Sliding in safe: Lenders can avoid a CFPB probe early on

Cordray: A good faith effort at compliance is enough

The Consumer Financial Protection Bureau is not expecting perfect compliance when new mortgage lending and servicing rules take effect in January, the bureau's director Richard Cordray told a panel of lawmakers Tuesday.

One of the most burdensome regulations slated to hit on Jan. 10, is the ability-to-repay rule — not to mention, the related qualified mortgage guidelines — both of which passed as part of the Dodd-Frank Act.

Members of the Senate Banking Committee grilled Cordray on what will happen to firms that face technical glitches or processing errors early on.

Cordray allayed those fears, saying within the first several months, the bureau only expects firms to show they have made a "good faith effort toward substantial compliance by that date." Yet, the director believes a majority of the impacted firms are prepared for the launch.

When asked to define 'good faith effort,' Cordray said a good faith effort takes its standard meeting from the general supervisory context.

"We are looking for entities to have taken the responsibility seriously," he said. "They have compliance systems in place, and this is something that has been brought to the attention of the leadership and the board."

Cordray said the bureau is not expecting perfect execution right away, but efforts made should be obvious.

"They have to put in effort," he said. Still, the director assured the panel, "We are not going to be playing a game of gotcha with people in the early months."

Cordray’s hearing in front of the Senate Banking Committee remained friendly despite questions about the CFPB’s efforts in utilizing consumer credit card information to spot trends in how financial firms are dealing with customers.

Cordray assured lawmakers the credit card information collected is not used to see what consumers are buying or where they're spending their money. Instead, the data – which is not tied back to a particular consumer – allows the bureau to monitor how financial firms are interacting with those consumers, he advised.

Cordray defended the practice, saying, “We're not tracking anyone’s credit or spending."

Cordray suggested the student debt issue remains a dark cloud over the mortgage finance market, with college graduates unable to afford properties.

"It has a domino effect on the housing market," Cordray pointed out. He noted that college graduates, who should be the best positioned to enter the housing market, are holding back on home purchases, creating greater concerns about the U.S. economy.

Cordray said the bureau is currently pushing for more transparency on the student loan front, with plans to address lending options, transparency and loan usage.

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