The American Financial Services Association, a lender trade group, stuck to familiar complaints about the Consumer Financial Protection Bureau -- especially from the point of view of auto lenders -- in a hearing today before a congressional subcommittee examining “opportunities for reform” in federal regulations.
But Bill Himpler, AFSA executive vice president, found himself before a more sympathetic audience, due to a Republican administration which is on the record as seeking to rein in the CFPB, too.
“The CFPB is tasked with helping consumer finance markets work by making rules more effective, by consistently and fairly enforcing those rules, and by empowering consumers to take more control over their economic lives,” Himpler said. “Unfortunately, that’s not what the CFPB does.”
In his written testimony, Himpler reiterated AFSA’s longstanding, main arguments against the CFPB.
His main points pertaining to auto lending, according to an advance copy of his written testimony, included the following:
- The CFPB’s use of the disparate impact theory in evaluating alleged discrimination in vehicle financing.
- A “flawed” supervision process, which AFSA says includes lack of understanding of the markets it is supervising.
- So-called “regulation by enforcement,” instead of rewriting broader rules.
- A CFPB proposal to ban pre-dispute arbitration agreements.
- The CFPB’s definition of “larger participants” which are subject to the CFPB’s jurisdiction.
- Problems with the CFPB’s consumer complaint database, including insufficient security and the agency’s failure to verify the validity of complaints.
“The CFPB has greatly expanded its mission and needs to be reined in,” Himpler said in the written testimony, which was submitted in its entirety to the Subcommittee on Financial Institutions and Consumer Credit of the House Committee on Financial Services.
'Back on course'
Himpler’s spoken testimony was much shorter than his written, submitted testimony, because of time constraints.
In the hearing, U.S. Rep. Bill Posey (R-Fla.) asked Himpler what the CFPB could do to get “back on course.”
Himpler said in part the CFPB should refrain from “regulation by enforcement.” That referred to the agency’s practice of issuing enforcement actions against individual companies and then holding lenders accountable for following those examples.
That approach has been used especially in the case of auto lending, Himpler said. “There have been three public enforcements, other private enforcements, and none of them looks like the other,” Himpler said. “The [CFPB] director tells us it’s financial malpractice not to follow these orders. But which one do we follow?”
Himpler asked Congress in his written testimony to prohibit the CFPB from using the disparate impact theory in the vehicle finance market, to limit the CFPB’s enforcement authority, to remove the CFPB’s supervision authority and return it to the relevant federal or state regulators, to prohibit the CFPB from finalizing the anti-arbitration rule, and to halt the use of the CFPB’s complaint database.
The disparate impact theory holds that if members of legally protected classes, such as minorities, pay a higher rate than nonmembers of protected classes, that by itself constitutes illegal discrimination, even if it’s unintentional.
Financial Services Committee Chairman Jeb Hensarling (R-Texas) is a longtime foe of the CFPB. Meanwhile, under the Trump administration, the U.S. Department of Justice submitted a letter on March 17 seeking to join a lawsuit in part over the conditions under which the president can fire the CFPB’s director.