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From Banking and Finance Law Daily, January 28, 2014

Cordray testifies on fourth semi-annual report to Congress

By Katalina M. Bianco, J.D.

Consumer Financial Protection Bureau Director Richard Cordray testified before the House Financial Services Committee on the bureau’s fourth Semi-Annual Report to Congress. Cordray said that the report outlines the CFPB’s efforts to achieve its mission of “making consumer financial markets work better for the American people, and helping them improve their financial lives.”

Background. The CFPB published its fourth semi-annual report to Congress on Nov. 5, 2013. In the report, the bureau said it “is analyzing whether rules are needed to address concerns that have been raised regarding payday loans and deposit advance products, and with debt collection, which is the focus of more consumer complaints to the federal government than any other financial product or service.” The report covered the CFPB’s rulemaking projects for 2014, including a proposal to implement Dodd-Frank Act amendments to the Home Mortgage Disclosure Act to require creditors to collect and report certain additional lending data. In addition, the bureau reported that it is developing a proposed rule building on the comments received concerning its earlier Advanced Notice of Proposed Rulemaking on general purpose reloadable prepaid cards, which are currently not subject to the same federal protections as debit and payroll cards or checking accounts.

The CFPB report indicated that the bureau also plans to release a proposed rule to seek comment on streamlining certain requirements to provide consumers with annual notices of financial institutions’ information sharing practices. This proposal would follow up on comments received in response to a request for public input on priority areas for regulatory action.

Refunds to consumers. In his testimony, Cordray noted that through its supervisory and enforcement actions, the bureau “will be putting approximately $3 billion back in the pockets of millions of consumers who fell victim to various violations of consumer financial protection laws.” This includes a refund of more than $6 million to U.S. servicemembers for failures to properly disclose costs associated with repaying auto loans through the military allotments system and expensive auto loan add-on products sold to active-duty military.

“CFPB’s supervisory actions have also caused financial institutions to make changes to compliance management systems that prevented violations, reduced risks to consumers, and resulted in financial restitution to many thousands of additional consumers,” Cordray told the committee.

Rulemaking. The CFPB director spoke about the rules put into place by the bureau in 2013, including the Qualified Mortgages rule, mortgage servicing rules, and the remittance rule. “Since then, the Bureau has focused on making sure that businesses—both small and large—have what they need from a practical and operational standpoint to understand and comply with our new regulations, which are designed both to help consumers and create a level playing field for all companies that play by the rules,” Cordray said.

Cordray also explained that the CFPB has issued plain language versions of the rules, created and posted video guidance, met with major market players and industry stakeholders, and responded directly to industry input about points the industry needed clarified or modified.

Financial decision making. Cordray testified that the bureau’s strategy to increase consumers’ financial literacy and capability encompasses “foundational research, collaborative education initiatives with stakeholders who can reach consumers where they are, and providing tools and information directly to the public to help them navigate the financial choices they face.” He discussed the tools the bureau has developed to assist consumers in making informed financial decisions and its efforts to increase financial literacy, including:

  • the AskCFPB section of the bureau’s website;

  • a financial literacy report issued in July 2013 that describes the CFPB’s strategy and the financial literacy activities it has undertaken during its first two years of operation;

  • a financial education agenda focused on providing consumers with tools and information to develop practical skills and support sound financial decision making; and

  • tailored approaches to address financial decision making circumstances for specific populations.

Student loans. Cordray spoke of the bureau’s focus on student loan debt, saying that in the past year, the bureau has received thousands of private student loan complaints and close to 30,000 comments in response to its request for information about how student debt is affecting individual consumers and the economy. “The burden of student debt is jeopardizing the ability of young Americans to buy homes, start small businesses, and save for the future,” he said.

MainStory: TopStory CFPB CrimesOffenses DebtCollection DoddFrankAct Loans Mortgages

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