Prepared Remarks by Richard Cordray
Director of the Consumer Financial Protection Bureau
CUNA’s Governmental Affairs Conference
March 19, 2012
Thank you so much for inviting me to be with you today. I think we share many of the same principles because like you, I am here to serve the people and to help ensure that the consumer financial markets actually work for them. Like CUNA, the Consumer Bureau came along in a period of tumultuous finances, even though we were born nearly a century after you. Rooted in the idea of serving the middle class through economic democracy, credit unions are unique in the financial world – rarely do you find a financial institution that clearly and emphatically says it is not working for a profit.
You are people helping people by providing high quality financial services to your members. Like the Bureau, you value financial education. I know that some credit unions run a “Mortgage School” so their members can fully understand the process of obtaining a mortgage and becoming a homeowner. I applaud you for those efforts and wish more financial institutions would follow your example. With tens of millions of members and thousands of credit unions in this nation alone, you are indeed fulfilling your mission of service.
At the Bureau, we have been working with one of the largest credit unions in the country, the Pentagon Federal Credit Union, to pilot a prototype credit card agreement. As part of our Know Before You Owe campaign, we released a simplified agreement that is short, written in plain language, and explains key features up front. The Pentagon Federal Credit Union has one million members and 350,000 cardholders, so we are very pleased to be running our pilot program with them.
The credit union motto of “not for profit, not for charity, but for service” resonates with me because it captures the very essence of our work at the Bureau. We are not looking to give anyone a handout; we are simply looking to help and educate consumers so that the recent financial crisis never repeats itself.
One of our core beliefs at the Consumer Financial Protection Bureau is that honest businesses will benefit when those that cheat their customers are held accountable. We want all financial institutions, all of your competitors, to have the same kind of accountability that credit unions face every day. You make the costs and risks clear to your customers up front. Maybe they already know about them from attending your mortgage school.
Unfortunately, the fact that you make these costs clear can sometimes hurt your business. If consumers think they will get better rates elsewhere, they will go elsewhere, only to be hit by hidden fees later. That is not right. That kind of back-end pricing, along with other harmful practices, is what got us into this financial mess.
Going forward, the Consumer Bureau has an important role to play in ensuring that the great financial meltdown does not happen again. We now have the ability to examine participants in both the bank and nonbank segments of the mortgage market, and our authority over nonbanks will be especially helpful. Before the crisis hit, only part of this multi-trillion-dollar market was subject to federal oversight. We have seen how that turned out. Bad practices drove out the good. The whole economy eventually collapsed, harming many innocent people in the process. I firmly believe that had the Bureau been in place ten years ago, the crisis would have been averted.
One of our major objectives is to help level the playing field between you and your nonbank competitors. In order to do that, we need your help. We need to hear from you about what you see going on in the marketplace. Where do you see corners being cut? Where do you see standards being bent or stretched? Where do you see the law being violated? We have learned that we need evenhanded oversight to make the marketplace work. If the cheaters are not allowed to prosper, then the honest businesses will regain their natural advantage.
Let me also say a few words about regulation. Under the law, other than large credit unions with assets over $10 billion, we do not enforce the law against credit unions. We do not examine credit unions. But we do write rules that can affect the credit unions. Over the next year, the Bureau will be implementing new mortgage standards Congress adopted in the Dodd-Frank Act.
One of our most important rulemakings will implement a new statutory requirement that lenders make a good faith and reasonable determination that a borrower can repay the mortgage. Other rules that address the origination of mortgages will implement statutory standards for loan originator compensation and the origination of high-priced mortgages.
On all of these fronts, we need to return to sound customer service. Our principal goal in implementing the law is to improve consumer financial markets and help ensure that individual consumers are not steered into loans they cannot afford. A number of new statutory provisions address mortgage servicing, covering topics such as new disclosure requirements, force-placed insurance, the crediting of payments, and error resolution requirements. Here our principal goal is fair treatment of borrowers.
As we develop these initiatives, we are intent upon keeping your concerns in mind. We know that one size does not fit all. Where it makes sense to treat credit unions differently from larger institutions, we have pledged to consider doing so. We also want our regulations to be more accessible. We plan to highlight the key points for small providers, which do not have the same army of compliance officers that are on staff at the very large institutions. We know that is simply not feasible for you. Nor should it need to be.
Let me say one thing very plainly that it is important for you to hear: We understand at the Consumer Bureau that credit unions were not the root of the financial crisis. As we work to clean up the mess that the crisis created, we must be mindful of the fact that credit unions were among those harmed by the mortgage frenzy, the ensuing credit crunch, and the deep recession that cratered our local economies.
Like the homeowner who has a sensible mortgage and has always faithfully made the payments but finds that the foreclosure crisis has left the family home deeply underwater, you deserve better. You deserve a fair marketplace where your model of steadfast customer service and concern for long-term relationships can succeed. That model is just as sound today as it ever was, and we embrace it.
So please take away today a new understanding of our mission that is a bit broader than what is typically described. Our fundamental purpose at the Consumer Financial Protection Bureau is to protect consumers in the financial marketplace. But we do that in part by seeking to create a level playing field that allows honest businesses to thrive.
In my hometown, and in hometowns across this nation, many millions of Americans depend on you every day. They place their trust in you and they know that you have earned their trust. This is about far more than mere economics. It is about human beings depending on one another.
When people entrust you with their money and their critical financial transactions, they are entrusting you with their hopes for the future, with the claim they are staking to the American Dream. We will work with you to vindicate their hopes, and to see that they can realize that dream. Work with us, talk with us, guide us and support us, and together we will be able to make it so.