WASHINGTON—Richard Cordray took the stage at CUNA’s GAC in an effort to dispel “myths” he said CUs have created about the CFPB, one being that the Bureau is an “enemy” of credit unions.
But the director of the CFPB then went on to say that CUs should be subject to the bureau’s rules and do not deserve to be exempted from its rules
“I have had the opportunity to meet with many of your executives, some of whom are in this room,” said Cordray. “Almost always, they note that credit unions made consumer protection ‘job one’ long before our agency came to be, and we at the Consumer Bureau are well aware of it. We know that credit unions were not a culprit in the recent financial crisis. I saw that during my time as Ohio Treasurer and Ohio Attorney General, where I saw events unfold in real time. Credit unions did not underwrite the bad loans that sank the housing market. On the contrary, you upheld sound underwriting standards to protect consumers, even as it cost you customers and market share went to financial predators that circled those troubled waters. Your early warnings should have been heeded.”
Cordray emphasized that credit union leaders have “strenuously made the suggestion” that in light of credit unions’ sound financial history, the Bureau should “simply exempt credit unions altogether from consumer financial protection laws. They have argued that the law would allow us to do that. I have considered their arguments carefully and I do not believe that is correct. The U.S. Congress had all of these suggestions in front of it when the Dodd-Frank Act was being written. But Congress did not do that, and though it gave us some amount of exemption authority, it is not plausible to me that we could use such authority to override Congress’s own judgment on such a broad-based policy matter.”
Cordray said that instead, Congress wanted all financial institutions have to play by the rules, and the Bureau has to enforce them.
“That is our charge. But that does not mean one size necessarily fits all. Congress itself drew some thresholds and tiers that distinguished larger institutions from smaller institutions, such as its provision giving us supervisory authority over banks and credit unions with more than $10 billion in assets but not those with less,” he said. “So where we can customize our rules to treat smaller institutions differently in light of their compliance burdens and the level of risk they pose, we have done so and will continue to do so.”
Throughout his 15-minute presentation that drew muted applause from attendees, the director of the CFPB discussed rules and regulations his agency has issued since 2010 that have impacted banks and credit unions.
Cordray contended that the Bureau has been a “friend” of credit unions because the rules the agency has put in place, many around mortgages, are penalizing the bad actors and allowing those that responsibly offer financial services to consumers to expand market share.
“Let’s pause and look over these facts. This is the good news: All around (the new regulations) mean more opportunity for consumers and a mortgage market made stronger, a mortgage market that is a more fertile ground for responsible lenders, like credit unions. You are being put on a level playing field for the first time,” said Cordray. “Instead of attacking the CFPB you should be supporting the Bureau for what it is doing for responsible lenders. When you compete on level ground no one beats you.”
Credit unions and their trade groups have lobbied Congress to exempt credit unions from CFPB rulemaking, arguing that CUs don’t need the regulation and they can’t afford the costs the new rules bring.
But Cordray contended that credit unions have benefitted from the new mortgage rules in the past year.
“We know change is hard and we understood the concerns, but at the Consumer Bureau, we never bought into the prophecies of doom and gloom. And as it turns out, we were right,” said Cordray. “The first set of mortgage rules have been in place for more than two years, and none of those pessimistic forecasts came to pass. In 2014, year one of our new rules, home purchase mortgages went up 4.6%, according to the authoritative HMDA data, and for jumbo loans, which are often non-QM loans, the increase was even higher.”
Even more relevant to the GAC audience, suggested Cordray, is that credit unions have “thrived” in this new and improved mortgage market.
“In fact, credit unions originated 39% more mortgage loans for home purchases in the first nine months of 2015 than the same period of 2014, according to the latest CUNA Mutual Group Report, which is prepared by CUNA’s own economists,” he said. “The upward trend has continued in recent months. And while some parts of the mortgage market saw some minor consolidation, no mass exodus materialized, as some predicted. In fact, the share of mortgage lending by credit unions is growing.”