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Prepared Remarks of Deputy Director Antonakes at the Federal Reserve Bank of Atlanta 2014 Banking Outlook Conference

Good morning. It is my pleasure to have the opportunity to be with you today at the Federal Reserve Bank of Atlanta’s 2014 Banking Outlook Conference. I think an open dialogue among regulators and industry participants benefits everyone involved. Today, I will update you on a few of our key initiatives and discuss how we approach our supervision and enforcement work.

By way of background, I am a career regulator having started in this line of work over 24 years ago as an entry level bank examiner. I later served for seven years as the Massachusetts Commissioner of Banks. Under this purview, I had a mandate to ensure compliance with safety and soundness, consumer protection, community reinvestment, and fair lending laws and regulations. Moreover, I have supervised banks, credit unions, and nonbanks throughout my career.

While the Bureau’s mandate focuses on consumer protection rather than on safety and soundness, we very much care about the financial health of banks and credit unions. As a veteran of two banking crises, I can tell you unequivocally that, in my view, consumer protection is not in conflict with safety and soundness. Consumers benefit from a healthy, competitive, and diversified financial services system through greater access to credit and competitive pricing.

We hold that banks, credit unions, and nonbanks should be treated alike and receive similar oversight if they offer the same types of financial products and services. Accordingly, we want responsible businesses playing by the rules to succeed, free of unfair pressure from predatory competitors.

Ultimately, both financial and consumer compliance performance are dependent on strong management. Seldom do institutions excel in one and not the other. No business built on deceiving its customer base will be sustainable. Moreover, when businesses underinvest in compliance management systems it can pose significant reputational and financial risks. There is no better evidence than the banking industry’s ongoing recovery from a significant underinvestment in internal control systems relative to mortgage origination and servicing.


Reform stemming from the financial crisis resulted in the creation of the Consumer Financial Protection Bureau. Our mission, quite simply, is to make markets for consumer financial products and services work for Americans. Above all, this means ensuring that consumers get the information they need to make financial decisions that are best for themselves and their families.

Since we opened our doors, our consumer response team has received over 300,000 complaints. Just last month we received more than 30,000 calls and handled more than 20,000 complaints. Debt collection is our largest source of these complaints. We receive approximately 5,900 debt collection complaints a month. Mortgage complaint volume, however, remains high and averages around 4,900 complaints per month. Complaints are not only opportunities for us to assist specific people; they also make a difference by informing our work and helping us identify problems, which then feed into our supervision and enforcement prioritization process.

One of our largest tasks has been to draft rules to restore confidence and common sense to our mortgage market.

In the lead-up to the crisis, many mortgage businesses failed to conduct the very due diligence necessary to safely and prudently underwrite mortgages. Some joined their customers in wishful thinking. Some tricked people into believing they could afford loans they could not. Some actually falsified documents. Certainly some consumers should have known better and made very bad choices. But too many consumers could not recognize the risks they were taking until it was too late.

Our mortgage origination work marks a return to traditional mortgage lending. Our Loan Originator Compensation rule restricts certain practices that created financial incentives to push people into loans with higher interest rates. Under our Ability to Repay (QM) rule, lenders must now make a reasonable, good-faith determination that the consumer can actually afford the mortgage before they make the loan. Now, obviously, mortgage lenders do not have a crystal ball: they cannot predict if someone will lose a job or have an unexpected financial emergency. But they must look at a consumer’s income or assets, and at their debt, and must weigh them against the monthly payments over the long term. In other words, lenders must revert to responsible lending.

Our second back to basics regulation is in mortgage servicing. We recognize that servicers play a critical role in the mortgage market. Servicers collect and apply payments to loans. When necessary, they can work out modifications to the terms of a loan. And they handle the difficult foreclosure process. Because of all the things servicers do, their effects on borrowers and communities can be profound. Wrongful foreclosures are disruptive: homes were lost forever, families wrenched from their communities, children lost their friends, and the biggest financial asset for that family was taken with a process that sometimes ended with a sheriff.

In both our mortgage origination and servicing rules, we intentionally created important exemptions intended to reflect that credit unions and community banks typically did not engage in the type of activities that led to the mortgage crisis. The Qualified Mortgage rule has a small creditor category that covers all institutions that hold less than $2 billion in assets and, with affiliates, extend 500 or fewer first-lien mortgage loans a year. This comprises the vast majority of the community banks and credit unions in our country. Significant portions of the servicing rule exempt firms that service 5,000 or fewer mortgage loans, which were originated or owned by the servicer itself or its affiliates. We estimate that this also covers most community banks and credit unions, exempting them from, among other provisions, the periodic statement requirement, the general servicing policies and procedures, and most of the loss mitigation provision.

The notion that government intervention has been required to get the mortgage industry to perform basic functions correctly – like underwriting, customer service and record keeping – is bizarre to me but, regrettably, necessary.


Additional areas of concern and focus include debt collection, consumer reporting, and student loans. One in ten consumers has debts in collection. The best estimates are that 30 million Americans came out of the financial crisis with one or more debts in collection for amounts that average $1,500 per person. Collection of consumer debts serves an important role in the proper functioning of consumer credit markets. But certain debt collection practices have long been a source of frustration for many consumers, generating a heavy volume of consumer complaints at all levels of government.

For example, we recently filed a lawsuit against CashCall, an online loan servicer. We believe that they violated federal law by seeking to collect on loans that were rendered void or otherwise nullified because the loans violated state caps on interest rates or state licensing requirement laws. We also ordered Cash America, one of the largest short term, small-dollar lenders in the country, to refund consumers up to $14 million for robo-signing debt collection documents and illegally overcharging service members. They were also ordered to pay a $5 million fine for these violations and destroying records in advance of our examination.

In November, we published an Advance Notice of Proposed Rulemaking asking consumers for feedback about their experiences with debt collections and asking the industry for information about their practices. We want to ensure that collectors are seeking to recover debts from the right person in the right amounts. In particular we are concerned that the accuracy of account information degrades as it passed on from the original creditor to debt collection firms or debt buyers.

Consumers are also challenged in that they cannot control the information that goes into their credit reports and can have difficulty correcting the errors they find in them. For consumers with errors in their reports, the damage done can be severe. We have issued a bulletin putting companies that supply information to consumer reporting agencies on notice of their obligations to review consumer disputes and correct inaccurate information. We have also completed larger participant rulemakings for the markets for consumer debt collection and consumer reporting companies. Accordingly, larger players in both of these critical markets are now subject to oversight through the Bureau’s supervision program. Our enforcement oversight extends to all debt collectors and consumer reporting agencies.


I would also like to talk about student loans, which comprise the second largest consumer debt market. Student loans allow many Americans to pursue opportunities through higher education that they could not otherwise afford. However, the cost of higher education has been rising steadily, and so more students and their families are taking out loans in order to afford college. The result is that more than 40 million Americans collectively hold approximately $1.2 trillion in outstanding loan balances. These rising levels of student loan debt can also have a domino effect on our economy and on our society. In recent months, other agencies have joined the Bureau in expressing concern about how this rising debt burden may be holding back the economic recovery – slowing household formation, discouraging business start-ups, inhibiting first-time homeownership, and limiting the mobility and options of young graduates who would otherwise consider, say, working in rural communities or as teachers.

We know that student loan borrowers rely on the business practices of financial companies once they have taken on the debt. Student loan servicers have come to play an increasingly important role in graduates’ economic futures. We have identified a number of potential servicing concerns in this market, based on complaints and other market data. These complaints bear some resemblance to those voiced by struggling homeowners – servicing personnel without authority to provide assistance, no clear options when borrowers run into trouble, and a raft of record retention and payment processing problems that leave borrowers stymied with no clear recourse.

For example, some borrowers have found that when they attempt to prepay their loans, the servicers do not apply the excess payment to the highest interest loan. Other borrowers who can only make partial payments have found that the servicers apply the payment in a way that maximizes the late fees they incur. And, as we have seen in the mortgage servicing market, when borrowers’ loans get transferred, they may experience lost paperwork or processing errors that result in late fees, damaged credit, and, in some cases delinquency and default. We have serious concerns that these are the same sort of systematic breakdowns that millions of homeowners faced when dealing with their mortgage servicer.

Because student loan servicing is so important, our most recently completed larger participant rulemaking covered nonbanks in the student loan servicing market. As of March 1st, our supervisory jurisdiction will complement our existing enforcement authority with respect to the larger nonbanks in this market and our existing authority over large banks in this market. As with other markets where the Bureau has supervision activity, we are taking steps to make sure that student loan servicers are complying with federal consumer financial laws. This means that we are reviewing the policies and procedures, assessing their compliance management systems, and testing transactions for compliance. Our supervision program in this market will allow the Bureau to scrutinize practices in these areas, assess the risks and harms to consumers, and take corrective action where necessary.

The Consumer Bureau has also developed new resources to help students make more informed decisions when it comes to higher education. Our “Paying for College” set of tools, which is available on our website, is designed to help families consider their options and assess the costs and risks in terms that are easier to understand. These tools help students and families – who may be facing this intimidating challenge for the first time in their lives – to ask the right questions and make more informed decisions. We urge everyone to spread the word about these tools and to make use of them.


As the head of our supervision, enforcement, and fair lending team, I would also like to tell you a bit about how those specific tools work. The Bureau’s jurisdiction is unlike any traditional prudential bank regulatory agency. My focus today has been on the mortgage, debt collection, consumer reporting, and student loan markets. However, our authority extends to all consumer finance markets. We have regulatory oversight for banks, thrifts, and credit unions with assets over $10 billion, as well as their affiliates. These large institutions and their smaller depository affiliates total less than 200, but on a combined basis account for $10 trillion in assets, or nearly 75 percent of the nation’s banking market. The number of nonbank entities subject to the Bureau’s supervisory jurisdiction likely numbers in the thousands.

A specific charge of the Bureau is to attempt to level the playing field between banks, credit unions, and nonbank entities relative to compliance with federal consumer financial laws. This dual authority provides the Bureau with the opportunity to oversee consumer financial products and services across charters and business models. Consequently, charter or license type is becoming less relevant in determining how we will prioritize and schedule our examinations and investigations.

Accordingly, we have implemented a prioritization framework that allocates our examination, investigation, and fair lending resources across product types. This strategy intentionally moves us away from static examination cycles.

Our supervisory approach encompasses an assessment of potential consumer risk, as well as a number of qualitative and quantitative factors. These factors include: (1) the size of a product market; (2) the regulated entity’s market share; (3) the potential for consumer harm related to a particular market; and (4) field and market intelligence that encompasses a range of issues including, but not limited to, the quality of a regulated entity’s management, the existence of other regulatory actions, default rates, and consumer complaints. This last factor in particular allows us to use market insights and other data from sources around the Bureau to prioritize our work. In particular, the 300,000 complaints that we have received, touching every market that we oversee, allow us to focus on actual risk to consumers.

We have the ability to utilize our enforcement tools independent of our supervisory or examination process. We do this by listening to and analyzing consumer complaints, industry whistleblower tips, and information from government agencies, industry, and consumer groups. If we find possible violations, we have enforcement authorities that are both inherited and new.

As with our supervisory tool, we have the ability to touch a wide variety of markets with our enforcement authorities, including: mortgage origination, mortgage servicing, student loans, auto loans, payday lending, debt collection, debt relief and credit counseling, credit cards, prepaid cards, electronic fund transfers, remittances, consumer reporting, and deposit products.

We have the choice of pursuing our enforcement actions through two different tracks: administrative proceedings or actions in the federal courts across the country, so we are able to choose the forum that best fits the circumstances of each case. We have independent litigating authority, so we don’t need to rely on the Justice Department to bring actions on our behalf.

We also have a dedicated fair lending office to ensure compliance with the Equal Credit Opportunity Act and the Home Mortgage Disclosure Act. Our fair lending work cuts across our supervision and enforcement tools, and is integrated into the prioritization framework that I have just described.

Both our supervision and enforcement tools are flexible to respond appropriately to consumer risks and harm, and we are very intentional about how we utilize them. Importantly, we use these tools in tandem to ensure that companies of all types are complying with consumer protection laws. Together, they have led to settlements that have provided over $1 billion in restitution to consumers and $2 billion in foreclosure relief.


A renewed and appropriate focus on consumer protection will go a long way toward preventing the problems that give rise to the financial crisis. Our goal is that this will allow substantial opportunities for all responsible companies to innovate and compete in the marketplace.

Put another way, we are attempting to recalibrate the relationship between consumers and financial service providers by ensuring it is grounded in fairness, transparency, and choice. We look forward to continuing to work with our fellow regulators and with industry to achieve these goals. Thank you.

The Consumer Financial Protection Bureau is a 21st century agency that implements and enforces Federal consumer financial law and ensures that markets for consumer financial products are fair, transparent, and competitive. For more information, visit