Dodd-Frank News Center

Democrats urge CFPB to include compliance with Military Lending Act in examinations

This story appeared in Bank Digest.                                     

The entire Senate Democratic Caucus has sent a letter to Consumer Financial Protection Bureau Director Kathleen Kraninger requesting that she "fulfill the Consumer Financial Protection Bureau's (CFPB) mission by including compliance with the Military Lending Act (MLA) in the Bureau's routine lender examinations, as was its practice prior to November 2018."

According to a press release by Sen. Jack Reed (D-RI), one of letter's leaders, the MLA was passed in 2006 with bipartisan support to help safeguard active-duty military members and their families from financial fraud, predatory loans, and credit gouging, but the CFPB has discontinued the supervision of regulated entities for compliance with the MLA.

In their letter, the senators said, "The CFPB's existing statutory authorities are more than sufficient to justify including MLA compliance in routine examinations, and to our knowledge, the CFPB's authority in this regard has never been challenged." The senators also asked Kraninger to provide a justification for the Bureau's current practice of not examining for compliance with the MLA.

 

Democrats write to CFPB opposing changes to payday loan rule

This story appeared in Bank Digest.                                   

Senators Jeff Merkley (D-Ore), Dick Durbin (D-Ill), and Sherrod Brown (D-Ohio) have led a group of 47 senators in writing to Consumer Financial Protection Bureau Director Kathleen Kraninger to oppose the CFPB's proposal to revise its payday loan rule to eliminate underwriting requirements.

In their letter, the senators said, "Currently under the Payday Rule, lenders will be required to verify a borrower's income, debts, and other spending in order to assess a borrower's ability to remain current and repay credit, and provide an affordable repayment plan for borrowers who take out more than three loans in succession."

They went on to say, "Repealing this rule provides a green light to the payday lending industry to prey on vulnerable American consumers. In drafting these devastating changes to the Payday Rule, the CFPB is ignoring one of the most fundamental principles of consumer finance--an individual should not be offered a predatory loan that they cannot pay back." The senators asked for answers to several questions regarding the effect of the proposed changes.

CFPB moves to eliminate payday lenders' underwriting obligations

This story appeared in Bank Digest.                                   

The Consumer Financial Protection Bureau is proposing amendments to its 2017 final rule governing "Payday, Vehicle Title, and Certain High-Cost Installment Loans" that would allow lenders to extend short-term, high-cost loans to consumers without needing to satisfy regulatory underwriting requirements. In addition to proposing to eliminate the underwriting requirements, the Bureau is proposing to extend the Aug. 19, 2019, compliance date of the rule's mandatory underwriting provisions until Nov. 19, 2020, which would enable the CFPB to eliminate the requirements before they take effect.

Senate Banking Committee Ranking Member Sherrod Brown (D-Ohio) issued a statement saying, "Eliminating these common sense protections will result in millions of hardworking families trapped in a cycle of debt and poverty." Similarly, House Financial Services Committee Chairwoman Maxine Waters (D-Calif) said she was "deeply troubled by the Consumer Bureau's proposal to gut a much-needed rule that would have reined in payday lenders and ensure consumers can afford to pay off their loans."

But House Financial Services Committee Ranking Member Patrick McHenry (R-NC) said the Bureau's "announcement on an updated payday lending rule and extended comment period will allow all stakeholders another chance to weigh in and establish new underwriting criteria. Most importantly, it will give consumers the opportunity to make their own decisions on credit availability needs for themselves and their families."

Portman introduces bill to create separate inspector general for CFPB

This story appeared in Bank Digest.                                   

Senator Rob Portman (R-Ohio) has introduced legislation to create a dedicated, Senate-confirmed inspector general for the Consumer Financial Protection Bureau. Several Republican senators served as original cosponsors of the bill.

According to Portman's release, the CFPB currently shares an IG with the Federal Reserve Board, but unlike most major agency IGs, the Fed's is a "designated federal entity IG" hired by the Fed Chairman, rather than one appointed by the President with the advice and consent of the Senate.

Portman issued a statement saying, "Installing a dedicated, Senate-confirmed internal watchdog at the CFPB will provide greater transparency and accountability at the CFPB. Given the vast powers of this large bureaucracy and the CFPB's insulation from congressional oversight, it is critical that it have an independent IG to ensure robust oversight."

Senators request update on FSOC's progress in reforming nonbank designation process

This story appeared in Bank Digest.  

Senators Thom Tillis (R-NC), Mike Rounds (R-SD), Tom Cotton (R-Ark), and David Perdue (R-Ga) have written a letter to Treasury Secretary Steven Mnuchin requesting an update on the progress being made by the Financial Stability Oversight Council to reform the systematically important designation process for nonbank financial companies in accordance with recommendations the Treasury Department made in a November 2017 report.

The Dodd-Frank Act established the FSOC with the authority to determine that certain nonbank financial companies would be supervised by the Federal Reserve Board and subject to enhanced prudential standards.

In their letter, the senators said Treasury "should prioritize the enactment of reforms recommended in its report as soon as possible" and that the FSOC must make "fundamental changes to the way in which it operates." They went on to say, "Particularly troubling is its history of flawed designations that have subjected individual companies to inappropriate and burdensome regulation by the Federal Reserve." The senators asked for answers to several questions on the implementation of the recommended reforms.

Perdue introduces bill to provide relief from costs of 'duplicative capital buffers'

This story appeared in Bank Digest.                                   

Senator David Perdue (R-Ga) has introduced a bill (S. 3682) intended to provide relief from financial regulatory burdens and extra costs that are passed down to small business owners, farmers, and consumers. According to Perdue's press release, after the 2008-2009 financial crisis, federal bank regulators increased the amount of capital held by banks for certain "risky" activities. This included the supplemental leverage ratio (SLR), which requires banks to hold a certain amount of capital.

But according to the release, the SLR did not account for the initial margin that customers pay, and as a result, duplicative capital buffers were built as banks had to hold additional capital aside. The cost of this trapped capital was ultimately passed on to the end users, such as farmers and business owners.

Senate confirms Kraninger nomination by one-vote margin

This story appeared in Bank Digest.                                   

The nomination of Kathy Kraninger to be director of the Consumer Financial Protection Bureau was confirmed by the Senate by a vote of 50 to 49 on Dec. 6, 2018. Kraninger will be the second Senate-confirmed CFPB director, following Richard Cordray. Mick Mulvaney has been serving as acting director since Cordray's resignation. House Financial Services Committee Chairman Jeb Hensarling (R-Texas) congratulated Kraninger on her confirmation and said he was "confident that with her experience and knowledge of budget management, Kathy will excel as Director of the Bureau."

Committee Ranking Member Maxine Waters (D-Calif) said Mulvaney had taken "a series of actions to weaken the agency's ability to carry out its important mission" and called on Kraninger "to put consumers first by rolling back the anti-consumer actions taken by her predecessor and allowing the Consumer Bureau to resume its work of protecting hardworking Americans from unfair, deceptive or abusive practices."

Brown and Luetkemeyer differ on Fed proposals to revise prudential standards framework

This story appeared in Bank Digest.                                     

Senate Banking Committee Ranking Member Sherrod Brown (D-Ohio) and Rep. Blaine Luetkemeyer (R-Mo) have issued contrasting statements regarding recent proposals by the Federal Reserve Board to establish a revised framework for applying prudential standards to large U.S. banking organizations based on risk, consistent with Section 401 of the Economic Growth, Regulatory Relief, and Consumer Protection Act. 

One proposal would tailor the application of prudential standards to U.S. bank holding companies and apply enhanced standards to certain large savings and loan holding companies. A second proposal--which would be issued jointly with the Office of the Comptroller of the Currency and Federal Deposit Insurance Corporation--would tailor the application of the agencies' capital and liquidity rules. 

According to Brown, "This Administration and Congress continue to fail hardworking Americans by weakening protections that guard taxpayers from big bank risk." But Luetkemeyer said, "It is refreshing to see regulators finally propose a more reasonable and responsible supervisory framework."

Sanders and Sherman introduce bill to cap size of financial institutions

This story appeared in Bank Digest.                                   

Senator Bernie Sanders (I-Vt) has introduced the Too Big to Fail, Too Big to Exist Act (S. 3542), which would break up the nation's biggest banks and risky financial institutions in order to safeguard the economy and prevent another costly taxpayer bailout. Representative Brad Sherman (D-Calif) will introduce a companion bill in the House. According to a press release issued by Sanders, the bill would cap the size of the largest financial institutions so that a company's total exposure is no more than 3 percent of GDP. 

The release said that by applying a cap on the size of financial institutions, the bill would break up the six largest banks in the country: JP Morgan Chase, Bank of America, Citigroup, Wells Fargo, Goldman Sachs, and Morgan Stanley. The bill also addresses large nonbank financial service companies such as Prudential, MetLife, and AIG.

Student Loan Ombudsman resigns, offers criticism of Bureau leadership

This story appeared in Bank Digest.   

Citing concerns that the Consumer Financial Protection Bureau is no longer concerned with protecting consumers, the Bureau's Student Loan Ombudsman has offered his resignation effective Sept. 1, 2018. In a letter to Acting Director Mick Mulvaney, Seth Frotman accused current Bureau leadership of hurting American families, particularly student loan borrowers.

Under Mulvaney's leadership, charged Frotman, the Bureau has abandoned these consumers and now serves "the wishes of the most powerful financial companies in America." Frotman points to the following "sweeping changes" that the CFPB has made in the last few months, including: undercutting enforcement of the law; undermining the Bureau's independence; and shielding bad actors from scrutiny. While pledging to continue fighting on behalf of student loan borrowers trapped in a broken system, the letter criticizes the damage that has been done to the CFPB and the "financial futures of millions of Americans in communities across the country." 

Following Frotman's announcement, Sen. Sherrod Brown (D-Ohio), Ranking Member of the Banking Committee, stated, "Shady lenders and predatory for-profit schools gained an ally at the CFPB, while students have lost their chief watchdog," said Brown. "The CFPB needs an independent Director who will fight for servicemembers and students." Brown previously introduced the legislation that created the Student Loan Ombudsman and fought for its inclusion as part of the CFPB during consideration of the Dodd-Frank Act. According to Brown, since 2011, the Office for Students has secured more than $750 million in relief for student loan borrowers including servicemembers, veterans, and older Americans with student loan debt.