April 07, 2016

Cordray affirms CUs' small loans, defends exemption stance

CFPB views credit unions' payday alternative loans as a "good product" and wants to make room for those loans in its payday lending rulemaking, CFPB Director Richard Cordray told the Senate Banking Committee Thursday as he delivered his semiannual report to the panel.

In testimony similar to that given last month before the House Financial Services Committee, Cordray testified before the panel about CFPB's regulatory and enforcement activities, future rulemaking and the bureau's regulatory relief efforts for credit unions.

The CFPB director fielded numerous questions from committee members on matters important to credit unions, including consumer services and regulatory topics, such as the bureau's exemption authority.

Asked by Sen. Bob Corker, R-Tenn., what solutions are out there for small, short-term credit, Cordray noted the role of credit unions and singled out PALs as a good, law-abiding product. He added that the bureau wants to allow room for the product under any new rules on payday lending.

On the bureau's rules exemption authority, Sen. Tim Scott, R-S.C., asked Cordray about section 1022 of the Dodd-Frank Act and the possibility of tailoring more regulations to small credit unions and community banks. Cordray reiterated his view that he has tailored rules for small credit unions and community banks, especially regarding mortgage rules. He questioned the notion that CFPB is can provide credit unions a blanket exemption from rules.

NAFCU President and CEO Dan Berger, in a statement, disagreed. "NAFCU and our members again must challenge CFPB Director Cordray's characterization of the authority given the bureau under the Dodd-Frank Act to exempt credit unions from its rules," said Berger. "Congress gave CFPB broad authority in Section 1022 of the act to grant exemptions on a rule-by-rule basis to ‘any class of covered persons, service providers, or consumer financial products or services.' Clearly, such an exemption is, by statute, available to the nation's member-owned, non-profit credit unions if the CFPB will only apply it."

Cordray, during the hearing, said the bureau is "very careful about exemption authority" and wants to avoid overstepping what Congress provided. However, he also said he welcomed input on how the bureau might better apply that authority and noted NAFCU's continued input on that score.

Scott noted his concern for the credit union industry and responded that while membership within the institutions is up, as Cordray noted, the number of institutions is declining.

Cordray also restated that he expects a final rulemaking on prepaid products to come out sometime this spring.

In response to questioning from Sen. Mike Rounds, R-S.D., on the bureau's no-action letters, Cordray said he is open to thinking about using the letters more, as he isn't sure the bureau currently has the right balance.

Also touched on during the hearing were indirect auto lending, the bureau's pending arbitration rulemaking, CFPB data collection, the Military Lending Act and the bureau's TILA-RESPA integrated mortgage disclosure rule.

NAFCU's letters to the committee this week were entered into the hearing record.