Small Banks May Escape CFPB Enforcement, Somewhat

The smallest of banks might get a pass when it comes to Consumer Financial Protection Bureau enforcement, the CFPB’s director told a House oversight committee during a hearing this week, referencing an earlier conversation with the Independent Community Bankers of America.

That conversation, which took place via conference call and is outlined on ICBA’s website, reports that Cordray “emphasized that the bureau is focused on leveling the playing field with nonbank providers, such as mortgage brokers and payday lenders, so responsible businesses, such as community banks, can thrive and prosper.”

A question-and-answer session during the call revealed a possible two-tiered plan for the CFPB’s enforcement of banks, with respect to size or market share.


“Cordray recognized that community banks have a different business model that emphasizes customer service in the community and that community banks were therefore not responsible for the problems that led to the financial crisis,” ICBA reported. “Cordray also said the bureau will be considering two-tiered regulatory requirements and exemption thresholds as it writes regulations so that community banks will be able to conduct their business without overly burdensome regulatory requirements.”

The hearing this week marked Cordray’s first public appearance before House members since his January 4 recess appointment by President Obama. Many have speculated that the CFPB could be open to potential scrutiny and lawsuits following the controversial means by which Cordray came into the director seat.

Written by Elizabeth Ecker

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  • Mr. Cordray oversees an organization whose primary practical connection to the communities it oversees is through auditing the entities which compose those business communities.  From a representative sample of such audits, the CFPB can begin to gather the information needed to reach relevant conclusions of the need for regulation on the various types of entities participating in the consumer lending world. 

    Without representative sampling and no experience in this regulatory area, the statements attributed to Mr. Cordray seemed based more on bias than reliable CFPB audited information.  The CFPB has yet to audit any representative sample of non-bank entities from which its leadership could have reached such lofty decisions.

    Writing regulations and exemptions from regulations with no conclusive evidence established through audits of current information hardly seems the level of reason and responsible decision making, the nation was promised from such a powerful bureau.  Why is there such a rush to judgment about one type of lending institution over another?

    While there appears to be very strong reasoning to emphasize the audits of non-bank lenders over banking lenders in the beginning of the CFPB, long-term such emphasis should be based on CFPB auditing experience and results rather than early rationalizations.  

    I opine as an auditor and licensed CPA, not as a representative of my employer or of our industry.

  • “so responsible businesses, such as community banks, can thrive and prosper.”

    The inverse of this comment is that we non-bank lenders are still the problem. We MUST be watched. It’s sort of like that phrase from the DaVinci Code….”The FRENCH cannot be trusted”.  Substitute Broker.

    Man, we are all so sick of this. One of the main reasons they target brokers, is because brokers are low hanging fruit. Period.

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