AFSA Testimony Provides Industry Perspective

Bill Himpler, Executive Vice President

Last week, I testified before the House Financial Services subcommittee on Financial Institutions and Consumer Credit as part of a panel of distinguished experts on financial regulation. Our testimony provided the public with much-needed industry perspective on testimony provided by Consumer Financial Protection Bureau (CFPB) Director Richard Cordray, who appeared before the committee the day before.

Two critical points made during our testimony need to be highlighted. 

First, everyone, from Democrats to Republicans, industry to consumer groups, believes that the mission of the CFPB is a critically important one. Ensuring that consumers are adequately protected against bad actors in financial services is important. On a purely economic level, an inadequately protected consumer is bad for business, as we saw during the mortgage crisis.

More importantly, Americans deserve to know that the cars they buy, the homes they finance and the loans that they take out are backed by sound underwriting and commonsense regulatory protections.

However, this brings us to the other point that bears some highlighting. Both of last week’s hearings laid bare the realization that the CFPB is not promulgating commonsense regulatory protections. We all agree that the bureau’s mission to protect consumers must be balanced with ensuring availability of safe, affordable credit.

Unfortunately, all too often, the bureau does not have this balance in mind when rendering enforcement actions.

Take the broad issue of financial regulation; small, family-owned and operated consumer credit companies – many of which may only operate in one state – are expected to follow the same regulations as a large, international banks with nowhere near the same resources.  

The CFPB established the consumer complaint database to allow consumers the opportunity to share their experiences with financial institutions. The bureau, however, does not vet these complaints for accuracy and requires companies to respond to them with a preset number of phrases. As Rep. Barry Loudermilk (R-GA) put it, “this database appears to exist only to blame and shame.” Worse still, there is no safeguard for the protection of consumer’s personal data.

The CFPB said that the bureau’s enforcement actions against companies should serve as guidance to other companies in the marketplace. Each order is different, however, with different terms and requirements. How is a business supposed to comply with a “law” that is constantly changing?

On the topic of enforcement actions, the bureau’s press releases announcing them are written in such a way to make readers believe a company has done something illegal. This, despite the fact that the language of the enforcement action itself notes that no illegal activities ever took place.

The list goes on and on.

Our association represents banks and consumer credit companies and is over a century old. It was originally formed hand-in-hand with consumer advocacy groups to ensure that access to quality credit is maintained and accessible for all Americans. The bureau’s failure to balance regulation with appropriate enforcement is hurting consumers and the economy.

We hope that Congress will make important changes to the structure of the bureau and subject it to the normal congressional budgetary process so that it becomes accountable to the American people.

Most importantly, we hope the CFPB gets back to its original mission: protecting consumers.