The CFPB and Compliance Costs: Genuine Concern or Lip Service?

On March 20, 2013, the Consumer Financial Protection Bureau (CFPB) announced in a blog post¹ its intent to study the costs that financial institutions, including credit unions, incur in order to comply with consumer finance regulations. Specifically they indicated a desire to know the extent and nature of compliance costs and that their Research, Markets and Regulations team was studying the costs related to the rules inherited from other agencies.  Shortly after, the internet was flooded with articles and blog posts discussing the announcement, including an article from CUNA².  A quick review of many of those articles revealed a cautious optimism about the announcement and a hope that the CFPB was serious about its intended investigation.  However as the old adage goes, “actions speak louder than words”, and it is becoming clear that CFPB’s actions are falling well short of its words. 

Before dissecting the true intent of the CFPB’s “actions” however, it is important to take note of the exact wording of the March 20 post.   For starters, it states in the opening paragraph that,
“[r]egulations can have many (emphasis added) benefits for consumers, but the benefits sometimes (emphasis added) come at a cost.”  What may seem like a harmless sentence is ultimately loaded to highlight the positive impacts of regulations while minimizing the costs, when in fact those costs are at the forefront for many credit unions and their members.  Nevertheless, the analysis does not stop there.  While the title of the post appears to infer a desire to analyze the costs of the regulations issued by the CFPB, that is not in fact the case.  Rather, the post states that it will look to investigate the costs of regulations inherited (emphasis added) from agencies.  Unfortunately, no where else in that post or in subsequent communications has there been any declaration by the CFPB to investigate the costs of the regulations it has already issued or intends to issue.  As always, the devil is in the details. 

As to those details, the CFPB website has a section that lists all of the final and proposed rules and regulations issued in 2012 and 2013.  Specifically, in 2012 the bureau issued twenty (20) final rules, many of which dealt with definitions and adjustments to existing regulations.  In 2013, the days and months leading up to the March 20 blog post, eight (8) final rules were issued.   However, since that time an additional eleven (11) rules have been finalized, bringing the total in 2013 through the first half of the year to nineteen (19).  As of July, an additional fourteen (14) proposed rules remained open for comment.  While the content of many of the 2012 final rules were definitional and procedural in nature, the majority of the 2013 rules involve substantive matters particularly dealing with mortgages and more recently debt collection.  Beyond the formal rules, the CFPB has also issued many bulletins on topics covering all areas of the financial sector, including but not limited to equal credit discrimination, student lending and auto lending.  In fact, its very next blog entry after the March 20 announcement,  the CFPB issued Bulletin 2013-12³ regarding indirect auto lending, which many credit unions are involved in, and compliance with the Equal Credit Opportunity Act.  Ironically enough, at no point was there any discussion as to the costs associated with the CFPB’s intended increased scrutiny. 

It is no secret that compliance costs are quickly becoming the giant elephant in the room for credit unions.  What once was nothing more than a regular function for one or several staff members in small and mid size credit unions has morphed into a major undertaking that has created a substantial strain on the personnel and financial resources of those institutions.  Large credit unions, while perhaps in a stronger position to absorb additional compliance costs, have had to substantially increase compliance training and staff as well.  While no one can dispute the importance of common sense regulations in the financial sector, the continued onslaught of burdensome  “one size fits all” regulations from the CFPB strongly suggests that any concern about the costs associated with the new regulations, particularly as they apply to credit unions, appear to in fact be nothing but lip service.