A Semi-Annual Review of the Consumer Financial Protection Bureau
JUNE 13 & 14, 2023
What Happened
On June 13 and 14, the Senate Banking and House Financial Services Committees held hearings on the Consumer Financial Protection Bureau’s (CFPB) semi-annual report to Congress. Under the Dodd-Frank Act, the CFPB Director is required to testify before the House and Senate twice a year regarding a report the Bureau must submit to Congress.

What CBA Is Saying
In new letters sent ahead of the CFPB’s semi-annual report to Congress, we outlined legislative and regulatory recommendations necessary to fulfill the Bureau’s responsibility of protecting consumers and supporting a competitive financial services marketplace, stating in part:
  • “Recent actions taken by the Bureau have established new regulatory requirements for banks outside of the rulemaking process required by the Administrative Procedure Act, and, under the current leadership, the Bureau seeks minimal input from the industry it is responsible for overseeing. This is in stark contrast to the open dialogue that the banking industry experienced with multiple previous CFPB Directors, regardless of party affiliation.”
Along those lines: Last night, following the hearing in the Senate on June 13 and ahead of today’s hearing in the House on June 14, the CFPB released its Spring 2023 Unified Agenda. Read CBA’s analysis of the Unified Agenda HERE.

The Honorable Rohit Chopra, Director, Consumer Financial Protection Bureau
Key Takeaways
The hearings focused on a variety of pressing issues under the CFPB’s jurisdiction. Key highlights affecting CBA member banks include:
Credit Card Late Fees
  • Republicans criticized the CFPB’s proposed rule on credit card late fees and argued the data used in the proposal is flawed and insufficient. For example, the CFPB failed to account for post-charge off collection costs in the $8 credit card late fee safe harbor proposal. 

  • They also argued the drastically lower safe harbor dollar amount would result in higher costs of credit for cardholders across the board, citing a peer-reviewed study done by two former CFPB economists which the CFPB dismissed in the proposed rule. 

  • Democrats discussed the credit card late fee proposed rule, stating it wouldn’t impact banks because they currently profit from late fees.  

  • In the Senate, members argued banks could calculate the actual cost of a missed payment and if that amount was higher than the $8 safe harbor they would be allowed to charge additional funds under the proposed rule. 

  • In the House, members argued industry may want consumers to pay late because of the funds they’ll accrue, and the Director said that the market is much less competitive if the industry has an incentive for someone to default or pay late. 
Section 1071 Rule
  • Republicans raised concerns about the complexity of the Section 1071 final rule and argued the compliance deadline of 18 months is too short and should be extended. Director Chopra was dismissive of these concerns and argued the longer compliance period for lenders making less than 2,500 small business loans per year will exempt many small lenders from the October 1, 2024, deadline. 

  • Republicans also raised concerns the CFPB will scrutinize lenders if they have low response rates on 1071 data even though the rule makes it optional for small business loan borrowers to report the data. 

  • House Democrats highlighted their support for Section 1071 and endorsed the 18-month implementation deadline.
  • House Republicans criticized the CFPB’s recent “abusive” guidance and argued that it is vague and unclear, and that “abusive” can be whatever the Director wants it to be. Director Chopra strongly disagreed with that characterization. 
Section 1033 Rule
  • Director Chopra stated the CFPB will release its Section 1033 proposed rule in October 2023.  

  • Director Chopra indicated for the first time that the proposed rule will include discussion of downstream liability in the data sharing ecosystem.

  • House Republicans raised concerns about the SBREFA outline applying only to depository accounts and not to accounts offered by non-banks.
  • Director Chopra argued transaction data is the most valuable and will capture data from non-banks, but also said he is open to including other types of data.
Peer-to-Peer (P2P) Payments Scams 
  • Members of both parties raised concerns about the CFPB’s lack of investment in consumer education and financial literacy pertaining to scams and urged the Bureau to use the substantial balance in the Civil Penalty Fund to do more on that front.

  • Director Chopra argued some of the CFPB’s previous education efforts were ineffective and said the Bureau is looking at a broad range of consumer education options.

  • Led by Senator Robert Menendez, there was concern from Democrats that the industry is not doing enough to protect consumers under P2P. He specifically referenced the Zelle owner’s public comments about covering the costs of scams for the consumer, but said they have yet to take any action.  
Go Deeper

To read full summaries of both hearings, click HERE and HERE.