CFPB  Rulemaking

  • Payday Loans: On March 25th, CFPB Director Richard Cordray delivered prepared remarks at a field hearing in Nashville (TN).  Cordray announced that the CFPB is, “in the late stages” of its rulemaking for the payday loan industry. To date, the CFPB has taken an enforcement action against small-dollar lenders and has issued examination guidelines that help identify consumer harm and risks under the Military Lending Act.  In speaking at the field hearing, industry representatives appeared willing to accept forthcoming regulations, providing that the regulations don’t “cripple” the industry, in particular by capping interest rates.  On March 26th, the Senate Banking Committee’s Subcommittee on Financial Institutions and Consumer Protection held a hearing entitled, “Are Alternative Financial Products Serving Consumers?” at which Republicans and Democrats sharply disagreed on the approach of legislation and regulation directed at the payday lending.
  • Research: Last week, representatives from different industries discussed establishing a Research Integrity Council to recommend improvements to the CFPB regarding research underlying CFPB rulemaking.  Currently, the CFPB’s Academic Research Council is responsible for advising the CFPB in its economic research; however, the newly proposed Council seeks to provide more transparency in the research process.
  • Appraisal Management Companies: On March 24th, the CFPB and five other federal agencies—the Office of the Comptroller of the Currency, the Federal Reserve, the Federal Deposit Insurance Corporation, the Federal Housing Finance Agency, and the National Credit Union Administration—published a proposed rule that would implement minimum requirements for state registration and supervision of appraisal management companies (AMCs).  Under the proposed rule, states that establish an appraiser certifying and licensing agency that registers and supervises AMCs must require that such AMCs:
    • Register in the state and be subject to its supervision;
    • Use only state-certified or licensed appraisers for federally-related transactions;
    • Require that appraisals comply with the Uniform Standards of Professional Appraisal Practice;
    • Ensure selection of a competent and independent appraiser; and
    • Establish and comply with processes and controls designed to ensure that appraisals comply with the appraisal independence standards established under the Truth in Lending Act.

Public comments are being accepted through May 23rd.

CFPB & Congress

  • Employee Management: On March 27th, the House Financial Services Committee’s Subcommittee on Oversight and Investigations announced that it will hold a hearing entitled, “Allegations of Discrimination and Retaliation within the Consumer Financial Protection Bureau.”  In a memorandum announcing the hearing, the Committee references a March 6th American Banker article (previously reported) alleging that, “the CFPB’s own managers have shown distinctly different patterns in how they rate employees of different races.”  Witnesses at the hearing are scheduled to include a CFPB employee who alleged both gender discrimination and retaliation for filing a corresponding Equal Employment Opportunity complaint with the CFPB’s Human Capital Office, as well as the outside investigator that the CFPB retained to investigate those claims. The Committee has also invited the following additional witnesses for a second panel:
    • Stacey Bach, CFPB Assistant Director for the Office of Equal Opportunity Employment;
    • Robert Cauldwell, President of Chapter 335 of the National Treasury Employees Union; and
    • Liza Strong, CFPB Director of Employee Relations.

CFPB Operations

  • Contracts: On March 24th, the CFPB published a notice in the Federal Register (79 FR 15963) of the public availability of its FY2013 Service Contract Inventory.  The inventory briefly lists the 215 service contracts the CFPB awarded in FY2013 at values exceeding $25,000, totaling $84.9 million.
  • Payday Loans: On March 25th, the CFPB’s Office of Research published a report entitled, “CFPB Data Point: Payday Lending,” which, “presents the results of several analyses of consumers’ use of payday loans,” and, in particular, sequences of loans that follow a borrower’s original loan.  In the Data Point report, the CFPB states that:
    • “[Eighty percent] of payday loans are rolled over or followed by another loan within 14 days (i.e., renewed)”;
    • Fifteen percent of new loans, and nearly half of all loans, are followed by a loan sequence at least 10 loans long;
    • “For more than 80% of the loan sequences that last for more than one loan, the last loan is the same size as or larger than the first loan in the sequence”; and
    • “Monthly borrowers are disproportionately likely to stay in debt for 11 months or longer.”

In a preface, the Office of Research states that the Data Point, “is the first in an occasional series of publications…intended to further the [CFPB]’s objective of providing an evidence- based perspective.”

CFPB Commentary

  • Elizabeth Warren: Next month, Sen. Elizabeth Warren (D-MA) will publish a memoir entitled, A Fighting Chance, that recounts, in part, her efforts to establish the CFPB.  In what her publisher, Macmillan, calls a, “passionate, funny, rabble-rousing book,” Warren revisits her life from childhood in Oklahoma to her current service as a U.S. Senator.