[Q&A] How Will a New CFPB Director Affect Compliance?
As most people have probably heard by now, Consumer Financial Protection Bureau Director Richard Cordray has left the CFPB. Regardless of who is appointed Deputy Director, the direction of the CFPB is sure to change under new leadership.
The CFPB was created as in independent agency as a result of the Dodd-Frank Wall Street Reform and Consumer Protection Act. The CFPB has long been criticized for overreaching its authority and acting without oversight. In 2016, an U.S. appeals court, said that the CFPB's director had "more unilateral authority than any other officer in any of the three branches of the U.S. government, other than the president."
With the upcoming change in leadership, we decided to have QuestSoft President Leonard Ryan and QuestSoft Vice President of Support and Training Carey Aimone weigh in on how a new director could affect the future of compliance and regulations.
* The views, opinions, and positions expressed by the authors and those providing comments on this blog are theirs alone and do not necessarily reflect the views, opinions or positions of QuestSoft.
Q: Compliance seems to be heading towards Fair Lending, does a new director change this?
Leonard: No. Fair Lending has been a practice for decades and the HMDA data rules are set. The additional data will be available and the analysis more automated. What may change with a new director is the severity of enforcement to lenders that are making an honest effort to fair lending compliance yet have statistical anomalies. I would expect that intentional fair lending violations will continue to be punished.
Carey: Time will tell. It certainly could. Adherence to fair lending undoubtedly means more regulation. The current administration has not been quick to embrace corporate regulation.
Q: Will having a more laissez-faire director change HMDA regulations?
Carey: The HMDA rules have been written and are in the process of being implemented. It would take a lot to roll them back. That said, the Bureau will likely react to some of the more confusing parts of the new rules, to hopefully make them more logical.
Leonard: I would think that appointing a critic of the current CFPB regulation overreach would strike more of a balance between credit availability, consumer education and protection.
Q: Will compliance get more complicated or less in the future?
Carey: Government rarely removes complexity. They may try, but it’s a difficult task. If they can do it with taxes, maybe they can do it with compliance. We’re not holding our breath.
Leonard: It will be different rather than less complicated. Efforts toward digital mortgages and digital loan transactions are already moving forward with great speed. Compliance will shift to the front of the transaction (loan application) before a person at the lender touches the loan. If rules are objective and able to be measured rather than subjective, you will see highly accurate application and more consumers able to qualify.
Q: What regulations would most likely change with a new director?
Leonard: In mortgages, I see QM/ATR opening up especially for portfolio lenders and see a consumer review of TRID and adjustments that don’t give the industry a pass but correct the “Catch 22” issues where by complying with one regulation you don’t violate another.
Carey: It really depends on the director and their background. If Mulvaney is allowed to remain, he has already made his disdain for the Bureau and its overreach quite clear. How much his hands will be tied, remains to be seen.
Q: Is there any chance of the CFPB being dismantled?
Leonard: No. It could go to a 5-person committee. It is entrenched and would take more work to eliminate. Also, there are a number of benefits of the CFPB to the lending industry. A single regulator for regulations (rather than OCC/FDIC/FRS/NCUA/HUD) having their own versions, regulation of industries that have gotten a pass at the detriment of consumers such as payday lenders and student loans. It is just when the purpose is to fine companies and reroute the fines to selected politically preferred parties that the motivations for enforcement become suspect.
Carey: Unlikely. You can’t put the toothpaste back in the tube.
Q: How can companies better adapt to changing leadership in regulatory agencies and the regulation changes that come along with it?
Leonard: Work with the regulator and automate potential issues away when possible. I hate to say it but the CFPB has provided some specific benchmarks for what is good and what is bad. Take away the human error elements and you can protect your institution.
Carey: Our customers trust us to ease their regulatory burden. We’ve got this!
Q: Will the financial burdens of compliance increase or decrease in the future?
Leonard: The jury is still out on that. For the immediate future, you still have to comply but I think the CFPB will become more reasonable and the activist states will want to take over for whatever the CFPB relaxes their efforts on. But ask again in three years when the presidential election rolls around again.
Carey: Our Magic 8 Ball says “Signs point to Increased