Last month, a bipartisan group of 70 Senators were signatories to a letter sent to Director Cordray urging the CFPB to “carefully tailor its regulations to match the unique nature of community banks and credit unions.”  In their letter, the Senators referenced Dodd Frank Section 1022(b)(3)(A) which allows the CFPB to create exemptions from its rules for any class of covered persons, service providers, or consumer financial products or services as the CFPB “determines necessary or appropriate to carry out the purposes and objectives” of the Consumer Financial Protection Act after taking into consideration certain specified factors.  The Senators stated that they “believe the CFPB has robust tailoring authority and ask that you act accordingly to prevent any unintended consequences that negatively impact community banks and credit unions or unnecessarily limit their ability to serve consumers.”

In a letter sent last week responding to the Senators’ letter, Director Cordray acknowledged the CFPB’s exemption authority under Section 1022.  However, to the extent the Senators were suggesting that the CFPB create wide-scale exemptions for community banks and credit unions, Director Cordray did not appear to be receptive to that concept.  He stated only that “[a]s I have expressed in the past, the Bureau recognizes that community banks and credit unions did not cause the financial crisis.  For that reason, the Bureau is committed to ensuring that the regulations that we promulgate are well-tailored and effective.”

Most of Director Cordray’s letter consisted of a list of various actions the CFPB has taken as part of its “commitment to achieving tailored and effective regulations.”  For example, Director Cordray described the small creditor safe harbor in its qualified mortgage loan (QM) rule, the exemption for small creditors in rural and underserved areas from certain requirements applicable to QMs and HOEPA loans, exemptions for small mortgage servicers from certain TILA and RESPA requirements, and HMDA exemptions for lower-volume depository institutions.  He also noted the CFPB’s obligation to conduct SBREFA panels for rules that will have a significant impact on a substantial number of small entities and referenced various CFPB resources to help financial institutions understand CFPB rules.