On Wednesday, July 15, CFPB Director Richard Cordray appeared before the Senate Committee on Banking, Housing, & Urban Affairs to answer questions regarding the Bureau’s Semi-Annual Report to Congress and the President, which it published on June 15, 2015.
Dir. Cordray observed that during the six month period covered by the report, from October 2014 through March 2015, the CFPB helped obtain more than $19 million in restitution for consumers through enforcement actions, including $2.5 million in relief for servicemembers for illegal debt collection practices, and more than $32 million in civil money penalties. The report noted that during the same six month period CFPB supervisory actions resulted in financial institutions providing more than $114 million in redress to over 700,000 consumers.
The exchanges between members of the committee and Dir. Cordray tread some familiar ground, such as concerns about renovations to the CFPB’s headquarters and CFPB data collection practices, but a few newsworthy points emerged:
- Arbitration rulemaking to be commenced “in due course”: In response to Ranking Member Sherrod Brown’s questions about the rulemaking efforts he had encouraged the CFPB to undertake following publication of the Bureau’s arbitration study, Dir. Cordray said that the CFPB was “moving ahead” with rulemaking efforts that would address pre-dispute arbitration agreements in consumer financial products or services pursuant to its authority under section 1028(b) of the Dodd-Frank Act. He noted that “in due course” the CFPB would convene “a small business review panel as the first step” in the rulemaking process. (The American Bankers Association, the Consumer Bankers Association and The Financial Services Roundtable (“Associations”) have submitted a joint letter to the CFPB commenting on the arbitration study. In the letter, the Associations assert that the study does not support rulemaking under section 1028 of Dodd-Frank. Ballard Spahr served as counsel to the Associations in preparing the comment letter.)
- Effective date for TILA-RESPA Integrated Disclosure (“TRID”) rule: As we’ve noted before, the CFPB proposed to delay the effective date of the TRID rule until October 3, 2015. In response to concerns expressed by Sen. Tim Scott about requests from Congress for a grace period before industry will be expected to comply with the rule, Dir. Cordray noted that a delay to January, which had been requested by some members of Congress and some companies, would likely introduce new challenges given the “system freezes” that many companies schedule to occur at the end of each calendar year. But he also stated that the CFPB had coordinated with other agencies to ensure an implementation grace period “which may last many months” would be afforded:
We went out and worked with the other agencies to get an agreement, which we have, that the early examination of this will be diagnostic and corrective. We don’t think people are out there, are going to be trying to exploit consumers on something like this. They’re just going to be trying to get it right. And so for the first period, which may last many months, the other agencies and ourselves as we look at this, if we see errors, we will point out what they are and how they should be corrected. We will not be looking to be punitive toward people. We have said that explicitly. I will say it again on the record here today to you that is how it will be. I can tell you that’s what we said about the mortgage rules two years ago and that is how it has been and nobody has said otherwise or complained and we’ve taken that to heart here as well.
- Military Lending Act rulemaking by Department of Defense (“DoD”): In response to questions from Sen. Jack Reed regarding new rules under the Military Lending Act that were proposed by the DoD last year, Dir. Cordray telegraphed that he expects the new rules to be published by the DoD “very shortly”: “I believe that very shortly we’re going to have a new set of rules and servicemembers will have new important protections that they probably should have had several years ago.”
- Rulemaking regarding payday loans and similar credit products: Several committee members addressed this pending rulemaking within their questions. While no new details about the rules under consideration or the anticipated timeframe for publication of the proposed rules were disclosed, there was bipartisan agreement that the need for access to such credit would endure and that the rules under consideration by the CFPB should acknowledge that. Sen. Heidi Heitkamp observed that the CFPB would need to strike a balance between protecting consumers and ensuring access to credit, noting that “sometimes people need diapers, and sometimes they need gas, and they have a flat tire and they can’t fix it.” For such “folks that are living on the margin[,] I understand the need to protect people, but I also understand the need to have some form of small dollar, short-term lending.” Chairman Richard Shelby agreed, noting that with the regulations under consideration, “we don’t want to drive the small, marginal consumer underground where there is no regulation, because that’s what we’ve had before . . . . [The thrust of the question is] how do we do this without overregulating this and how do we have access to some type of credit for these [consumers] because there will be credit, it’s a question is it going to be legal or illegal.” Dir. Cordray affirmatively acknowledged Chairman Shelby’s comment.
The hearing failed to provide any news of note on other significant issues, including the evolution, if any, of the Bureau’s rulemakings on prepaid cards or the progress of pre-rulemaking activities on debt collection.