Markup of H.R. 1315, the Consumer Financial Protection Safety and Soundness Improvement Act of 2011
Financial Services Committee
Washington,
May 12, 2011 -
Opening Statement & Amendment Statements
Opening
Mr. Chairman, I am deeply, deeply opposed to H.R. 1315, which would decrease the threshold needed for the Financial Stability Oversight Council (FSOC) to override regulations issued by the Consumer Financial Protection Bureau (CFPB) from a 2/3 super-majority, to a simple majority, and would exclude the CFPB from voting.
Honestly, I have to ask if my Republican colleagues at all remember the utter failures of our banking regulators leading up to the 2008 financial crisis.
The OCC infamously used their power of pre-emption to block state proposals to rein in predatory mortgage products; these include simple proposals such as mandatory counseling for subprime borrowers, or the listing of fees the banks were going to charge for the loan.
The Fed, with similar infamy, brushed off comments from advocates like the Greenlining Institute, who came in to meet with then-Chairman Greenspan sharing anecdote after anecdote detailing predatory lending practices. Yet no action was taken until well after the crisis.
As one columnist noted, “you’d think the financial crisis would have knocked some sense into [banking regulators], exposing the awful consequences of regulatory negligence.” But no. Just look at the mortgage servicing issue – federal banking regulators came to my Subcommittee during the last Congress and said they had learned about “robo-signing” and other fraudulent practices via newspaper reports, despite having examination and enforcement authority at servicers’ parent banks!
Unfortunately, I am convinced that the culture at these banking regulators cannot be changed.
But luckily, under Dodd-Frank, we can stop just wishing that the regulators will “see the light” and take action. The newly-created Consumer Financial Protection Bureau finally excises consumer protection functions from these banking regulators, so they no longer serve two masters: the banks and ordinary Americans. Because history has taught us that when a regulator serves these two masters, the banks always win.
H.R. 1315 would take us backward by expanding the ability of the same banking regulators that failed to prevent the 2008 to override the CFPB.
Make no mistake, by expanding the ability for banking regulators to veto the CFPB, I believe that my Republican colleagues are far less concerned about the stability of the banking system, and far more concerned about hurting bank profitability.
Unfortunately, bank profits often come at the expense of consumer protection. Take for example the issue of mortgage servicing – the CFPB estimates that banks “saved” at least $20 billion by cutting-corners in their servicing violations. That corner-cutting includes forging signatures, faking notary seals, and not abiding by the Service Members Civil Relief Act – the law outlining the ways in which banks can foreclose on deployed members of the Armed Forces.
We must preserve the integrity of the CFPB if we want to prevent another erosion of the American middle class.
Mr. Chairman, I must reiterate my strong opposition to H.R. 1315. I yield back the balance of my time.
Amendment 1
I have an amendment at the desk: Waters #1
Thank you, Mr. Chairman.
This amendment would make a terrible bill slightly less terrible. Specifically, the amendment would preserve the two-thirds super-majority needed by the Financial Stability Oversight Council (FSOC) to overturn regulations or provisions issued by the Consumer Financial Protection Bureau (CFPB), and would restore CFPB voting rights, for regulations or provisions whose primary purpose is for the financial protection of members of the Armed Forces.
Mr. Chairman, you’ll remember that when we considered Dodd-Frank, Congress recognized a unique and urgent need for the financial protection of service members. In fact, because members of the Armed Forces tend to be targeted for predatory products, Congress created a special Office of Service Member Affairs within the CFPB.
Let’s just look at the facts: service members consider their finances to be the second largest source of stress in their life, behind career concerns but ahead of deployments, health, family, and war.
Additionally, a recent online survey commissioned by the FINRA Foundation found that almost one in four of the enlisted personnel or junior NCO respondents had used a high-cost alternative borrowing method, such as a payday or auto title loan, in the previous five years.
Financial problems can also lead troops to lose their often essential security clearances. For example, the Department of the Navy reported in 2007 that financial management issues accounted for 78 percent of security clearance revocations and denials for Navy personnel.
And importantly, earlier this year, news reports revealed that JPMorgan Chase violated the Service Members Civil Relief Act and wrongfully foreclosed on at least 14 veterans, and admitted to charging at least 4,000 veterans more than the 6 percent interest rate permitted under SCRA. The Republican-controlled Veterans’ Affairs Committee immediately held a hearing on this because it was so alarming.
So there is a long legislative history that this Committee, and other Committees, have built on the need for strong financial protection for service members. That is why I think it’s important to preserve the two-thirds threshold needed by the FSOC to overturn CFPB regulations whose primary purpose is veteran protection.
Finally, I would note that Holly Petreaus was selected by President Obama to head the Office of Service Member Affairs at the CFPB. Petraeus has worked extensively in the area of military financial protection, and is the former Director of the Better Business Bureau (BBB) Military Line.
I think she knows more about the challenges facing military families than members of the FSOC, and a super-majority, rather than a simple majority, of the Council should be required to override her expertise.
Now – make no mistake. This amendment in no way indicates that I think stripping consumer protection away from all Americans is appropriate. In fact, I think that this entire bill amounts to a real attack on the American middle-class. But since preserving the CFPB is not possible given the make-up of this Committee, I’ve offered this amendment as an attempt to preserve protection for at least one narrow group of Americans.
I urge my colleagues to support this amendment and yield back the balance of my time.
Amendment 2
I have an amendment at the desk: Waters #2
Thank you, Mr. Chairman.
Again, I have an amendment that would make a terrible bill slightly less terrible. Specifically, this amendment would preserve the two-thirds super-majority needed by the Financial Stability Oversight Council (FSOC) to overturn regulations or provisions issued by the Consumer Financial Protection Bureau (CFPB), and would restore CFPB voting rights, for regulations or provisions whose primary purpose is for the financial protection of members of older Americans.
Mr. Chairman, like I mentioned on my amendment related to veterans, you’ll remember that when we considered Dodd-Frank, Congress recognized a unique and urgent need for the financial protection of certain groups. One of those groups is seniors. And again, because older Americans tend to be targeted for predatory products, Congress created a special Office of Financial Protection for Older Americans within the CFPB.
Through conversations with our constituents and visits to senior centers, I think all members recognize the unique vulnerabilities faced by some older Americans.
And there is a tremendous amount of data outlining those unique challenges.
According to a MetLife study from 2009, about a million older Americans lose an estimated $2.6 billion annually as a result of financial abuse.
In 2006, the National Center on Elder Abuse estimated that about 15 percent of all elder abuse cases involved financial exploitation. The Center also estimates that for every case of elder abuse and neglect reported to authorities, there may be as many as 5 cases not reported.
The GAO reports that, “the elderly have disproportionately been victims of predatory lending…older consumers may be targeted by predatory lenders because they are more likely to have substantial home equity and may have physical or cognitive impairments that make them more vulnerable to an unscrupulous mortgage lender or broker.”
I think sometimes members forget that at the height of the housing boom, over 70 percent of subprime lending was actually in the form of refinances. These refis were often targeted to older individuals with substantial home equity. It is awful that so many older Americans were stripped of the houses they had worked their whole lives to achieve because of predatory refinance products.
Finally, many advocacy groups for the elderly have also noted that some elderly people lack social and family support systems, potentially increasing their susceptibility to unscrupulous lenders who may market loans by making home visits or offering other personal contact.
Now – let me repeat: this amendment in no way indicates that I think stripping consumer protection away from all Americans is appropriate. In fact, I think that this entire bill amounts to a real attack on the American middle-class. But since preserving the CFPB is not possible given the make-up of this Committee, I’ve offered this amendment as an attempt to preserve protection for at least one narrow group of Americans.
I urge my colleagues to support this amendment and yield back the balance of my time.
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