosures in a body of an email to be able to ensure consumers have access to important information in a timely manner. Communication is a two-way street and both collectors and consumers should be able to communicate with one another electronically, especially during this pandemic.”

While the rule is finalized, ACA is supporting efforts to modernize the Electronic Signatures in Global and National Commerce (E-SIGN) Act.

Members of the Senate Committee on Commerce, Science, and Transportation introduced bipartisan legislation, the E-SIGN Modernization Act of 2020, July 2 to streamline the process for consumers receiving electronic documents, ACA previously reported.

Tipton asked if the bureau would consider allowing exemption from the E-SIGN Act requirements for validation notices from companies that are otherwise complying with FDCPA requirements.

“We have recognized some of the E-SIGN Act challenges during the pandemic and have offered some flexibility,” Kraninger said. “Our debt collection notice of proposed rulemaking does address electronic communications in addition to obviously continuing to preclude harassing communication (and) trying to facilitate that two-way communication … and enabling individuals to communicate the way they want to communicate.”

Seila Law v. Consumer Financial Protection Bureau and the Bureau’s Leadership Structure

In Seila Law v. Consumer Financial Protection Bureau, the U.S. Supreme Court found that the CFPB’s single director structure is unconstitutional, but the provision allowing the removal of the CFPB director only “for cause” is severable from the rest of the statute.

My colleagues and I believe you have too much power,” McHenry said. “The structure of the bureau is unchecked by Congress and the president. In June, the Supreme Court agreed with what Republicans have said all along. We now have a real opportunity to work together on necessary statutory reforms to the bureau.”

U.S. Rep. Blaine Luetkemeyer, R-Mo., continues to seek a change in the CFPB’s leadership structure with the introduction of legislation to replace the director position with a five-member bipartisan commission in March.

In June, U.S. Senator Deb Fischer, R-Neb., also reintroduced legislation as a companion bill to Luetkemeyer’s proposal.

“I was very gratified that the Supreme Court took up that case and made the decision on it. It created a lot of certainty in the agency’s enforcement actions and around the agency’s mission,” Kraninger said. “I think that is incredibly helpful to the process. I leave those changes in the hands of Congress. We will certainly work to institute those changes.”

Data Privacy and Consumer Access to Data

The CFPB is planning to issue an advance notice of proposed rulemaking (ANPR) later this year on consumer-authorized access to financial records. The announcement follows a symposium the bureau held earlier this year on the topic, which included experts from consumer groups, fintechs, trade associations, financial institutions and data aggregators.

U.S. Rep. Ann Wagner, R-Mo., asked how the bureau plans to address data privacy through that process.

“The primary driver is the consumer should be the one who should authorize the data,” Kraninger said.

Credit Reporting

Legislative proposals presented as part of the hearing seek to delay credit reporting during the COVID-19 pandemic and emergency situations.

“My view is this would weaken, not increase, access to credit,” Tipton said.

Kraninger said the Fair Credit Reporting Act holds accuracy in the system as a high priority and the bureau is tasked with overseeing that as well as reviewing other options to provide alternative and more robust data to help lenders assess borrowers’ eligibility for credit.

She also noted in her testimony that the bureau has developed “prioritized assessments,” which consist of high-level inquiries designed to obtain information from entities to assess the impacts on consumer financial product markets due to pandemic-related issues. These assessments will allow the bureau to identify potential risk to consumers across a large number of entities, while continuing to reduce the burden on institutions and allowing examiners to continue to work safely from their home-duty stations.

The Coronavirus Aid, Relief, and Economic Security Act (CARES) Act passed in March requires lenders to report to credit bureaus that consumers are current on their loans if consumers have sought relief due to the pandemic. The bureau’s policy statement on the bill informs lenders they must comply with the CARES Act. It also encourages lenders to continue to voluntarily provide payment relief to consumers and to report accurate information to credit bureaus relating to this relief. The continuation of reporting such accurate payment information produces substantial benefits for consumers, users of consumer reports, and the economy as a whole.

In her opening remarks, U.S. Rep. Maxine Waters, D-Calif., chairwoman of the committee, asked for clarification on the proactive supervisory and enforcement steps the bureau has taken to protect consumers who have lost income due to COVID-19.

“Our supervisory and enforcement work continues through the pandemic,” Kraninger said, noting the bureau is reviewing financial institutions’ practices for compliance with the CARES Act policy statement.

“We are looking to prevent consumer harm through those steps,” she said.

Legislative Proposals

In addition to hearing testimony from Kraninger, the House committee discussed several legislative proposals, including the Relief for Consumers During COVID-19 Act sponsored by U.S. Rep. Joyce Beatty, D-Ohio.

The bill, according to the hearing memorandum, “would provide for a temporary debt collection moratorium for consumers during the COVID-19 emergency period, and for 120 days thereafter. This would also provide sustainable repayment plans when borrower payments resume and would provide creditors access to a low-interest, long-term loan from the Federal Reserve until borrower payments resume. Similar provisions were included in H.R. 6800, the HEROES Act.”

ACA also shared its position letter on the Health and Economic Recovery Omnibus Emergency Solutions (HEROES) ACT (H.R. 6800) with the House Financial Services Committee.

In addition to Beatty’s proposal, industry-related legislation also discussed during the hearing, many with similar provisions from the HEROES Act, included:

H.R. 6361, the “Relief for Small Businesses and Nonprofits Act,” sponsored by U.S. Rep. Ed Perlmutter, D-Colo.

H.R. 6370, the “Disaster Protection for Workers’ Credit Act,” sponsored by U.S. Rep. Brad Sherman, D-Calif.

H.R. 6741, the “COVID-19 Mortgage Relief Act,” sponsored by U.S. Rep. Lacy Clay, D-Mo.

H.R. 7793, the “Financial Compensation for CFPB Whistleblowers Act,” sponsored by U.S. Rep. Al Green, D-Texas.

ACA is continuing to review the House Financial Services Committee hearing proceedings and will provide additional industry updates for readers and members.

Kraninger also testified before the Senate Committee on Banking, Housing and Urban Affairs July 29. Read ACA’s coverage here.

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