Politics & MoneyMortgage

Senate Banking puts CFPB and Cordray in the crosshairs

Call for reform, oversight and restructuring for unfettered regulator

The director of the Consumer Financial Protection Bureau appeared before the Senate Banking Committee on Wednesday for his twice-a-year legislative grilling, where lawmakers raised ongoing concerns about the bureau’s massive data collection, its management, its lack of oversight and its overspending.

Director Richard Cordray provided a summary of the CFPB’s actions during the reporting period, but senators focused on criticism of the bureau, though they admitted that currently their power to rein in the CFPB is limited. 

“To date, the bureau’s enforcement activity has resulted in more than $10.1 billion in relief for over 17 million consumers. Our supervisory actions have resulted in financial institutions providing more than $178 million in redress to over 1.6 million consumers,” Cordray said. “And we have now handled more than 650,000 complaints from consumers addressing all manner of financial products and services.

“During the timeframe covered by the report, we have helped secure orders through enforcement actions for more than $19 million in relief to consumers who fell victim to various violations of consumer financial protection laws, along with over $32 million in civil money penalties,” Cordray said.

Chairman Richard Shelby, R-Ala., noted that the CFPB has grown to over 1,450 employees and it has recently expanded enforcement actions to cover telecom companies and broadened its authority over the auto finance industry.

“These actions, like others undertaken by the bureau since its formation, have not been without controversy. Many would say that some of them go beyond what Congress envisioned in Dodd-Frank,” Shelby said in prepared remarks. “In addition to concerns with recent regulatory actions, issues remain with the Bureau’s lack of accountability.” 

Shelby also raised concerns about the CFPB’s profligate spending and lack of budgetary oversight. In particular, there was concern for the cost of renovating the CFPB headquarters in a building that was, in a bit of irony, formerly leased by the Office of Thrift Supervision.

“This has been demonstrated by concerns with the bureau’s budgeting process, including the rising costs of renovation for the CFPB’s new headquarters,” Shelby said. “According to the Federal Reserve Inspector General, the estimated cost of actual renovation increased from $40 million in February of 2012 to $145 million in December of 2013 — this is over three-and-a-half times the initial estimate. The Inspector General estimated that the total cost is now closer to $216 million.

“Furthermore, the administration has yet to explain who approved the renovation and what happened to the documentation involved,” Shelby said.

Shelby said that he and other lawmakers are concerned because Congress does not have control over how the bureau spends its funds, as the CFPB operates outside of the appropriations process — which other independent agencies like the Securities & Exchange Commission, Federal Trade Commission and Consumer Protection and Safety Commission — are subject to. 

“By putting the bureau through the appropriations process and establishing a board of directors, it would resemble other independent agencies and provide Congress with the ability to conduct meaningful oversight,” Shelby said. “Unfortunately, calls for reform have been rejected in past Congresses.

“Congressional oversight of the bureau is critical now more than ever because of the CFPB’s growing reach over the practices of individuals and companies in the financial sector,” Shelby said. “I am confident, however, that the time will come when we reassert our constitutional prerogative that the supporters of Dodd-Frank sacrificed five years ago in the name of bureaucratic independence."

Speaking of the TILA-RESPA Integrated Disclosure rule, Cordray told the committee that the CFPB listens to industry feedback — citing concerns by the mortgage industry as to why TRID is being pushed back to Oct. 3 from its initial Aug. 1 deadline.

However, in June, the reason the CFPB gave for pushing back the deadline was unrelated to industry concerns, but resulted from its own administrative error.

“If you’re wondering what the ‘administrative error’ was that forced CFPB to delay its TRID rule, we have been informed by CFPB that the bureau failed to comply with the Congressional Review Act’s requirement to notify Congress at least 60 days before a regulation becomes effective,” Jeff Emerson, a spokesperson for the House Financial Services Committee, said in June.

The TRID rule requires additional mortgage disclosure forms and a more complex compliance apparatus for lenders. The required loan documentation consists of two new forms: the Loan Estimate and the Closing Disclosure to ensure compliance.

Another big concern raised by senators is the CFPB’s massive data collection, and the CFPB’s monitoring of Americans’ credit card purchases.

A comprehensive study last fall by the non-partisan Government Accountability Office confirmed that the CFPB collected financial data on up to 600 million consumer credit card accounts, without sufficient security and privacy protections to ensure there is no risk of improper collection, use, or release of consumer financial data.  

Now, using 12 data-mining programs, the bureau collects and monitors information for nearly 600 million personal credit-card accounts on a monthly basis. The CFPB wants to be able to monitor 95% of all credit-card transactions by 2016.

Every month the CFPB also gathers data on 22 million mortgages and 5.5 million student loans, among hundreds of thousands of other personal financial records.

A USCC-Zogby Analytics poll published in late June showed the majority of Americans oppose the CFPB collecting financial data on citizens.

Senators raised concerns that the CFPB would not be able to secure the massive amount of data it collects, in light of the recent Chinese-directed hack of 25 million federal employee and other personal files and fingerprints at the Office of Personnel Management, which led to the OPM director’s resignation.

Sen. Elizabeth Warren, D-Mass., praised the CFPB’s consumer complaint database, which provides a place for people to submit and have published complaints about companies that are not verified.

Warren also said she is suspicious of House Republican efforts to rein in the rule-making and administrative action powers of the CFPB, praising the benefits consumers have received from the CFPB’s actions.

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