Community Banker Suing CFPB Takes Case to Congress

WASHINGTON — The Texas community banker who's leading the courtroom fight against the Consumer Financial Protection Bureau took his case to Capitol Hill on Thursday, using homespun adages to make the case against excessive regulation.

For the House Republicans who called the hearing, Jim Purcell, chief executive officer of State National Bank of Big Spring, was right out of central casting, speaking with a drawl and emphasizing his small-town roots, though he had a hard time answering certain questions from Democrats.

Purcell urged financial policymakers to show more caution regarding the impact of new regulations, saying they should follow the advice his first-grade teacher gave him regarding railroad tracks: "Stop, look, and listen."

Rep. Michael Capuano, D-Mass., agreed that policymakers should show caution as they implement financial reform, but argued that they should not be frozen into inactivity.

"We are stopping, looking and listening," he said. "I totally agree."

Purcell thrust his $30 million asset bank into the national spotlight last month when he signed onto a lawsuit — spearheaded by conservative lawyers in Washington — that challenges the constitutionality of the consumer agency.

In the suit, State National Bank of Big Spring alleges that it exited the mortgage business because of regulatory uncertainty stemming from the Dodd-Frank Act's wide grant of authority to the CFPB.

Purcell said Thursday that his bank traditionally offered residential mortgages and kept them on its books, insisting on five-year balloon payments in order to manage its interest rate risk. He testified that new rules on balloon payments helped drive his bank out of the mortgage business, and wondered aloud about where the bank's customers will now go.

"Our customers have a dilemma: 'Where do we turn?" he told the House financial oversight subcommittee.

But several of the panel's Democrats were skeptical of the claims made by Purcell and some of the other witnesses about the size of the impact Dodd-Frank will have on small financial institutions, since much of the law applies only to larger firms.

Rep. Brad Miller, D-N.C., asked Purcell to identify which sections of Dodd-Frank apply to his bank.

In response, Purcell mentioned the creation of the consumer agency before conceding: "I could not tell you at this moment exactly which ones do and which ones don't."

Rep. Barney Frank, D-Mass., challenged Purcell regarding the lawsuit's claim that the CFPB got something close to a blank check from Congress. Frank, one of the 2010 law's principal authors, argued that the Office of the Comptroller of Currency has similar autonomy.

"Why didn't you sue to get the comptroller of the currency thrown out?" Frank asked. "Or you just don't like consumer protection?"

"I'm going to leave that up to the attorneys," Purcell responded.

Rep. Randy Neugebauer, R-Texas, pushed back at the Democrats' claim that some community banks are overstating the impact of Dodd-Frank.

Asked whether small financial institutions simply dreamed up the law's negative consequences, Purcell responded: "Our customers are not dreaming it up, and they're worried."

Purcell went on to contrast his bank's business model with those of large banks. "I don't understand all there is in Wall Street," he said at one point. "I don't understand all the default swaps."

The hearing, called by Neugebauer, who chairs the financial oversight subcommittee, was the latest in a series that House Republicans have convened to make the case against Dodd-Frank.

It was titled "Who's In Your Wallet? Dodd-Frank's Impact on Families, Communities and Small Businesses," a reference to Capital One's "What's In Your Wallet?" marketing campaign.

In light of Wednesday's enforcement action against Capital One regarding credit-card marketing, Frank joked that "what was in the wallet of many consumers were the hands of Capital One. So references of who's in whose wallet and for what purpose are very relevant to today's hearing."