In a letter sent last week to Director Cordray, the Chamber of Commerce’s Center for Capital Markets Competitiveness suggested several steps “based upon the actual experiences of numerous individual businesses” for the CFPB to take “to eliminate inefficiency and unjustified burdens in connection with its supervision and investigatory processes.”
In the area of investigations, the Chamber states that the CFPB’s practice is to issue “extremely expansive” requests for information. Noting that it is unaware of another agency that “routinely issues such broad demands,” the Chamber urges the CFPB to reconsider its policy and adopt an approach that is consistent with that of the FTC and other federal agencies.
In the area of supervision, the Chamber suggests six steps the CFPB should take to improve the supervisory process, consisting of the following:
1. Improve training of supervision staff to address a lack of experience with the exam process. The Chamber observes that frequent turnover in staff and insufficient training has resulted in dramatically different competency levels among members of supervision teams and between teams and may be the reason exam teams have little decision-making authority.
2. Eliminate inconsistent approaches to exams, such as some entities receiving multi-year schedules of exam plans or quarterly “closing letters” and others not receiving such schedules or letters.
3. Create an end-point to eliminate open-ended exams and improve the closing letter process so that an examined entity has the opportunity to review the letter and identify factual errors before the letter goes to Washington for approval.
4. Clarify the role of enforcement lawyers in the exam process.
5. End misuse of the supervision process through demands for huge amounts of data that can require businesses to incur significant costs, are often unfocused, overly inclusive and not coordinated with other regulators, and may be for the purpose of enhancing the CFPB’s understanding of the marketplace rather than to perform its exam function.
6. End use of the supervisory process in lieu of the notice-and-comment process to create compliance standards.
The Chambers’ suggestions, which we think have considerable merit, are consistent with concerns we have voiced on issues such as the use of civil investigative demands (CIDs) for similarly expansive, unfocused and overly inclusive investigations, the presence of enforcement attorneys during exams and the circumvention of the notice-and-comment process for rulemaking. I am particularly concerned about the CFPB’S practice of not providing the CID target with any specific information about potential violations of law on which the CFPB is focused. Typically, a CID only lists various statutes that the CFPB suspects might have been violated without providing any facts.
Additionally, the CFPB’s consent orders have effectively regulated an entire industry of products–credit card add-on products–without the benefit of the checks and balances that administrative regulations typically require. These consent orders have resulted in many card issuers abandoning the sale of add-on products because of the belief that the CFPB does not like the products, regardless of how valuable the products are to consumers and how fairly they are sold.