On July 21, 2013, the CFPB celebrated its second birthday. That was only a few short days after the confirmation of Richard Cordray to be the first Director of the CFPB. In many ways that agency had been in limbo, believe it or not, with only an Acting Assistant Director in charge. At that, the CFPB was able to successfully begin its compliance examination function for those banks bigger than $10 billion, and at the same time finalize regulations aimed at restructuring mortgage finance in the United States.
But many observers think that the CFPB has only begun to hit its stride. Upcoming are the combined TILA/RESPA disclosure forms set for release yet sometime this year. Final action on the use of mandatory arbitration agreements in consumer finance contracts is also expected, and the CFPB is expected to step up enforcement actions against automobile sales finance companies and banks that purchase their contracts.
Perhaps one of the most important issues we can expect the CFPB to focus on will be Fair Lending. The search for unintentional discrimination based on the disparate impact theory of discrimination will likely intensify and will be complicated by the unintended consequences of the Ability to Repay and Qualified Mortgage Rules.
Already we think we see the CFPB’s attitude toward Fair Lending influencing the other federal bank regulatory agencies. Recent CRA and Fair Lending exams conducted by the FDIC, the OCC and the Federal Reserve have become more thorough and more difficult. Compliance and safety and soundness examinations will also be more onerous once the Ability to Repay and Qualified Mortgage Rules kick in on January 10, 2014.
And we still await new regulations that will require the reporting of HMDA-like data for small business loans, focusing on loans to female and minority customers – more data for Fair Lending analysis.
It was probably inevitable that we would reach this point, and in some ways it may be a good thing to have a fully functional CFPB. But we can rest assured now, this new regulator is here to stay. We will continue to track these fast moving developments for the members of both Bank Groups.