The Consumer Financial Protection Bureau (CFPB) is now into its second year and is building strength for a long run of compliance changes.
Credit unions barraged with thousands of pages of proposed and final regulations in 2012 are faced with a daunting three-pronged task:
1. Digesting the new regulations;
2. Planning and implementing significant compliance changes to forms, procedures, and policies in the near future; and
3. Monitoring the coming deluge of new regulations.
As you remember, Congress enacted the Dodd–Frank Act following the financial crisis of 2008 to ensure the problems causing the financial crisis wouldn’t happen again. Dodd-Frank created the CFPB for the sole purpose of protecting consumers, a completely unique focus among federal banking agencies.
The CFPB has four key tasks:
1. Rule making, supervision, and enforcement of federal consumer financial laws;
2. Restricting unfair, deceptive, or abusive acts;
3. Taking consumer complaints; and
4. Researching consumer behavior and monitoring financial markets for new risks to consumers.
The inevitable results? More disclosures, more regulations, and more enforcement.
For credit unions, the most important is CFPB’s rule-making authority. The CFPB now has power over 10 major consumer financial regulations, many of which apply to all credit unions regardless of size or charter.
And soon the CFPB’s mortgage regulations will have an enormous impact. The CFPB’s proposed changes affect mortgage lending and include new or revised disclosures in the following areas:
The integrated mortgage disclosures proposal and the mortgage servicing proposals contain the most significant changes in real estate lending in the past 30 years.
The CFPB already issued 18 rules or proposals, and within the next five years, it must conduct a complete as-sessment of each of the regulations it inherited.
CFPB Director Richard Cordray’s term continues to 2017, and the bureau’s strategic plan for the next five years lays out an aggressive agenda for compliance changes. The CFPB’s actions so far represent the direction and pace CFPB has set for the future.
The CFPB has implemented a Web-based system to collect and process consumer complaints related to specific financial services. The bureau wants to increase the number of complaints the system handles.
The complaint system is controversial because it’s both public and unverified. The scope of complaints has grown this year, focusing on problems with credit cards, mortgages, student loans, deposit accounts, auto loans, credit reporting, and money transfers.
The system impacts large credit unions (with more than $10 billion in as-sets) directly, but it also impacts other credit unions indirectly. That’s because the CFPB now acts as a complaint processor with referrals to NCUA and state agencies.
Although the CFPB doesn’t have primary authority over institutions smaller than $10 billion in assets, it does have the authority to issue investigative demands to any size credit union. It’s unclear at this point how far the agency will take that authority.
Credit unions must prepare for a long path of increased regulatory changes affecting virtually every consumer product and service. After the mortgage lending overhaul in 2013, the CFPB likely will issue new regulations covering areas such as overdraft protection and payday lending.
We believe the CFPB will keep an aggressive pace—and will remain watchful to attack any unfair and abusive financial services practices or providers along the way.