A taskforce established by the Consumer Financial Protection Bureau to examine the existing legal and regulatory environment facing consumers and financial services providers released its recommendations this week – a move that prompted conflicting reactions from the housing industry and consumer groups.
The CFPB announced back in 2019 that it plans to “periodically” review its regulations and may amend or even abolish existing rules. According to the CFPB, the review of its rules is stipulated by the Regulatory Flexibility Act, which establishes that agencies should review certain rules within 10 years of their enactment and consider those rules’ impact on “small businesses.”
The CFPB’s Taskforce on Federal Consumer Financial Law gave recommendations on how to improve consumer protection in the financial marketplace.
The taskforce report uses five interrelated principles that serve as the foundation for proposed systematic changes to the current legal and regulatory framework: consumer protection, information and education, competition and innovation, regulatory modernization and flexibility and inclusion and access.
“The bureau is already committed to many of the recommended ideas presented in the report,” CFPB Director Kathy Kraninger said. “The taskforce recommendations help define and illuminate our current path.”
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To help inform its work, the taskforce engaged with external stakeholders, including consumer advocates, the Bureau’s combined advisory boards, state and federal regulators and industry. The taskforce’s report discusses what it learned during its examination and outreach to stakeholders and offers recommendations for the future of consumer financial protection.
Here are some of the recommendations the taskforce laid out:
- Authorize the CFPB to issue licenses to non-depository institutions that provide lending, money transmission, and payments services;
- Expand access to the payment system by unbanked and underbanked consumers and ensure consistent treatment by applying the same rules to similar financial products;
- Identify competitive barriers and make appropriate recommendations to policymakers and regulators for expanding access to the payments systems by non-bank providers;
- Research and develop policies tailored to the unique challenges of formerly incarcerated people, and work with state and federal authorities to improve protection of this population;
- Research and develop policies to address problems of financial inclusion in rural communities;
- Facilitate creditor access to immigrants’ credit information prior to their arrival in the United States in order to use that information in credit decisions
- Research consumer reporting issues that arise in connection with a consumer’s bankruptcy
- Consider the benefits and costs of preempting state law where conflicts can impede the provision of valuable products and services, such as the regulation of FinTech companies engaged in money transmission
- Identify opportunities to coordinate regulatory efforts. For example, the Bureau and prudential regulators should eliminate overlapping examination subject areas and reconcile inconsistent examination standards that unnecessarily expend multiple resources and can cause confusion
- Continue to increase dialogue with state regulators to bridge knowledge gaps and streamline regulation
- Work with other agencies to create a unified regulatory regime for new and innovative technologies providing services similar to banks
- Establish independent review of the Bureau’s regulatory cost-benefit analyses by staffing an office of cost-benefit analysis at the Bureau and or by submitting its analyses to OIRA for review
- Evaluate any positive or negative effect on inclusion as part of the Bureau’s cost-benefit analyses as appropriate
- Exercise caution (a recommendation for the Bureau, Congress, and other federal and state regulators) in restricting the use of nonfinancial alternative data, which can be very useful indicators of creditworthiness
- Clarify the obligations of CRAs and furnishers with respect to disputes under the FCRA
- Assess periodically the accuracy and completeness of consumer credit reports
The response from the housing industry was positive, commending the taskforce for its suggestions and urging the Biden administration, which comes to power on Jan. 20, to follow up on the recommendations.
“NAFCU strongly appreciates the CFPB and its taskforce on Federal Consumer Financial Law listening to our calls for reform and announcing their support for several of our recommendations,” said Dan Berger, President and CEO of National Association of Federally Insured Credit Unions.
“In addition to their support for expanding credit union access in underserved areas, we were pleased to see support for our longstanding call to modernize ESIGN Act requirements, expanding the use of alternative data and minimizing examination overlap included in the taskforce’s report,” Berger said. “We strongly encourage policymakers to move forward with these recommendations and several others that will provide regulatory relief to credit unions – allowing them to better serve their growing membership.”
Other stakeholders agreed.
“The Consumer Financial Protection Bureau Taskforce on Federal Consumer Financial Law has issued a comprehensive, thoughtful report on Americans’ access to credit and financial services,” said John Berlau, Competitive Enterprise Institute senior fellow. “The taskforce members put forth many solid recommendations for financial regulatory agencies and Congress to advance financial inclusion and reduce the number of unbanked and underbanked consumers.”
“Among these are repealing the Durbin Amendment debit card price controls that sharply reduced free checking for lower-income consumers and clearing away red tape preventing fintech firms from offering services across state lines,” Berlau said. “These nonpartisan ideas should be strongly considered by all interested in advancing the welfare of American consumers.”
But consumer groups did not agree, even going as far as to call it “unlawfull” and “anti-consumer.”
“From day one, Director Kraninger and her Taskforce on Federal Consumer Financial Law have flouted federal law,” consumer law expert Kathleen Engel, Democracy Forward, National Association of Consumer Advocates, and U.S. Public Interest Research Group said in a joint statement. “The taskforce fundamentally lacked the credentials to take on a complete review of federal consumer financial laws as it was supposedly tasked to do. Now, in the Trump administration’s waning days, this illegal advisory group is advocating to transform critical consumer protections.
“The Taskforce’s report recommends changes to consumer protections that will prove harmful to Americans struggling to weather the economic fallout of the ongoing pandemic,” the statement continued. “Developed without transparency or a fairly balanced membership, the report revealed today is the fruit of a poisonous tree. The CFPB should make public all records used in preparing the report, should not be permitted to rely on the report’s recommendations in future agency actions, and should label the report the result of an unlawful committee. We’ll continue to fight for these results in court.”
Consumer groups argued that the results were biased toward the housing industry and said consumers had no seat at the table when it comes to issuing the recommendations.
“There’s a reason this has been dubbed a ‘Task Farce,’” said Derek Martin, director of Allied Progress, the consumer advocacy group behind CFPBWatch.org. “Consumers literally had no seat at this table and now we see the industry-friendly result. In the middle of a pandemic and while millions of Americans are struggling, Trump’s CFPB encouraged friends of the financial industry to meet behind closed doors and start hacking up consumer protections. Leaders in Washington must put consumers first by rejecting these ideas written by and for many of the same industries that exploit hardworking Americans.”
Some of the recommendations consumer groups took issue with the include: Calls for eliminating caps on abusively high interest rates, eliminating protections against predatory college-sponsored credit cards in CARD Act and suggesting a lighter touch on the enforcement of anti-discrimination safeguards.