GOP lawmakers and community bankers used Monday’s U.S. House Committee Financial Services field hearing in Chicago to air their objections to the 2010 financial overhaul, as consumer and community advocates called for a commitment from policymakers and the industry to give the new Consumer Financial Protection Agency (CFPB) time to put into place consumer protections from firms such as mortgage brokers and payday lenders that previously were not subject to federal regulation.
“The Dodd-Frank Act contains important provisions and tools that will address many of the problems that led to the current foreclosure and economic crisis and will make our financial system more effective, transparent and fair for consumers, small businesses, and financial institutions,” said Dory Rand president of Woodstock Institute in her testimony to the committee. “I ask that members of Congress refrain from weakening this law and, instead, give it time to be fully implemented.”
Rep. Robert Dold (R-IL) questioned witnesses on the appropriateness of the Financial Services Oversight Committee requirement of a two thirds majority to override a consumer protection proposal put forth by the CFPB. William Bates, Executive Vice President at Seaway Bank and Trust Company, also called for increased deference to the same banking regulators that failed to avert the housing crisis. “Because bank regulators have long expertise in balancing the safety and soundness of banking operations with the need to protect customers, we hope that prudential regulators will have a more meaningful role in writing rules for CFPB,” said Bates in a prepared statement.
Rand defended the CFPB’s autonomy, citing a history of regulatory capture at prudential regulators, many of which often green-lighted profitable high-cost, high-risk products or practices at the expense of consumers.
Bob Palmer, policy director at Housing Action Illinois, also called for a critical look at what caused the ongoing economic and foreclosure crisis and highlighted the need to ensure that the full scope of consumer protections envisioned by Dodd-Frank are enacted. “We believe that if the regulatory provisions in the Dodd-Frank Act had been in place back in 2006, the housing market and the overall economy would be much healthier today,” said Palmer.
Rand and Palmer also called for Senate confirmation of Richard Cordray as CFPB director to ensure that nondepository financial institutions such as payday lenders, mortgage brokers, and student lenders are required comply with consumer protection regulations similar to small bank regulations. These non-bank institutions are not subject to CFPB oversight until the Senate confirms a permanent director, putting regulated institutions such as banks and thrifts at a competitive disadvantage.
The field hearing, entitled “Regulatory Reform: Examining How New Regulations are Impacting Financial Institutions, Small Businesses and Consumers in Illinois,” was attended by four House Committee on Financial Services members: Committee chairman Spencer Bachus, (R-AL), and Reps. Judy Biggert, (R-IL) Donald A. Manzullo, (R-IL) Robert J. Dold, (R-IL), and David Schweikert, (R-AZ). Reps. Adam Kinzinger (R-IL) and Joe Walsh (R-IL) were also in attendance.