Bankers are calling on Congress to enact structural changes to the Consumer Financial Protection Bureau that would increase its accountability and curb its powers.
Lenders challenged the bureau’s current structure and urged reform during a hearing titled “Examining Legislative Proposals to Reform the Consumer Financial Protection Bureau” before the House Financial Services Committee on Tuesday.
A regulatory “onslaught” is burdening credit unions that are required to comply with the same rules and regulations as the largest financial institutions—despite often having much smaller compliance departments, said Lynnette Smith, president and CEO of Washington Gas Light Federal Credit Union in Springfield, Va.
“I cannot emphasize enough how burdensome and costly the unnecessary and duplicative compliance costs are to credit unions,” Smith said, citing a 2012 survey of National Association of Federal Credit Unions members, 94% of whom reported an increased regulatory burden since the Dodd-Frank Act was enacted in 2010.
The credit union association called for “fundamental structural changes,” including creating a five-person board or commission to govern the CFPB, similar to another banker who recommended replacing the CFPB director—a position currently filled by Richard Cordray—with a multi-member board.
Among his recommendations, Robert Tissue, CFO of Moorefield, W.V.-based Summit Financial Group also called for better accountability by requiring the bureau to be funded by congressional appropriations and to regulate non-banks and banks alike.
“Unlike nonbanks, the banking industry already has a compliance culture and financial wherewithal to assure compliance with consumer regulations,” he said during his testimony on behalf of the West Virginia Bankers Association. “Thus, there needs to be great transparency regarding the Bureau’s funding to assure that the focus is on closing the gaps on nonbanks, including a break-out of Bureau expenditures attributable to bank versus nonbank regulation and supervision.”
The U.S. Chamber of Commerce stated its support for sound consumer regulation, but pointed out that like every other government function it must be carried out in a “fair, transparent manner consistent with the principles embodied in the Constitution.”
Consumer protection goals can only be achieved if an agency’s organizational structure promotes rather than frustrates a “consistent, effective” approach to regulatory issues, said Jess Sharp, managing director for the Center for Capital Markets Competitiveness at the Chamber of Commerce.
“The Consumer Financial Protection Bureau fails these basic tests,” Sharp said in his testimony, adding that “structural reforms are urgently needed.”
Written by Alyssa Gerace