Last week, CFPB Director Richard Cordray provided written testimony to the House Committee on Financial Services. His sixth semi-annual report lauded his agency, which, of course, is to be expected. The report also gives us insight into the thinking of those running the agency.
To highlight several takeaways from Director Cordray’s testimony:“[W]e all work together to strengthen our financial system so that it better serves consumers, responsible businesses, and our economy as a whole.” In the opening paragraph of his remarks, Mr. Cordray’s reference to “responsible businesses” indicates the thinking of the CFPB that there are many irresponsible businesses out there defrauding consumers. The CFPB believes that its mission is based on four forces: fair rules, consistent oversight, appropriate use of law enforcement, and broad-based consumer engagement. Many in the industry are concerned that “broad-based consumer engagement” means that the CFPB first sets its policies and then subsequently seeks “consumer engagement” to support them. The CFPB was forged out of the wake of the subprime mortgage meltdown that drove America’s financial crisis of a few years ago. The CFPB views its work as providing “guardrails” on “sloppy and irresponsible underwriting.” The report makes it very clear that mortgage lending is still front-and-center on the CFPB’s radar screen, but credit cards and student lending are close behind. Director Cordray professes confidence in community based lenders. The report lauds credit unions and community bankers. However, the report does not recognize that traditional installment lenders play an even larger role in reaching an unserved segment of the population. The CFPB is big on stats: $5.3 billion in relief to 15 million consumers who “fell victim to various violations;” $92 million in debt relief for 17,000 servicemembers; suit relief for 350,000 defendants in Georgia alone; and 540,000 logged consumer complaints in just four years.
The report is a good indication of the CFPB’s priorities. From the perspective of the consumer finance industry though, something is noticeably absent from the report.
That is, consumer finance companies understand the complexities of providing fair loan products, fairly priced to deserving borrowers. However, it appears as if the CFPB still does not appreciate this point. It would be nice for the CFPB to recognize that the industry is extremely important to consumers.
Maybe in the next report…