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 including state-level experience overseeing consumer credit;
- 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 enforcement actions on past practices;
- 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 define 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.
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 all 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.
Automobile Finance. Credit extended indirectly by a finance company or depository institution
and arranged by an auto dealer enhances consumer choice and offers rates that meet or beat
direct loans. Dealer participation in setting retail contract rates allows for discretion in pricing and
provides an opportunity for the consumer to negotiate. AFSA cautions against curtailing dealer
participation, which could unnecessarily raise the cost of purchasing a vehicle.
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. Policymakers should aim 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. AFSA remains concerned
about efforts to amend the definition of APR under TILA to include ancillary products.
Ancillary Products. Credit insurance, debt cancellation and credit protection products play a
critical role in delivering financial security to borrowers. AFSA resists efforts to limit consumer
choice through misleading disclosures or other unfair regulatory requirements.
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
and change policy in place since 1925.
Mortgage Lending. AFSA supports 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, while 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 urges the FDIC to resume granting charters to new institutions.
Swaps. The Dodd-Frank Act carves out captive finance companies from the definition of “major
swap participant,” subject to a 90% captive activity threshold that aims to avoid capturing
legitimate end-users. AFSA supports lowering this to 51%. The threshold must be clearly defined
and should provide a reasonable corrective process for entities that temporarily drop below.
Serving the Military. AFSA is committed to educating 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 to
empower individuals to make sound financial decisions and avoid deceptive practices and fraud.
Privacy of Consumer Data. The CFPB has demanded files from the largest payment card issuers
in a vast and unprecedented requisition of account-level data on tens of millions of consumers.
AFSA wonders why a representative sample would be insufficient to permit analysis of trends in
consumer behavior and to spot compliance issues. Maintenance of such comprehensive data risks
harm to consumers, should a data breach result in identity theft and fraudulent activity.
Annual Privacy Notice. Relieve financial institutions from mailing paper privacy notices to their
customers on an annual basis, so long as the notice has not changed and is available electronically.