WASHINGTON (3/13/13)--Credit unions and community banks did not engage in practices that caused the financial crisis, and the Consumer Financial Protection Bureau's regulatory actions "should take account of that fact and protect and preserve their traditional model of lending which is a very responsible model and good for many communities across this country," CFPB Director Richard Cordray said on Tuesday.
Cordray made the remarks during a Senate Banking Committee confirmation hearing. Committee Chairman Tim Johnson (D-S.D.) started Cordray's questioning by noting that credit unions and community banks continue to raise concerns about regulatory burden, and asking how the CFPB plans to address these issues while protecting consumers.
The CFPB has met with credit unions and other small financial institutions in South Dakota and elsewhere, and the CFPB's work has been influenced by these meetings, Cordray responded. The meetings affected the agency's qualified mortgage rule, escrow rule and servicing rule, he noted. The CFPB has created separate credit union and community bank advisory councils to speak regularly and specifically with small financial institutions about the issues they face, Cordray added. The regulation of non-banks and the shadow banking system are areas of emphasis for the agency, he said.
The agency's structure and funding were also touched on during the hearing. Cordray said he is open to working with the Senate to further develop transparency and accountability of the agency. He added that the agency is always accountable to Congress, and said he himself has found the congressional oversight process to be "vigorous and meaningful."
House and Senate Republicans have supported replacing the CFPB director's position with a five-member panel of leadership. Legislation that would create such a panel (S. 205) has been introduced in the Senate. The Credit Union National Association backs such a multi-member panel of directors if it includes seats statutorily designated for credit union system representatives, including a state or federal credit union regulator, and possibly a state consumer agency representative.
Senate Republicans have consistently said they would block any CFPB nominee if certain structural changes were not made to the agency.
The committee also heard from Mary Jo White, who is President Barack Obama's nominee to lead the Securities and Exchange Commission. A vote on both nominees will be held at a later date.
Cordray's nomination is expected to pass through the committee, but his prospects before the full Senate are uncertain, CUNA Senior Vice President for Legislative Affairs Ryan Donovan said. The banking committee approved Cordray's nomination in late 2011, but he did not receive a full vote in the Senate. President Barack Obama appointed Cordray to the director position during a brief congressional recess in 2012, and some have questioned the constitutionality of this appointment.
House Financial Services Committee Chairman Rep. Jeb Hensarling (R-Texas) in a March 8 letter to Federal Reserve Chairman Ben Bernanke said the nature of Cordray's appointment could impact the agency's funding. The letter questioned the circumstances under which the Fed could lawfully fund the CFPB's operations, and asked Bernanke to comment on that issue.