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CFPB Will Take a ‘Diagnostic’ Approach to Those Trying to Comply With TRID


Richard Cordray

Consumer Financial Protection Bureau (CFPB) Director Richard Cordray once again sat before the House Financial Services Committee on Tuesday for the CFPB's semi-annual report to Congress and touted the Bureau's efforts to protect consumers in its four years of existence while taking questions from Committee members on such topics as mortgages, auto lending, payday lending, and the TRID rule.

The Democrats on the Committee applauded Cordray's work as Director of the CFPB, while the Committee's Republicans continued to question the Bureau's perceived lack of accountability and transparency, as they did in Cordray's last testimony before the Committee on March 3.

Rep. Brad Sherman (D-California) questioned Cordray on the CFPB's much anticipated TILA-RESPA Integrated Disclosure (TRID) rule, which is scheduled to go into effect on Saturday, October 3, and has left those in the mortgage industry scrambling to be compliant in time with that date despite a two-month postponement from the rule's original effective date of August 1. Sherman likened the rule to a building a new ship, saying that no matter how much time is spent at the dock, the builder is not finished building the ship until it's taken on a shakedown cruise—which begins on October 3.

"It's the chance to try out these regulations and see how they work," Sherman said. "And it's going to be difficult. You've given additional time for the ship to be built, but it still hasn't been on a shakedown cruise, and in fact, you can't use the new regulations for September transactions. We're closing in on October 3."

Sherman asked Cordray if he was willing to announce a temporary three-month "hold harmless" period for those who are making a good faith effort to comply with TRID.

"Nobody believes that the market participants are trying to abuse consumers here. They're just trying to change their systems and get it right."

"There is obviously a lot of angst around it and people are trying to make their systems work," Cordray said. "We have said, and we're working now to provide written guidance on this, and we're working with the other agencies so we all provide the same written guidance on this, that for some period of months—and I'm not going to be specific about it; it might be longer—there will be a diagnostic approach to this. Nobody believes that the market participants are trying to abuse consumers here. They're just trying to change their systems and get it right. It will be diagnostic and corrective, not punitive, and there will be time for them to get it right and not have to be perfect on the first day."

Cordray said he was pushing hard to make an announcement along the lines of what Sherman was asking for by October 3.

Some members of the Committee revisited the controversial Dodd-Frank Wall Street Reform and Consumer Protection Act, out of which the CFPB was created in 2011. In the wake of three hearings in the Committee in the last three months on the impact of Dodd-Frank five years after the law went into effect, Committee Chairman Jeb Hensarling (R-Texas) said in his opening remarks that he believes the CFPB and Dodd-Frank have been particularly harmful to low-income consumers.

Maxine Waters

Maxine Waters


Jeb Hensarling

"Dodd-Frank and the CFPB are the prime reason the big banks are bigger and the small banks are now fewer," Hensarling said. "This has eliminated competition, stifled innovation and given consumers fewer choices. Dodd-Frank and the CFPB have raised prices, eliminated free checking for millions, and are cutting off access to mortgages, bank accounts and credit cards. This tragically makes it harder for low income Americans living paycheck to paycheck to improve their lives and achieve financial independence."

During the five-minute questioning period for Committee Ranking Member Maxine Waters (D-California), the Congresswoman praised the work of the Bureau.

"Director Cordray, first and foremost, I want to take the time to commend your efforts to return hard-earned money to the families who rightly earned it—specifically, with the 11 billion dollars of ill-gotten gains you’ve returned to 25 million Americans," Waters said. "That is no small feat, and I applaud you for it. Likewise, I want to commend your agency’s work to end the sorts of unfair, deceptive and abusive practices that nearly brought our economy to its knees seven years ago, and that continue to strip wealth from American families."

"This tragically makes it harder for low income Americans living paycheck to paycheck to improve their lives and achieve financial independence."

Cordray discussed before the Committee the progress made since his last testimony before Congress more than seven months ago, particularly in the mortgage space. The Home Mortgage Disclosure Act (HDMA) data released last week by federal agencies showed an increasing number of consumers obtaining mortgages, and mortgage originations for owner-occupied home purchases have risen by 4 to 5 percent since the CFPB's new mortgage rules went into effect in early 2014.

"And while we saw some continuing consolidation in parts of the mortgages market, there is no evidence of the decline some predicted," Cordray said. "In fact, after taking merger activity into account, the number of lenders that reported having originated mortgages showed an increase in 2014."

Cordray also noted the strength being exhibited by community banks and credit unions since his last testimony before the Committee. According to the FDIC, lending by community banks grew by 8.8 percent year-over-year in Q2, increasing at nearly double the rate of non-community banks, Cordray said. Also, credit rate membership grew in the last year at its fastest rate in 20 years, he said.

Click here to watch the hearing.

About Author: Brian Honea

Brian Honea's writing and editing career spans nearly two decades across many forms of media. He served as sports editor for two suburban newspaper chains in the DFW area and has freelanced for such publications as the Yahoo! Contributor Network, Dallas Home Improvement magazine, and the Dallas Morning News. He has written four non-fiction sports books, the latest of which, The Life of Coach Chuck Curtis, was published by the TCU Press in December 2014. A lifelong Texan, Brian received his master's degree from Amberton University in Garland.

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