Q&A on Finance Charge Following Cordray's Senate Testimony; Swamp People

Written by Steve Van Beek

Last Wednesday we examined NAFCU's comment letter to the CFPB regarding the proposed change to the finance charge definition.  The comment letter questions whether the CFPB has the legal authority to change the plain language of a law - namely the Truth in Lending Act - through regulation.  

Well, NAFCU isn't the only ones inquiring about the CFPB's legal authority.  Back on September 13th, CFPB Director Cordray appeared before the Senate Banking Committee to provide prepared testimony and answer Questions from Senators on both sides of the aisle.  The archive of the hearing is available here.  

Of particular interest is this back and forth between Ranking Member Richard Shelby (R-AL) and Cordray (starting at the 48:07 point of the archived hearing):

Ranking Member Shelby:  Mr. Cordray, let me ask a further question.  In other words, I assume you believe the Bureau’s authority to write rules includes the authority to exempt and modify statutory requirements.  That is troubling.  If a statute is clear, I don’t believe you can change that by a rule.  Do you disagree with that?  Do you disagree that if the statute is clear, unambiguous – that you cannot change the statute by rule?  

CFPB Director Cordray:  This is one provision of our statute.  Truth in Lending has other provisions – some of those are more explicit that this.  What is clear is that Congress intends for us here to write rules around disclosures and clarify and interpret the laws that Congress has provided with us.  In terms of ignore, I absolutely believe we should not ignore statute, nor can we, and we’ll be subject to judicial review if we do.  Interesting enough, there are many requests for us to consider our exemption authority or our modification authority to consider how provisions of law actually apply in a practical manner to different banks or other institutions.  Part of our rulewriting function is to take comment from individuals and stakeholders across the spectrum and to consider how best to apply the law to the rules because we have that delegated rulemaking authority.  I would absolutely agree with the tenor of your question which is – don’t consider that you as a Consumer Bureau can ignore or rewrite the law.

Ranking Member Shelby:  I hope you won’t.  I hope you will not. [Cordray: We do not believe we have that authority].  It seems like that is what you are doing.  I hope that is not what you are doing.  If you do, we will hold you accountable.

CFPB Director Cordray:  And, you should do so.  I fully welcome that.        

A very interesting back and forth, to say the least.  To view the exchange, watch from 48:07 to 50:20 of the archived hearing. 

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Swamp People.  Erin and I took advantage of the long weekend to head down to New Orleans.  If you've seen the show Swamp People, you'd know that we are not likely to be added to the cast for next season.  

Comments

[Dianna]

Wow. Back and forth with some good questions to be answered.
I also found interesting (scary - interesting) from Mr. Shelby's opening remarks (time 26:30 - 30:20), the fact that CFPB does not have to turn over funds from penalties imposed to the Treasury. What?? There is No oversight . . . AT ALL.

[Steve Van Beek]

Dianna,
Interesting indeed. Dodd-Frank definitely created a unique agency when it established the CFPB. It looks like everyone - including Congress - is still learning the details relating to the CFPB's operations.