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), which would permit such an exemption, 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.

However, Daniel Caldwell, president/CEO for the Atlanta-based, $22 million 1st Choice Credit Union, said the CFPB's actions barely register for his credit union.

“We don't have the staff to keep up with a lot of the regulations that are out there,” he said, adding that most of the issues arising from the CFPB are problems associated with larger financial institutions.

The customer complaint database is a problem for the small credit union, however.

“If there's a complaint at the CFPB, we have extra reporting steps,” he said. “They haven't been burdensome, but definitely been more time consuming. I try to keep up with at least the minimum we have to keep up with. For us, there hasn't been anything that really has impacted us.”

John McKechnie, senior partner at the Washington-based consulting firm Total Spectrum, said, “The CFPB seems pretty dug in on the exemption issue, but that's OK; they seem pretty dug in on every issue.”

Stivers, who co-authored the letter, illustrated his point of the of the one-size-fits all approach to regulations by providing a child's 2T-sized T-shirt to the director 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.

The answer, apparently, is nothing, according to former NCUA Board Chairman Dennis Dollar.

“One of the things I have learned about regulatory thinking during my career is that when a regulator wants to enact a regulation, they always seem to see their authorization statute as very elastic,” Dollar said. “Yet, when the regulator does not want to take an action that might be less far reaching, they automatically begin seeing their authorization statute as a virtual straight jacket.”

Cordray answered Stivers, saying 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, the director's claim received scrutiny from industry trades. NAFCU President/CEO Dan Berger called on his 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.”

Dollar agreed and said it all boils down to what the agency wants to do.

“I think the bottom line is that the CFPB doesn't want to be as flexible in interpreting their exemption authority as they do in interpreting the extensiveness of their regulatory authority,” he said, adding that the bureau is exercising fairly typical regulatory agency thinking.

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.

With a number of Democrats' signatures on the letter, the pressure for Cordray to act is mounting.

McKechnie added the negative reaction from Democratic members was interesting.

“Several Democratic members and staff expressed doubts that the CFPB is legally correct on their interpretation,” he said. “Even more said they wished Mr. Cordray had not been that dismissive of exemption authority, particularly in the face of the letter sent by over 300 House members.”

The director received some support on his position, however, 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.

Political showmanship continued unabated on both sides of the aisle. Some Democrats used their allotted time to praise the efforts of the director, such as Rep. Keith Ellison (D-Minn.) who did not question the director and argued that House Republicans are attempting to unwind the bureau.

“We are well aware of what it's all about,” Rep. Al Green (D-Texas) said. “Some want to eviscerate the CFPB.”

Dollar said his reading of the Dodd-Frank Act gives the bureau much more authority to focus on larger financial institutions and to shift focus away from smaller institutions.

“The regulatory default position is to regulate more and exempt less,” Dollar said. “The CFPB, even though they are a relatively new agency with new statutory authority to interpret, is a classic example of a regulator defaulting to more expansive authority – whether it is needed or not.”

Dollar added that the bureau should adopt a mantra to provide effective, not excessive, regulation.

“The CFPB has shown no example where they have chosen to be self-restrictive in interpreting their own authority,” he said.