After yet another marathon strategic planning session with yet another client struggling to come to terms with the crushing weight of compliance costs, the slow death of consumer banking, the weekly assault on the mortgage business and fears of next month’s guidance (and likely attack) on overdraft programs, I found myself staring at the ceiling in a Hampton/Fairfield/Holiday Inn in Middle America.
With all the swirling questions our clients are asking about the impact of Dodd-Frank and CFPB, I was hoping to find some little nugget that might help to predict how much worse the regulatory environment is going to get. Questions like:
- Can my lenders still use discretion to make a loan to a “questionable” borrower or will that trigger a Fair Lending issue if I don’t use a credit score-based rate sheet?
- How do I serve my rural borrowers who can’t meet the new QM guidelines?
- My customers want overdraft protection…is the CFPB going to kill that product in March?
And there it was in the fourth paragraph of embattled Director Cordray’s year in review summary; “Exemplary enforcement actions were taken in fiscal year 2012”.
Our industry’s worst fears confirmed – the CFPB’s measuring stick is enforcement actions.
As virtually everyone in the industry pointed out, we didn’t need the CFPB. The banking and credit union industry was already the most heavily regulated industry in the United States. We already have industry oversight by the FDIC, Federal Reserve, OCC, NCUA, 50 state banking agencies and 47 state credit union agencies.
Alas, we didn’t win that argument. Sixty senators felt that yet another agency was needed. So let’s see who was right. Let’s measure the CFPB by its own measuring stick. How’d they do?
In fiscal year 2012, nearly 1,000 highly paid CFPB employees spent $340 million, and their crowning achievement was forcing two credit card companies to rebate $60 to less than 2% of American cardholders.
So a couple of people got $60 at a taxpayer cost of $340 million. Hmm.
Ok, so what about their fulfillment of their self-declared mission to “make life better for consumers”? Have consumers’ lives been enriched by the CFPB?
- Consumers’ have seen a 40% reduction in free checking accounts and are paying up to 25% more in checking fees since Dodd-Frank and the creation of the CFPB
- Consumers’ have lost cash back and other debit card rewards
- Low income consumers’ access to home ownership has shrunk
- Consumers’ have seen a slower economic recovery and slower job growth due to Dodd-Frank and the CFPB
I got a B in macro economic theory so I’m not as smart as all the Yale and Harvard lawyers running CFPB, but it sure looks as if the only consumers whose lives have been enriched by the CFPB are the 1,000+ CFPB employees making, on average, more than $150,000 a year.
Who knew government regulators were part of the 1%.
Occupy CFPB, anyone?