By Matthew D. Urban, Attorney
As many politicians and pundits are fond of saying, elections have consequences, and in the case of the Consumer Financial Protection Bureau (CFPB), this old adage certainly holds true. Although much of the rhetoric of the campaign did not specifically touch on the current and future role and impact of the CFPB, an election night victory by President Obama ensured that it would continue to have the necessary support of the executive branch over the next four years to become an entrenched part of the federal government. When you take into account the Senate remaining in the hands of the democrats, it is abundantly clear that the CFPB is here to stay.
While the CFPB has only been in operation since July 21, 2011, a report just issued on December 14, 2012 by the House Oversight and Government Reform Committee reflects on the overall impact the CFPB has had on financial institutions, including credit unions along with the overall consumer credit market since its inception. Specifically, the report found that the CFPB has increased the cost of consumer credit by $17 billion and has depressed job creation by approximately 150,000 jobs. In addition to the impacts on the general economy, the regulations issued by the CFPB have created a trickle down effect by substantially increasing the regulatory burden on all financial institutions, including credit unions. Despite the CFPB only having supervisory authority over financial institutions with $10 billion or more in assets, all financial institutions are bound by the regulations it issues and as such, credit unions are left to navigate through complex regulations without having the benefit of an entire compliance department like many of the larger banks.
A specific area that the CFPB focused on in 2012 was the mortgage market. Specifically, the CFPB has spent substantial time and resources on proposed changes to the current requirements of the Truth in Lending Act (TILA) and the Real Estate Settlement Procedures Act (RESPA) to the tune of 1,099 pages. In fact, the CFPB felt it necessary to post a blog on its website explaining why it took so many pages to create a three page disclosure form. Unfortunately, while the CFPB believes it is reasonable to take almost 1,110 pages to make these changes, the real world impact for credit unions is that they now must wade through all of the pages just so they can ensure they are in compliance with the new rules. Onerous requirements such as these may ultimately lead credit unions to re-examine whether or not they should even be in the mortgage business, which in turn will ultimately impact a consumer’s ability to secure a competitively priced mortgage from a wide variety of lenders.
Another example of CFPB interventionism surrounds its involvement in regulating and enforcing the Equal Credit Opportunity Act (ECOA). On April 18, 2012, the CFPB issued bulletin 2012-04, which in their own words stated that they were providing lenders with “fair notice on fair lending” and that they intended to vigorously enforce the fair lending principles outlined in Regulation B. Along similar lines, the CFPB has spent substantial time and resources in the past year exploring alleged lending abuses being perpetrated against the elderly. More recently, they have begun looking into student loan lending practices.
While it may seem that the CFPB is doing its best to create an unmanageable regulatory environment for financial institutions, particularly credit unions, it is actually attempting to comply with one of its mandates by streamlining the regulations it inherited from the Federal Reserve. Specially, the Senate recently approved a House bill (H.R. 4367) which amended the Electronic Fund Transfer Act to eliminate the requirement that a fee disclosure be placed in a prominent and conspicuous location on or at an ATM. Provided the bill is signed into law by the president, the fee disclosure will only need to be made on the ATM screen and not physically on the machine. While this represents more of an isolated example of eliminating a regulation as opposed to creating a new one, the fact of the matter is that the requirement likely would still be in effect but for the work of the CFPB, thus giving credit unions one less compliance concern regarding their ATM’s.
As we enter 2013 however, one thing is clear and that is that the CFPB is here to stay. If credit unions are still of the belief that the CFPB does not impact them, they will soon discover that not to be the case. Whether your credit union has been monitoring the actions of the CFPB or not, now is the time to begin to develop a comprehensive strategy for navigating the ever-changing regulatory environment that exists.
Matthew Urban is the managing attorney of the Credit Union Group of Weltman, Weinberg & Reis Co., LPA, in the Pittsburgh office. He can be reached at 412.338.7134 and firstname.lastname@example.org.