Guest Opinion: Cordray, CFPB Embrace CU Principles
Credit unions are unique in the financial world. Rarely do you find a financial institution that clearly and emphatically says it is not working for a profit.
At the Consumer Financial Protection Bureau, we like that the focus of your business model is excellent customer service. This model allows people to help other people by providing high-quality financial services to the credit union members. With tens of millions of members and thousands of locations in this country alone, credit unions are indeed fulfilling their mission of service.
To pilot a prototype credit card agreement, we have been working with one of the largest credit unions in the country, Pentagon Federal Credit Union. As part of our “Know Before You Owe” campaign, we released a simplified agreement that is short, written in plain language, and explains the key features. Pentagon FCU has more than one million members and 350,000 cardholders, so we are very pleased to be running our pilot program with them.
One of our core beliefs at the consumer bureau is that honest businesses will benefit when those that cheat or mistreat their customers are held accountable. We want all financial institutions to have the same kind of accountability, and to operate by making costs and risks clear to their customers up front. Opaque, back-end pricing is confusing to consumers who then get hit by hidden fees later. That is not right. Those kinds of tactics, along with other harmful practices, are what got us into this financial mess.
Going forward, the new consumer bureau has an important role to play in ensuring that the recent and profound financial crisis does not happen again. Before the crisis hit, for example, only part of the multi-trillion-dollar mortgage market was subject to federal oversight. We have seen how that turned out. Bad practices drove out the good. We firmly believe that had the bureau been in place ten years ago, the crisis would have been averted.
We now have the ability to examine participants in both the depository and non-depository segments of the mortgage market. We are working to level the playing field for all market participants in order to clean up bad practices and various forms of unfair competition.
So, we are here to implement reasonable regulations. Under the law, other than large credit unions with assets over $10 billion, we do not enforce the law against credit unions, and we do not examine credit unions. But we do write rules that can affect the credit unions. Over the next year, the bureau will be implementing new mortgage standards that Congress specifically required us to adopt in the Dodd-Frank Act.
One of our most important rulemakings will implement a new statutory requirement that lenders make a good faith and reasonable determination that a borrower can repay the mortgage. Other rules that address mortgage origination will implement statutory standards for loan originator compensation and the origination of high-priced mortgages.
On all of these fronts, we need to return to traditional principles of underwriting and sound customer service. Our principal goal in implementing the law is to improve the functioning of consumer financial markets and help ensure that individual consumers are not steered into loans they do not understand or cannot afford.
A number of new statutory provisions address mortgage servicing, covering topics such as new disclosure requirements, force-placed insurance, the crediting of payments, and error resolution requirements. Here, our principal goal is fair treatment of borrowers.
As we develop these initiatives, we are intent upon keeping everyone’s concerns in mind. We know that one size does not fit all. Where it makes sense to treat smaller institutions differently from larger ones, we have pledged to consider doing so. We also want our regulations to be more accessible. We plan to highlight the key points for small providers, which do not have the same army of compliance officers that are on staff at the very large institutions. We know that is simply not feasible. Nor should it need to be.
At the consumer bureau, we understand that credit unions did not cause the financial crisis. As we work to clean up the mess that the crisis created, we must be mindful of the fact that credit unions were among those harmed at every step along the way: by the mortgage frenzy, by the ensuing credit crunch, and by the deep recession that cratered our local economies.
Credit unions deserve a fair marketplace where their model of steadfast customer service and concern for long-term relationships can succeed. That model is just as sound today as it ever was, and we embrace it.
In my hometown, and in hometowns across this nation, many millions of Americans depend on credit unions every day. This is about far more than mere economics. It is about human beings depending on one another.
When people entrust a credit union with their money and with their critical financial transactions, they are entrusting you with their hopes for the future and with the claim they are staking to the American Dream. We want you to continue to inspire and fulfill the hopes of all the people you serve.
Richard Cordray is director of the Consumer Financial Protection Bureau
Contact 202-435-7000 or email@example.com