On March 9, 2016, Consumer Financial Protection Bureau (“CFPB”) Director Richard Cordray outlined the CFPB’s progress and future plans to the Consumer Bankers Association (“CBA”). Cordray touted the CFPB’s great success despite pushback from the CBA and others from the financial industry. Cordray was careful, however, to note that the CFPB has taken the CBA’s criticisms to heart and applied some of them to improve the CFPB’s programs and regulations.
Cordray’s remarks deflected criticism that the CFPB has not been clear enough in issuing rules and has instead focused on providing guidance through enforcement actions. Cordray noted that the CFPB’s goal through its enforcement actions has been to work “toward a pattern of actions that conveys an intelligible direction to the marketplace, so as to create deterrence that can be readily understood and implemented.” He also claimed that courts have noted that “trying to craft specific rules to root out fraud or untruth is a hopeless endeavor,” as no set of regulations could serve as a catch-all against “dishonest schemers.” These comments suggest the CFPB will continue to take an enforcement-based, not regulatory-based, approach to changing the industry’s practices.
Cordray also illustrated positive developments for consumers in the credit card market. Cordray attributed the improved consumer credit card market to the “trifecta” of “improved regulation, improved industry practices, and more cautious consumer behavior.” He explained that, contrary to the CBA’s concerns, improved regulations have led to increased access to credit, albeit on more consumer-friendly terms. Cordray further praised the CBA, noting, “We also see financial providers doing a better job of serving their customers and treating them well,” and noting that in many cases banks implemented additional, non-required reforms that resulted in a better consumer experience.
Cordray also praised developments in the mortgage market. Cordray credited the CFPB for “dramatic reforms” that he claims have successfully walked the tightrope between reining in irresponsible practices and avoiding the creation of a regulatory environment that would cause mortgage credit to completely dry up. While Cordray admitted that the reforms have caused “minor consolidation in some parts of the mortgage market,” he insisted there has been no “mass exodus” of lenders. He emphasized that “sensible regulation that includes substantial consumer protections has begun to foster greater trust by consumers in the financial marketplace.” He complained that credit is still too tight, however, and seemed to encourage lenders to make mortgage credit more freely available, to help with “rebuilding a key marketplace that failed this country so brutally less than a decade ago.”
Next, Cordray outlined the CFPB’s agenda going forward: (1) to increase regulation of non-bank lenders that provide the same services as currently regulated bank lenders; (2) to finalize a rule protecting prepaid accounts and propose rules for small-dollar loans such as payday loans, auto loans, and “certain installment loans;” (3) to improve on the “incidence and transparency” of overdraft fees; (4) to address ongoing concerns with debt collection practices, particularly among third-party debt collectors; (5) to “establish a rule governing the collection and publication of data on small business lending” and find a way to manage the data that is collected; (6) to continue working with the Department of Justice to address discrimination in auto lending; and (7) to “enhance checking account access and accuracy of the screening process used by depository institutions.”
Cordray concluded by calling on lenders to follow the CFPB’s lead in providing financial education to consumers. Cordray encouraged lenders to lobby for financial education to be a mandatory part of high school curriculums, to implement workplace financial education, and to “educate older Americans and those who care for them about the new and more acute financial challenges they will face as they age.”
Cordray’s full remarks can be found here.
