CFPB accused of ‘vague and uncertain’ rule-making

by Ryan Smith18 Feb 2014
The head of a national business group is lashing out at the Consumer Financial Protection Bureau for pursuing what it calls “regulation by enforcement settlement” and the issuance of guidance statements rather than writing clear regulations.

In a letter to CFPB Director Richard Cordray, the U.S. Chamber of Commerce President David Hirschmann accused the CFPB of failing to promulgate clear rules, leaving lenders in constant fear of inadvertently incurring the agency’s wrath by unknowingly violating murky regulations.

“We strongly believe that if the Bureau identifies areas in which it wants to fundamentally alter the rules, it should take the time to write new standards rather than rely on one-off enforcement and press release ‘warnings’ to other regulated companies,” Hirshcmann wrote. “While we understand that writing regulations may not always be the Bureau’s preference or the most expedient process, the Bureau has a number of other options, including issuing detailed, practical guidance — following public comment and meaningful economic analysis — that both protects consumers and preserves access to credit and gives regulated businesses the clear, understandable standards they need to ensure that they are complying with the law.”

Hirschmann accused the CFPB of allowing certain standards to remain “vague and uncertain,” which made it “impossible for companies to implement effective compliance systems.”

“By utilizing ‘regulation by enforcement settlement’ combined with issuance of brief guidance statements -- all without soliciting public comment on the question being addressed -- the Bureau has increased uncertainty regarding significant legal standards and made it virtually impossible for companies to determine in advance what they should do to comply with the law,” Hirschmann wrote. “Faced with regulatory uncertainty and the real potential of reputational risk coming from enforcement actions, some market participants are simply abandoning or considering abandoning consumer lending in areas that are not core to their business. The result is fewer choices, less competition, and higher costs for consumers.”
 

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