The mission of the Consumer Financial Protection Bureau is to "aim to make consumer financial markets work for consumers, responsible providers, and the economy as a whole." As its website further states, "we arm people with the information, steps, and tools that they need to make smart financial decisions."
However, the agency consistently overlooks the actions of responsible providers, instead issuing one-size-fits-all regulations.
Regulations that don't consider the unique benefits and challenges faced by smaller financial institutions, including not-for-profit credit unions.
Regulations that make services harder to provide and, in turn, harder for consumers to access safe and affordable products and services.
Enough is enough. Financial services organizations like the Credit Union National Association are fighting back against CFPB actions that actually harm consumers.
This summer, a Texas court granted a preliminary injunction enjoining the implementation and enforcement of the 1071 final rule until the U.S. Supreme Court decides whether the CFPB is constitutionally structured, in a case brought by the Consumer Financial Services Association (CFSA). As part of the preliminary injunction, the court stayed all compliance deadlines under the final rule but limited the relief to only banks involved in the litigation instead of all financial institutions affected by the final rule.
To address the inequity, a motion to intervene filed by CUNA, Rally Credit Union and the Cornerstone League argued that the same constitutional and statutory challenges to the final rule applied to credit unions. Just a few weeks later, the court in Texas granted a motion for preliminary injunction and expanded it to a nationwide injunction.
The court stated, "In the event of a reversal in that (CFSA) case, Defendants are ORDERED to extend Plaintiffs and their members, Intervenors and their members, and all covered financial institutions' deadlines for compliance with the requirements of the final rule to compensate for the period stayed."
This gives credit unions and banks alike much needed additional time to comply with a very complex final rule – approximately 11 additional months, depending on when the Supreme Court rules. This extra time is important due to widespread concerns that smaller financial institutions, such as credit unions and community banks, will disproportionately feel the complexity and significant costs of Section 1071. This could ultimately lead to fewer and less favorable outcomes for all small-business borrowers, as the overly broad scope of the CFPB's rule would substantially raise the cost of small-business borrowing and require covered financial institutions to collect data on businesses that are not "small businesses" by any traditional metric.
However, this is not the only challenge at hand. The CFPB consistently churns out new regulations with tight deadlines and complex new requirements that impact financial institutions' ability to serve consumers. This regulatory wave includes new rules on data rights and open banking, changes to the credit reporting ecosystem, credit card late fees and two upcoming proposals on nonsufficient funds and overdraft transactions. All of which have massive implications for the availability of common financial products and services.
Within the last few months, the CFPB has issued more concerning proposals.
The $7.7 billion-asset federal credit union in East Lansing announced its third deal in as many months — the planned purchase of in-market peer Gabriels Community Credit Union. And it has two bank acquisitions pending.
In the CFPB's new guidance on financial institution consumer information requests, the advisory opinion asks that banks and credit unions with more than $10 billion in assets provide consumers with account information in a timely manner. While responding to requests for account information is a service many credit unions provide on a daily basis, the CFPB's guidance seeks to impose more expansive limitations and obligations on covered financial institutions than Congress intended when passing the Consumer Financial Protection Act.
Not even a week later, the CFPB once again announced another worrying personal financial data rights proposal.
That proposed rule would require financial institutions, card issuers and other payment facilitation providers to share certain consumer financial data on demand with consumers and third parties at the request of the consumer.
We want consumers, including our credit union members, to have access to their personal financial data — but that information must remain safe, secure and private. The CFPB's proposal would provide free services to third parties' competing businesses — businesses that provide financial services but are not subject to the same regulation and oversight as financial institutions. This has the potential to put the most vulnerable at risk, something the CFPB seems to forget about when creating policies to "protect" consumers. Adding to concerns, this proposal comes at a time when revenue streams are targeted from all angles and the cost of serving our communities is rising.
Most recently, the CFPB's proposals related to the Fair Credit Reporting Act are an "unwarranted and vast expansion" of the statute and include an insufficient timeline for feedback. It also does not align with the intent of Congress in passing the FCRA.
This is a common theme: the CFPB positioning itself between financial institutions and the consumers they serve, often using "authority" not reflected in law, or demonstrated as the intent of Congress.
This is all happening while multiple courts question the CFPB's ability to write rules until its structure is deemed constitutional or not. With so many legal questions up in the air, it is even more problematic to navigate a never-ending stream of new regulations, guidance and other CFPB directives.
The compliance burdens and resources needed to consider these massive proposals, and the planning for implementing complicated final rules, is a heavy lift for smaller financial institutions. Time spent deciphering new requirements that often aren't tailored to credit unions and community banks is time and resources taken away from serving people's financial needs and innovating with new products and services.
This reality of the CFPB's actions counters its very mission. It's a blind spot, as the CFPB consistently oversteps or fails to consider the whole impact on consumer-focused financial institutions — including credit unions. This ultimately hurts the very consumers the CFPB is supposed to help.
