WASHINGTON — In unusually expansive comments, Consumer Financial Protection Bureau Director Richard Cordray provided new details Tuesday about proposals due soon from the agency while offering insights into an internal battle over easing a key mortgage rule.
Speaking at a town hall meeting organized by the NCUA, Cordray gave some specifics about how the agency plans to write rules on overdraft programs, the first time he's publicly delved so deeply into the issue after the agency released several reports on overdrafts in recent years.
The CFPB is looking at "the size of fees, frequency of fees, occasions for fees, the ordering of transactions" in overdraft but "we are not going to be banning the overdraft product," Cordray said. "As to whether we will have certain modifications or constraints around existing practices, that will all depend on what we see in the data."
Still, there's a number of other proposals that are likely to come out first, he said.
"Overdraft is in the queue but not quite as upfront as some of the things I mentioned such as prepaid, payday and HMDA [Home Mortgage Disclosure Act]," he said. "But we're thinking about it, we're working on it and happy to have input."
During a question and answer session, Cordray was unusually candid in response to questions from credit union executives. He defended the agency's investigations of indirect auto lenders while shedding light on internal disagreements on how to make changes to the "qualified mortgage" rule to help smaller institutions.
On Jan. 29, the CFPB proposed raising the threshold for small and rural lenders which would allow more institutions to make qualified mortgage loans without having to meet certain requirements as larger lenders.
Cordray, who noted that his Ohio home would be considered rural under the plan, saw the changes as a positive, though there was some internal pushback.
"This was a matter of debate within the bureau" but "I ultimately believed and concluded that we had [initially] drawn the line too narrowly; that we should allow more latitude to the small creditors to give them some breathing room, maybe some room to grow," he said.
As for expanding the definition of rural, Cordray said the proposal would cover about 22% of the population, which is almost 10 times the initial proposal from the Federal Reserve Board (before rulewriting power was transferred to the CFPB) and up from the 9.9% of the population that the existing rule covers.
Cordray said he thought the reasoning to expand what qualifies as "rural" was "quite justified."
One controversial area the CFPB has not eased up on is using so-called disparate impact theory to cite indirect auto lenders for unintentional discrimination. The legal theory is currently the subject of a case before the Supreme Court, though it is specifically tied to a different law than the one the CFPB mostly uses to bring such cases.
Cordray said agency exams of certain auto lenders that were publicized last year remain "ongoing" while some have been resolved in the exam process and through nonpublic supervisory actions.
"I believe the practice of dealer markup — with financial incentives to mark up the rates for some consumers and not others based on eyeballing the consumer in a way that is not transparent to the consumer and they do not know what is happening in terms of their rate — is, I think, a regrettable practice," he said. "It's a practice that I would not be proud of if I were a lender and running my own lending program. And it's something that we continue to have significant concerns about in the marketplace and there's ongoing work around that."
In terms of other rulemaking that is coming down the pike, Cordray said they are currently "digesting" comments after the agency proposed expanding the kinds of information lenders must provide to regulators under HMDA.
"We are not yet in a position to finalize that rule but we will be in the relatively near future, not the immediate future," he said.
The agency is also currently reviewing comments that are still coming in for its proposal on prepaid cards and plans to issue a highly anticipated proposal soon on payday loans and deposit-advance products.
"We have work that's ongoing, that's known publicly, on payday lending rules which are well along," he said.
He added that the agency is working "on debt collection rules, which is somewhat along; on overdraft, which is somewhat along; and a variety of other things."
Cordray kicked off the session by explaining that he "obtained" a "temporary" black eye from a basketball game.
NCUA Chairman Debbie Matz was quick to respond, "Maybe it was part of the process of my twisting your arm to get you here," she joked.