Banking and Finance Law Daily ‘Dictator’ Cordray testifies before Financial Services Committee
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Thursday, March 17, 2016

‘Dictator’ Cordray testifies before Financial Services Committee

By Katalina M. Bianco, J.D.

The House Financial Services Committee held a hearing on the Consumer Financial Protection Bureau’s semi-annual report to Congress on March 16, 2016. The hearing featured the testimony of CFPB Director Richard Cordray and was opened by Chair Jeb Hensarling (R-Texas) who stated, Congress has made Mr. Cordray a dictator. And when it comes to the well-being and liberty of American consumers, he is not a particularly benevolent one.”

In his opening remarks, Hensarling charged that Corday “will presume” to decide whether Americans will be able to take out a small-dollar loan or resolve contract disputes through arbitration. He referred to auto loans, stating, “Already Mr. Cordray has decided that countless Americans should pay more for auto loans based upon junk science and a dubious legal theory of statistical unintentional discrimination.” The committee chair went on to criticize the CFPB’s Qualified Mortgage rule “which when fully implemented will disqualify almost one-fourth of all Americans who qualified for a home mortgage just a few years ago.”

Hensarling dismissed the citing of millions of dollars in fines imposed by the bureau via enforcement actions, stating that this argument is raised by “apologists” for the bureau. Rather, he continued, the bureau “operates as legislature cop on the beat, prosecutor, judge and jury all rolled into one.”

Waters remarks. In her opening remarks, Rep. Maxine Waters (D-Calif), Ranking Member of the Financial Services Committee, expressed views of the CFPB and its director that were in direct contrast to those presented by Hensarling. She praised the bureau’s accomplishments that she said have helped more Americans “participate in a financial system that is fair and strong.” She commended the bureau for the $11.2 billion dollars it returned to consumers through its supervision and enforcement efforts. The lawmaker also highlighted “particularly important efforts” such as its work so far on payday lending, discrimination in the auto lending industry, and the “unscrupulous” for-profit college that “deceived students into taking out expensive private loans and engaging in illegal debt collection practices.”

Cordray testimony on consumer initiatives. In his written testimony, Cordray discussed the efforts that the bureau has undertaken to fulfill its mission mandated by the Dodd-Frank Act as outlined in the CFPB’s latest semi-annual report. First and foremost, the CFPB listens and responds to consumers, a task that is central to its mission, Cordray said. The CFPB director discussed improvements made to the CFPB’s Office of Consumer Complaints and the fact that the bureau has begun publishing consumer complaint narratives. In July 2015, the CFPB launched the first in a new series of monthly reports to highlight key trends from consumer complaints submitted to the agency. Cordray added that the CFPB also is working to provide tools and information intended to develop practical skills and support sound financial decision-making by consumers.

Supervision and enforcement. Discussing the bureau’s supervision and enforcement functions, the CFPB director noted that in the six months since its last semi-annual report, supervisory actions have led to more than $95 million in redress to over 177,000 consumers. During the same period, the CFPB also announced orders through enforcement actions for approximately $5.8 billion in total relief for consumers, along with over $153 million in civil money penalties. Cordray outlined for the committee specific enforcement actions taken by the CFPB during the same timeframe and its partnership with other agencies, federal and local, to enforce consumer compliance laws.

Rulemaking. Cordray listed the bureau’s rulemaking efforts during the past six months, including a final rule defining larger participants of the automobile financing market and defining certain automobile leasing activity as a financial product or service, “which extends the Bureau’s supervision relating to consumer financial protection laws to any nonbank auto finance company that makes, acquires, or refinances 10,000 or more loans or leases in a year, and a request for information regarding student loan servicing.”

The CFPB director said that the bureau “seeks to serve as a resource, by writing clear rules of the road, enforcing consumer financial protection laws in ways that improve the consumer financial marketplace, and by helping individual consumers resolve their specific issues with financial products and services.”

Committee view on hearing. In a release issued after the hearing, the Financial Services Committee provided its view as to key “takeways.” First, the CFPB is not accountable to Congress or the American people because it is not subject to checks and balances. According to the committee, “real” consumer protection puts power in the hands of consumers. Finally, the bureau does have an important mission, and if properly designed and led, it is “capable of great good.” However, when the CFPB acts in ways that are not accountable or transparent, it is “also capable of great harm to the consumers it is supposed to protect.” A link to a video of Hensarling’s questioning of Cordray and the CFPB director’s testimony is included in the release.

Joint trade comments. The Consumer Bankers Association, in conjunction with the American Bankers Association and Financial Services Roundtable, wrote to Hensarling and Waters to express approval of the Financial Service Committee’s continued oversight of the CFPB. The trade associations provided their views on the recent Home Mortgage Disclosure Act rules and upcoming areas of bureau rulemaking: arbitration and small-dollar lending. The associations also had comments on the CFPB’s stance on indirect auto lending.

The trade associations told the legislators that the bureau’s actions have the potential to restrict consumers’ ability to exercise free will while placing additional regulatory constraints on “an already heavily regulated industry.”

Companies: American Bankers Association; Consumer Bankers Association; Financial Services Roundtable

MainStory: TopStory CFPB CommunityDevelopment DoddFrankAct EnforcementActions Loans Mortgages OversightInvestigations

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