Last week, Consumer Financial Protection Bureau (“CFPB”) Director Richard Cordray testified before the Senate Banking Committee in connection with the CFPB’s latest Semi-Annual Report to Congress, covering the period of April through September 2013. As professionals in the consumer financial services arena are well aware, 2013 has been a very busy year on the regulatory front, and as such, Director Cordray’s testimony covered a range of topics.
Mortgage rule implementation was a major focus of several committee members, including the compliance expectations for financial institutions beginning in January. Because of the vast changes facing industry participants, the scope of the new mortgage rules is daunting. Director Cordray emphasized that the CFPB is sticking with the January implementation deadline; it believes most institutions will be in substantial compliance by that date; and in “the early months,” the CFPB will be assessing whether institutions have made “good faith efforts” to comply, as opposed to strict compliance. Director Cordray said that the CFPB does not plan to play “gotcha” but that it will examine whether institutions are implementing a compliance system that permits monitoring and reports to the institution’s board.
Student loans received attention in both the written and oral remarks. Director Cordray said that the CFPB has received nearly 30,000 comments about student lending, and he discussed the problems identified during a field hearing in April on student loan debt.
Auto lending continues to be a major focus of the CFPB, including its bulletin on indirect auto finance issued earlier this year. Director Cordray addressed questions regarding the CFPB’s methodology for determining disparate impact, which has come under fire because it proxies race and national origin based on statistics about surname and geocoding. Director Cordray defended this methodology. Auto dealers were excluded from CFPB regulation in Dodd-Frank, and Director Cordray acknowledged the jurisdictional issues the CFPB faces in this area. However, recent discussion of regulating dealer participation agreements raises questions about the CFPB’s ability to toe this line.
Director Cordray touched on a number of other topics, including prepaid cards, rulemaking procedures, privacy, and military lending. If your business has questions about its compliance efforts or the CFPB’s regulation of these areas, please contact Spilman or other knowledgeable counsel.