During his semi-annual report to Congress, CFPB Director Richard Cordray said the CFPB continues to look at its authority under the Dodd-Frank Act to exempt credit unions from its rulemaking and cited instances where the bureau has used some exemptions for small financial institutions.
Several Republican members of the House Financial Services Committee questioned the director about a March 14 letter penned by Reps. Adam Schiff (D-Calif.) and Steve Stivers (R-Ohio). In the letter, a bipartisan group of 329 members of Congress called on the director to use the bureau's authority to exempt credit unions from its rulemaking.
Rep. Ed Royce (R-Calif.) was the first of several congressmen to bring up the letter. Citing both the letter and Section 1022(b)(3)(a), he asked if the director had changed his view of congressional intent.
"On the question of exemptive authority, as it applies to your ability to exempt community banks and credit unions from rulemakings, you argued in a recent speech that it was not plausible for you to use such authority to override Congress' own judgment on such a broad-based policy matter," Royce said. "Does a letter from over three quarters of Congress change your view of congressional intent?"
Cordray answered the bureau routinely tailors its rules to take into account different circumstances of small lenders, citing the mortgage origination rule, the mortgage servicing rule and its remittance rule.
"We will continue to do it where appropriate," he said.
He added that CUNA and NAFCU both sought to exempt credit unions from the Dodd-Frank Act, but that notion was rejected.
The CFPB provided special provisions for small creditors and will continue to do so when appropriate based on the facts, Cordray added.
"In terms of a broad overriding of what Congress made a judgement about in that statute, which was not to simply exempt all credit unions from everything to do with consumer protection, I feel that Congress has spoken on that," Cordray concluded.
As a way of illustrating his point of the one-size-fits all approach to regulations, letter co-author Stivers handed Cordray a child's 2T-sized T-shirt and asked Cordray to put it on.
"You wouldn't fit in it," Stivers said, adding that a lot of institutions are trying to make themselves smaller and service their clients less.
Stivers added credit unions and small banks have discontinued or limited access to some products as a result of some of the agency's rulemaking. That's the problem small financial institutions are dealing with, he continued, telling Cordray to take his authority under 1022 seriously.
"What are you going to do about it?" he asked.
Cordray said there are facts that are being ignored, such as the record number of credit union members in the industry and credit unions' share in the mortgage lending market. He added credit unions are doing better in a marketplace that rewards responsible lenders.
"We have tailored our rules that give advantages to smaller lenders, because that is consistent with the data coming out of the crisis that they had lower defaults coming out of other lenders," he said.
However, NAFCU refuted the director's claim in a statement following the hearing. NAFCU President/CEO Dan Berger called on its members to challenge the director's assertion that credit unions were not meant to be granted a blanket exemption.
"Unfortunately, the CFPB has failed to exercise this broad legal authority," Berger said. "We believe Congress intended to allow credit unions to be exempted from certain rules. Director Cordray's denial that the tide of regulation is not contributing to the continued trend of credit unions being forced to cut back on member services, merge or go out of business flies in the face of facts."
Additionally, CUNA President/CEO Jim Nussle expressed his disappointment in Cordray's statement.
"The director unfortunately seems comfortable with his own narrow set of facts that do not take into account a full understanding of the damage the increasingly complex regulatory burden is having on credit unions," Nussle said.
The director received some support on his position from Rep. Brad Sherman (D-Calif.), who also signed the letter and only asked that Cordray look at the regulations and ensure they do not have unintended consequences.
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