House Subcommittee Continues Critique of CFPB


4/6/2017 3:06 PM

The House Financial Institutions and Consumer Credit Subcommittee met Thursday to examine regulatory due process.

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Critique of the Consumer Financial Protection Bureau (CFPB), its leadership and regulations continued Thursday during a hearing of the House Financial Institutions and Consumer Credit Subcommittee.

Subcommittee Chairman U.S. Rep. Blaine Luetkemeyer, (R-Mo.), a featured speaker at ACA International’s Washington Insights Conference May 2-4, said there are contradictory rules and guidance now from regulators such as the CFPB.

“Financial companies are standing on regulatory quicksand,” Luetkemeyer said. “The director [Richard Cordray] continues to state the bureau has never and would never regulate through enforcement. Now because of the bureau, people need a crystal ball to run their businesses.”

Members of the subcommittee examined due process for financial companies and opportunities for reform of the federal financial agencies, according to the hearing memorandum.

The hearing discussion and questions for the witness panel focused on some of the same themes of Wednesday’s contentious House Financial Services Committee hearing with testimony from CFPB Director Richard Cordray, including the CFPB’s “regulation by enforcement,” language in news releases issued in connection with settlements and enforcement orders, small dollar lending rules and more.

Panel members, in their testimony, also discussed the presence of too many federal regulators for the financial industry and the need for consolidation.

“The system is so cumbersome that some consolidation simply makes sense,” said Norbert Michel, senior research fellow of the Financial Regulations and Monetary Policy Institute for Economic Freedom and Opportunity at The Heritage Foundation, in his opening statements. “The [United States] has too many financial regulators.”

Michel added that there was no shortage of consumer protection prior to the implementation of the Dodd-Frank Act and said the United States is “unusual” for having separate regulators for financial markets.

Subcommittee members and the witness panel also discussed the need for more guidance from the CFPB for companies on its definition of Unfair, Deceptive or Abusive Acts or Practices (UDAAP.)

“The CFPB should be limited to enforcing federal consumer financial laws and regulations,” said Bill Himpler, executive vice president of the American Financial Services Association, in his testimony. “The bureau’s unfair, deceptive, or abusive acts or practices (UDAAP) authority should be removed. The Federal Trade Commission will retain its unfair or deceptive acts or practices authority.”

He added, “The bureau is regulating by enforcement, it is not providing guidelines.”

In response, Luetkemeyer said, “To me this is really problematic.”

Flaws in CFPB’s Consumer Complaint Database

The subcommittee also briefly discussed the CFPB’s Consumer Complaint Database during the hearing.

U.S. Rep. Barry Loudermilk, (R-Ga.), asked the witness panel if the CFPB is trying to “blame and shame companies.”

Himpler noted that the narratives consumers may post when they file a complaint allow for unverified information about companies to be made public.

“This is reputational risk at its finest,” Himpler said. “No one in our industry can afford to take on financial regulators. Once that reputation has been damaged by a consumer protection agency, it’s irreparable”

ACA International has also continuously urged the CFPB to takes steps to address its flawed consumer complaint handling process, including ensuring that the complaint information it shares in the consumer complaint database is based on meaningful, and normalized data. In the May 2016 white paper Methodological and Analytical Limitations of the CFPB Consumer Complaint Database, and its most recent research, A Review of Debt Collection Complaints Submitted to the Consumer Financial Protection Bureau’s Complaint Database in 2016, ACA showed that the flaws in the database – namely bias in the data collection process and incorrect characterization of complaints by industry – render the data near useless for policymaking or developing best practices.

Earlier this year, President Donald Trump signed an executive order requiring extensive review of all financial industry regulations in the Dodd-Frank Act after stating, during an event with business leaders, his administration would be “cutting a lot out of” the 2010 law that created the CFPB, ACA International previously reported.

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