Despite how it may be perceived, the Consumer Financial Protection Bureau doesn’t view itself as an “enemy” of the financial industry, nor does it want the industry to view it in that way.
Rather, the CFPB wants the financial industry to think of it as “an important new friend and ally” in helping to serve the financial needs of the public, as CFPB Director Richard Cordray told the Credit Union National Association earlier this week.
According to Cordray’s prepared remarks made public by the CFPB, Cordray told the group of credit unions that the industry needs to stop “attacking or resisting the CFPB.”
Instead, Cordray said that credit unions should be “supporting and speaking up for what (the CFPB) is doing for the best and most responsible financial institutions such as credit unions, that compete based on personal focus and strong customer service.”
Cordray made the remarks in a wide-ranging speech touching on many issues that face credit unions and the financial industry at large. During his speech, Cordray repeatedly spoke about the disconnect that exists between the CFPB and the members of the industry it regulates.
“It is time for credit unions, and CUNA, to wake up and smell the coffee: the Consumer Financial Protection Bureau is not your enemy; on the contrary, it is an important new friend and ally,” Cordray said.
“Some of you may have smiled and elbowed your neighbor when you just heard me say that,” Cordray continued. “But it is the truth, and it is high time we all had the courage to face the truth and adjust our views to accommodate it.”
Cordray blamed some of the divide between the financial industry and the CFPB on “consultants and lawyers” who generate a “culture of fear” simply to earn more business, adding that the “culture of fear” is a myth that needs to be punctured.
“At the time we adopted the (Qualified Mortgage) rule, a cottage industry of lawyers and consultants sowed fear about the outsized legal liability that the rule would pose for mortgage lenders,” Cordray said.
“But now, more than two years later, so far as we can tell, not a single case has been brought against a mortgage lender for making a non-QM loan,” Cordray continued.
“If this is wrong on the facts, let me know, but I have yet to hear this point disputed by anyone,” Corday then said parenthetically.
“It is time to shrug off the naysaying consultants and lawyers who breed a culture of fear and hypothesized problems to hype their services,” Cordray continued.
“The right answer is simply to continue making hard-headed business judgments about lending based on your traditional underwriting models,” Cordray said. “That has served you well in the past, it serves you well now, and it will continue to serve you well long into the future.”
Cordray also reminded the credit unions about the gravity and significance of the October implementation of the CFPB’s TILA-RESPA Integrated Disclosures rule, which caused a number of issues, both positive and negative, throughout the mortgage and housing industry.
Cordray noted the long lead time that the CFPB allowed the industry to adapt to TRID, which combines “duplicative and overlapping disclosure paperwork that burdened mortgage lenders for over 30 years” into a more consumer-friendly format, as well the issues that the CFPB became aware of post-implementation.
“Up front, you told us that this rule required major operational changes and extensive coordination with third parties, so we allowed almost two years for implementation,” Cordray said.
“Even so, we have seen that the transition was difficult in some respects,” Cordray continued.
“We know you are just trying to get it right,” Cordray said. “So we and the other regulators (including the Office of the Comptroller of the Currency) have made clear that our initial examinations for compliance with the rule will be sensitive to the progress you have made.”
Cordray reiterated a previous pledge that the CFPB’s initial TRID compliance exams will not seek to punish companies for violations.
“Some minor errors are likely during this transition, so early evaluations will be corrective and diagnostic, not punitive,” Cordray said.
Cordray closed his speech with a plea for cooperation between the financial industry and the CFPB, for the good of the consumer.
“It has been said that cooperation is the most effective form of creation,” Cordray said.
“So we ask you to continue to cooperate with us to address the financial issues that play such pivotal roles in the lives of consumers,” Cordray continued.
“They need and deserve less mystery and more transparency,” Cordray concluded. “They need protection, not exploitation; they need support, not indifference. It is up to us, working together, to make sure people get what they need.”