Director Kraninger's Remarks at the Credit Union National Association Government Affairs Conference
Thank you, Antonio, for that kind introduction.
I’m thrilled for the invitation to address members of the Credit Union National Association. Since becoming Director in December 2018, I have appreciated the cooperative relationship the Bureau has with CUNA. Thanks to Jim Nussle and the staff who provide great insights into the issues you are all confronting.
Today, I would like to discuss the role of the Bureau in the consumer financial marketplace and how we prevent consumer harm by establishing clear rules of the road. This promotes competition, increases transparency, protects consumers, and preserves fair markets for financial products and services. Specifically, I would like to share with you our approach to reviewing regulations to ensure they are effective. And, lastly, I will discuss our Start Small, Save Up initiative that promotes emergency savings for consumers.
The Bureau was given four tools to carry out its mission of protecting consumers: rulemaking, supervision, enforcement and education. We are focused on using all four tools to prevent consumer harm and protect consumers.
Issuing clear rules of the road is our goal to ensure that companies know how to comply and understand what constitutes a violation. We want our rulemaking process to be transparent, allow for public feedback, and reflect rigorous economic and market analysis.
Let me provide you with two examples of how we are working to ensure we have effective rules of the road.
The Bureau last year began the process of addressing the Ability to Repay/Qualified Mortgage rule. Simply put, mortgages guaranteed by one of the GSEs are deemed as Qualified Mortgages under that rule. This provision, commonly called the Patch, is scheduled to expire early next year.
In order to provide certainty as to our intentions, in July 2019, the Bureau issued an Advance Notice of Proposed Rulemaking that signaled our intent to allow the patch to expire as intended in January 2021 or shortly thereafter to allow for a smooth and orderly transition.
We received a lot of public comments. And after reviewing them all, we have decided to propose to amend the QM rule by moving away from the 43 percent debt-to-income ratio requirement. Instead, the Bureau would propose an alternative, such as pricing threshold to better ensure that responsible, affordable mortgage credit remains available for consumers.
To this end, the Bureau is working diligently to issue, no later than this May, a proposed rule seeking comment on these possible amendments.
While still ongoing, the process of examining the QM rule and developing proposed amendments typifies my commitment to clarity and discourse. We took an objective look at both the market data and the comments received. There was rigorous analysis. There was a transparent process. It was a deliberative course. I think we are on course to land in a fair place that provides for a smooth transition.
Another example is the remittance rule. To implement the Electronic Fund Transfer Act, the remittance rule provides protections to consumers sending funds overseas.
Over the years, the Bureau has amended the Rule several times to improve its effectiveness or reduce its compliance burden.
The rule requires companies that provide remittances to disclose actual fees and exchange rates. An exception in the rule allows providers to disclose estimates of this information in certain circumstances, but this exception expires by law in July 2020. Without the additional flexibility, some providers have indicated they may have to discontinue sending remittances for their customers. In response, the Bureau issued an NPRM in December 2019 in which it proposed changes to mitigate the impact of the statutory limit on the estimates process.
In particular, the Bureau is proposing to increase the safe harbor threshold that determines whether a company needs to comply with the rule. Under the December 2019 NPRM, companies making 500 or fewer transfers annually in the current and prior calendar years would not be subject to the rule. This would reduce the burden on over 400 banks and almost 250 credit unions that send a relatively small number of remittances. Ultimately, by allowing the use of estimates in some circumstances and adjusting the threshold for coverage under the rule, our proposal was designed to preserve consumers’ ability to send remittances from their bank accounts to certain destinations.
After carefully considering the comments received, the Bureau intends to finalize its December 2019 NPRM in May.
Next, I want to discuss the process the Bureau will undertake to review economically significant regulations.
As I will discuss, the law requires the Bureau to review its rules in some circumstances. But even if the law did not require it, there are great benefits to an agency reviewing its own rules over time. Given the prospective nature of rules combined with the unpredictable pace of change in technologies and markets, agencies must review the regulations already on the books to ensure they are meeting their objectives. And if the rules are not, they need to change.
Last year, we announced how we will evaluate these rules to comply with Section 610 of the Regulatory Flexibility Act. That’s every 10 years. Further, the Dodd-Frank Act requires the Bureau to conduct assessments of significant rules five years after they’re issued, based on available evidence and any data we reasonably may collect.
At the conclusion of each review, the Bureau will determine whether the rule should be continued without change or should be amended or rescinded.
As we conduct the reviews, the public will be able to comment on:
- The continued need for the rule;
- The nature of public complaints or comments on the rule;
- The complexity of the rule;
- The extent to which the rule overlaps, or conflicts with federal, state, or other rules; and
- The time since the rule was evaluated or the degree to which technology, economic conditions, or other factors have changed the relevant market.
For an assessment to truly work, it starts with rigorous research and a baseline understanding of the data. We focus on fact finding. This might include public and commercially available data, surveys, and structured interviews.
Our approach to the regulatory reviews demonstrates my commitment under the law to effective evidence-based rulemaking. We have a responsibility to reduce unwarranted regulatory burden and to consider the impact of rulemaking on regulated entities and consumers.
Before I close, let me briefly touch upon our savings work. As you know, far too few Americans are prepared for the unexpected. Over the last year, the Bureau has been advancing an initiative we call "Start Small, Save Up." Its aim is to increase opportunities for people to save and to empower them to achieve their emergency savings goals.
Building and maintaining liquid savings isn’t as easy as it should be, and the most effective tools are not accessible to everyone. We also did it because saving for emergencies is an important way for people to improve their overall financial well-being.
Start Small, Save Up is focused on three strategies for affecting change, each of which depends heavily upon collaborating with others. The first involves employers prioritizing emergency savings for their workers. We are encouraging more employers to offer employees payroll deduction programs that make savings automatic. This will relieve people of the burden of having to remember to deposit or transfer money into a savings account each week or month or when a paycheck comes in.
Second, the Start Small, Save Up initiative will work directly with a select number of communities around the country. We will explore savings barriers that are specific to where people live. Then we can work with local leaders and institutions to expand and adapt proven solutions—or help develop new ones. We take this approach because we know there is no one-size-fits all solution. For instance, we know that a car breaking down in a city with convenient public transportation creates a much different financial shock than a car breaking down where the nearest bus stop is 30 miles away.
Finally, Start Small, Save Up is encouraging financial companies and service providers to partner with us.
I know organizations and businesses have been at this longer than we have, so we aren’t here to start from scratch, but rather to use our platform and unique role to highlight the solutions that exist, to encourage new and even better solutions and to get the right tools in front of the people who can benefit most from them.
The Bureau will also leverage our research capacity to see what is working and what must improve. And we intend to use the agency’s communications channels to encourage people to save.
We welcome the opportunity to work with you on advancing savings products for people, as an employer providing automated solutions for your workforce or as a research collaborator.
I thank you again for giving me this opportunity to share our approach to rulemaking at the Bureau and to highlight our work on encouraging savings. Through better processes, we hope to create a climate where problems are dealt with promptly and fairly—and even better, kept from the consumer’s doorstep in the first place. We must help consumers know their rights and industry to know their responsibilities. Our goal is clear rules of the road for all to create consumer access to a fair, transparent, and competitive market. Thank you.
The Consumer Financial Protection Bureau (CFPB) is a 21st century agency that helps consumer finance markets work by making rules more effective, by consistently and fairly enforcing those rules, and by empowering consumers to take more control over their economic lives. For more information, visit www.consumerfinance.gov.