Consumer Financial Protection Bureau (CFPB). AFSA seeks the following reforms:
- Subject the CFPB to the annual appropriations process – removing its autonomous funding mechanism – to enhance congressional oversight of its budget;
- Place the CFPB under a bipartisan commission with state regulatory representation;
- Subject all new regulations to commission approval;
- Impose stronger checks on CFPB regulations to avoid adverse impacts on the financial system, institutions and consumers;
- Include a statute of limitations of two years for looking back at past practices and for bringing an action going forward;
- Eliminate cost recovery by CFPB and states as prevailing party in any enforcement actions;
- Require evidentiary standards for enforcement actions based on consumer complaints; and
- Seek to eliminate the amorphous concept of an “abusive” standard (which was added to “unfair and deceptive” by the Dodd-Frank Act).
Reform the Regulatory Process. AFSA believes the entire federal regulatory process is in need of comprehensive, systemic reform. The proposed “Regulations from the Executive In Need of Scrutiny (REINS) Act,” as passed by the House of Representatives in 2011, would prevent federal agencies from implementing major regulatory initiatives absent congressional approval. The bill provides that new rules that impose annual economic costs in excess of $100 million or otherwise have significant economic or anticompetitive effects cannot take effect unless Congress passes a Joint Resolution approving the regulation within 90 legislative days of the rule’s submission. Enactment of the REINS Act would restore congressional oversight of federal policymaking.
Supervisory Privilege. The CFPB possesses broad authority over covered persons involved in the provision of consumer credit. Under the law, no applicable privilege is waived by an institution that submits nonpublic information to either the CFPB or a federal or state bank agency in the course of supervision. In order to establish parity between depository and nondepository institutions, Congress should extend this protection to state regulators of nondepositories – with whom the CFPB is expected to exchange privileged and confidential information regularly.
Credit Pricing. Risk-based pricing is the cornerstone of the American consumer credit system and democratizes access to credit. AFSA opposes efforts that restrict lenders’ ability to price credit based on risk. While AFSA stands shoulder to shoulder with lawmakers and regulators on the goal of fighting discrimination in lending, we examine the details of such proposals to make sure that there are not, in fact, other negative consequences for borrowers.
Demographic Data. AFSA believes efforts to require non-mortgage lenders to collect race and gender data might decrease consumer choice and increase the cost of credit.
Rate Caps. AFSA seeks to work with Congress and the Administration to preserve consumer access to small-dollar loans. By capping annual percentage rates (APR), defined to include interest and fees, the government could eliminate access to short-term, unsecured credit for most Americans. In addition, AFSA remains concerned about efforts to amend the definition of APR under TILA to include ancillary products.
Bankruptcy. AFSA supports the bankruptcy code as currently written. Allowing judges to restructure loans would inhibit the re-establishment of the asset-backed securities marketplace.
Arbitration. AFSA values alternative dispute resolution, such as arbitration, as a fair and effective mode of settling agreements between borrowers and lenders. Proposed changes to the Federal Arbitration Act would retroactively rewrite millions of existing voluntarily accepted private contracts, eliminating access to cheaper, timelier and more confidential resolutions for consumers.
Mortgage Lending. AFSA continues to pursue a comprehensive approach to protecting consumers against unfair and deceptive mortgage lending practices through strong national standards that allow innovation in product development to ensure affordable access to credit for all Americans. Additionally, we support providing mortgage servicers with the greatest amount of flexibility in helping borrowers stay in their home.
Industrial Banks. Industrial banks (or industrial loan companies) have a 100-year history in consumer and commercial lending and are subject to the same consumer protection laws as other financial institutions. AFSA encourages Congress to provide the FDIC with any regulatory tools needed to maintain effective prudential oversight of industrial banks.
Data Security. AFSA urges Congress to move toward a uniform national standard for industry to safeguard personally identifiable information and efficiently deal with data breaches.
Credit Insurance and Debt Cancellation Products. AFSA recognizes the critical role that credit insurance, debt protection, and credit protection products play in providing financial security to borrowers throughout the country. AFSA resists efforts to limit consumer choice through unfair or misleading regulatory disclosure or other requirements.
Derivatives. The definition of “swap dealer” and “major swap participant” should be sufficiently narrow to avoid capturing legitimate end-users of derivatives. The Dodd-Frank Act carves out captive finance companies from the definition of “major swap participant,” subject to a 90% captive activity threshold. AFSA supports amending the law to lower this threshold to 51%. Whatever the threshold, it must be clearly defined and should provide a reasonable corrective process for entities that temporarily drop below the threshold.
Serving the Military. AFSA is committed to helping educate servicemembers, veterans and their families to improve personal financial literacy. The association and its members will engage with the Department of Defense, the CFPB’s Office of Servicemember Affairs and other policymakers who seek to empower individuals to make sound financial decisions and avoid abuse and fraud.