September 18, 2012
CBAI's Bob Wingert, President; Jerry Cavanaugh, General Counsel; David Schroeder, VP of Federal Governmental Relations; and Mike Kelley, President of the CommunityBanc Service Corporation recently discussed CBAI's observations, concerns, and recommendations regarding the Consumer Financial Protection Bureau (CFPB) with Director Richard Cordray. Director Cordray called on September 14th as part of the Bureau's outreach efforts to community bank trade associations.
Wingert encouraged the CFPB to focus its efforts on the largest financial institutions and the shadow financial industry to help level the playing field for community banks. Tiered regulation, which was expanded under the Dodd Frank Wall Street Reform Act, could also help accomplish this leveling. Wingert urged all of the banking regulators (including the CFPB) to aggressively continue the trend of expanded tiered regulation. Director Cordray expressed an appreciation for tiered regulation and the need to tailor regulation for community banks where possible. The most recent CFPB example is its small volume exemptions for remittance transfers.
Schroeder emphasized that consumers (as well as financial institutions) have responsibilities in their financial relationships. Financial products are rich with features, there are regulatory disclosure requirements, and banks incorporate lessons learned into their documents and disclosures. Consumers have the responsibility to read and understand what they are signing, but many are not. This is a significant and a widespread problem. It is impossible to distill all of the relevant information of a feature-rich financial service onto a single page, and there is a very real risk of reducing consumer options which is not in the best interests of consumers, community banks, and our communities. Director Cordray frankly agreed that consumers also have responsibilities in their financial dealings. His goal for the Bureau is, in part, to assist consumers in making informed financial decisions and to not "dumb down" products or services.
CBAI recommended that, when seeking consumer feedback, the CFPB should be looking for examples of exemplary behavior in addition to looking for examples of abusive practices. Besides tempering the perception that the CFPB is purely looking for "gotcha" moments the Bureau will be better informed about bank best practices. CBAI urged the Director to give these two objectives more equal weight. Director Cordray agreed with the recommendation and will implement them in the future.
CBAI also recommended that the CFPB make it very clear in its rule making precisely which institutions are subject to its rules, examination and enforcement. There is still confusion as to the role of the CFPB as it relates to community banks (rule writing for all, but examination and enforcement only for those over $10B). References in the Bureau's publications to "institutions we supervise" is insufficient to remove this confusion. Director Cordray stated that the unique responsibilities of the Bureau have created some confusion, particularly as to how the CFPB impacts community banks, and he appreciated the suggestion to help eliminate future confusion.
Prior to Director Cordray's outreach, the Bureau released details regarding its new Community Bank Advisory Council. The Council will provide the CFPB with feedback and recommendations to develop and influence policy, research, rulemaking, and engagement functions. CBAI is pleased that its former Chairman, Robin Loftus, was named to the Council and will serve as its first Chairman.
CBAI appreciated the opportunity to discuss the operations of the Bureau and its impact on community banks.