Consumer Financial Protection Bureau (CFPB) Director Richard Cordray has responded via letter to a bipartisan group of nearly three-quarters of the U.S. Senate which in July petitioned him to exempt community lenders and credit unions from complete CFPB oversight.
The Senators’ letter, headed by Sen. Joe Donnelly (D-Indiana) and Sen. Ben Sasse (R-Nebraska) and signed by 68 other senators, asked Cordray to consider the impact of the CFPB’s rulemaking on smaller financial institutions and consumers. Credit unions have long sought relief from the CFPB’s regulations, which the credit unions maintain are aimed at “bad actors” that caused the financial crisis. Critics of the Dodd-Frank Act, out of which the CFPB was created, have long maintained that its “one size fits all” approach to regulation that was intended for Wall Street has had an adverse effect on Main Street.
Noting the health of consumer financial markets and the strength being exhibited by community banks and credit unions, Cordray told the Senators in his letter that the CFPB already does tailor its regulations for different models and classes of institutions, such as providing an expanded “safe harbor” for small creditors for their Qualified Mortgage (QM) loans than larger institutions, exempting small creditors in rural and underserved areas, implementing a two-year pause for small creditors allowing them to make balloon payment QMs, relaxed rules regarding conflict of interest in ordering appraisals and other valuations, exempting smaller servicers from the TILA requirement to provide periodic statement, exempting smaller servicers from RESPA’s loss mitigation requirements, and exempting lower-v0lume depository institutions from Home Mortgage Disclosure Act (HMDA) reporting.
“As I have expressed in the past, the Bureau recognizes that community banks and credit unions did not cause the financial crisis,” Cordray wrote. “For that reason, the Bureau is committed to ensuring that the regulations we promulgate are well-tailored and effective.”
The Senators’ letter was not the only time this year that Congress has asked Cordray to lighten the regulation burden for small lenders and credit unions. In March, three-quarters of the U.S. House of Representatives signed a letter to Cordray asking him to exercise authority granted him by Dodd-Frank to exempt credit unions from certain CFPB rulemakings.
Click here to view Cordray’s complete letter.