Saying that credit unions and small banks “had very little, really nothing to do with causing the financial crisis,” Consumer Financial Protection Bureau Director Richard Cordray renewed his commitment to ensuring they don’t face unnecessary additional regulatory burdens.
Cordray told the Senate Banking Committee at a Jan. 31 hearing that credit unions and community banks are successful business models and are the institutions most responsive to the needs of consumers. Therefore, his bureau wants to ensure that its regulations to protect consumers don’t hurt those entities, he added.
Cordray said the CFPB would create advisory panels of credit unions and community banks to provide input before the agency issues proposed rules.
Sen. Jerry Moran (R-Kan.) said other regulatory agencies have such panels, and community banks “still feel they are misunderstood.”
Banking Committee Chairman Tim Johnson (D-S.D.) praised the bureau’s outreach to stakeholders in the rulemaking process.
But Sen. Richard Shelby, the panel’s top Republican, said the bureau hasn’t sought enough public input and has “displayed a propensity to use technicalities to do what you want.”
Cordray responded to Shelby’s criticism that the agency didn’t create bank and credit union advisory panels before issuing its most recent rule on remittances by explaining that the rule-writing process was started by the Federal Reserve and the CFPB took it over when it began operating last summer.
In response to another question from Shelby (R-Ala.), Cordray said his bureau frequently consults with the other banking regulators, and they will make a concerted effort to ensure that their regulations protect consumers but don’t jeopardize the safety and soundness of financial institutions.
Cordray will have responsibility for protecting the safety and soundness of banks as a result of his membership on the FDIC board.
Sen. Mike Johanns (R-Neb.) said he has doubts that the actions that the CFPB takes during Cordray’s tenure will be considered valid because of the constitutionally questionable nature of President Obama’s recess appointment of Cordray earlier this month.
Cordray said he believed the appointment was constitutionally valid, and he plans to perform the responsibilities that he is required to under the law.
Sen. Bob Corker (R-Tenn.) asked Cordray what he thought of risk-based pricing and inquired if the bureau plans to take steps to restrict the practice.
Cordray responded, “That’s the way the market works.” He noted that providers of financial products must take into account the risk of loss and the risk of default when setting prices.
Cordray also mentioned that his agency doesn’t have the power to set interest rates or the prices of financial products.
The tone of the questioning was generally friendlier on the Democratic-controlled committee than it was during a similar session on Jan. 24 by a House panel, controlled by Republicans.