No Progress on 12 Steps for CFPB
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In July, the Chamber sent Consumer Financial Protection Bureau (CFPB) Director Richard Cordray a list of 12 specific, practical steps he could take to improve the bureau’s supervision and rulewriting programs, and to give businesses clear rules of the road to follow.
Despite the CFPB’s unprecedented scope, authority, and independence, Director Cordray has pledged that “honest businesses have nothing to fear” from the CFPB. Some uncertainty about how a brand new $500 million dollar regulator will act is understandable as they figure things out. However, the tendency to keep businesses guessing by keeping the bureau’s options open creates huge uncertainty for all providers of consumer financial products and services. The CFPB still owes the companies it regulates answers to some basic questions.
But two years since its creation, there are few, if any, clear answers. In an effort to help move the ball forward, the Chamber suggested some practical, common sense steps the bureau could take to begin to provide some clarity. So far, we have not seen any progress. Cordray has yet another chance to provide some clarity this week when he testifies on Thursday before the House Financial Services Committee.
At the top of our list? Define “abusive.”
The CFPB’s 900-page examination manual is not short on detail, except in one area. It offers no hint as to what the CFPB believes constitutes an “abusive” act or practice under the Dodd Frank financial reform bill.
Unfair and deceptive acts or practices—also prohibited and subject to CFPB enforcement—each get several pages of description and examples, all built on guidance put out over the years from agencies like the Federal Trade Commission. Those agencies recognize that the best way to ensure companies comply with the law is to help them understand what the law requires. Meanwhile, the CFPB’s new legal standard, the one that commands everybody’s attention post-Dodd Frank, remains untouched and uninterpreted, but businesses remain very much on the hook for complying nonetheless.
The law assumes that the CFPB will provide guidance to define unfair, deceptive, or abusive acts or practices, but the CFPB has chosen not to. When pressed, Cordray has given conflicting answers about what the term means, and has explained that it is not the job of the CFPB to interpret Congress' words. It’s hard for companies that are committed to following the law to build a compliance program around “I’ll know it when I see it.”
Even if the CFPB is content to leave businesses in the dark about what “abusive” means, certainly the agency should want its own exam teams to know what to look for. These exam teams are fanning out across the country to review businesses big and small, in an ever-increasing number of financial services sectors. But if they are looking to their exam manual for help, they’re not going to find it.
Today, no one—not the business community that provides hundreds of billion of dollars in credit to consumers, not the CFPB, not the 50 state attorneys general who enforce these same standards—has any idea what this word means. This should be a “no-brainer.” The CFPB must define abusive before we have 50 divergent, impossible-to-manage interpretations that tie CFPB examiners and honest businesses up in knots.
If “abusive” can mean whatever the CFPB wants it to mean on any given day, then companies face a stark choice: stay in the market and take their chances, or pull back from providing credit for consumers and small businesses to eliminate the risk of arbitrary sanction by an unaccountable federal agency.
What would you do?