Center for Responsible Lending
When Barack Obama completed his two terms as America’s president, his legacy was punctuated by two key policy reforms: health care and consumer protection. Although broad news headlines chronicle multiple developments in attempts to repeal the Affordable Care Act, efforts to rollback consumer protections are just as determined and dangerous.
Only July 12, a public hearing of a House Financial Services subcommittee focused on a range of bills that seek changes in online banking, debt collection and more. But the main event of the hearing was legislation that would strip authority for the current aggressive enforcement that the Consumer Financial Protection Bureau has forged. If enacted, these measures will reduce CFPB to little more than a paper tiger.
H.R. 2133, The Community Lending Enhancement and Regulatory Relief Act, also known as CLEARR, is making its third attempt at passage. According to its sponsor, Rep. Blaine Luetkemeyer of Missouri, regulatory rollbacks will provide relief for both banks and consumers. As of press time, the measure attracted 25 co-sponsors from 17 states with districts that include portions of Atlanta, Austin, Dallas, suburban Detroit, Houston and Pittsburgh.
“The bottom line is that the Obama-era regulatory environment has stifled growth and hurt local communities,” Luetkemeyer said. “The pendulum has swung too far and it’s time to return to a common sense, responsible approach to financial regulation that protects consumers from harm without jeopardizing access to the financial protects they need to grow their businesses, invest in their communities, and provide for their families.”
One particularly offensive provision would weaken both the Equal Credit Opportunity Act and the Fair Housing Act by requiring proof of discriminatory “intent,” rather than the resulting effects of financial practices.
For civil rights leaders, consumer advocates, researchers and other lawmakers, Rep. Luetkemeyer is the one who has gone too far.
“Requiring intent imposes a barrier for equity,” noted Scott Astrada, director of federal advocacy with the Center for Responsible Lending. “If you are a victim of racism and discrimination, you don’t have the privilege of saying, ‘what are my feelings’ compared to your data collection efforts. Racism is not a cost benefit question.”
Other CLEARR Act rollbacks would include:
• Ending CFPB’s regulation that requires lenders to provide mortgage borrowers three days to review a closing disclosure ahead of a scheduled loan closing;
• Exempting certain lenders from CFPB mortgage servicing requirements; and
• Amending the Truth in Lending Act to “create a safe harbor” from consumer lawsuits based on a lender’s failure to comply with CFPB’s Ability-to-Repay Rule. This rule prevents lenders from selling mortgages that consumers cannot afford.
Although these and other reforms are presumed to create a more “business-friendly” environment – particularly for community banks, multiple research reports show that small lenders are operating better today under Dodd-Frank and CFPB.
For example, a 2016 Federal Deposit Insurance report determined that by the end of 2015, over 95 percent of community banks were profitable, with earnings up 9.7 percent that year.
Also in 2015, according to 2016 report by the CUNA Mutual Group, small lenders with assets less than $1 billion achieved a 37 percent increase in 2015 mortgage loan originations, compared to 2012. CUNA Mutual also found that credit unions alone originated $41.7 billion in first-lien mortgage loans in the fall of 2016, an increase of 22 percent over the same period in 2015.
Maybe the CLEARR Act is a legislative remedy in search of a problem that simply does not exist.
We can and should recall how not that long ago 7.8 million Americans lost their homes to foreclosure. Or that taxpayers footed a $7 trillion bailout of financial institutions during the foreclosure crisis.
Nor should we forget that communities of color – often Black and Latino – bore the brunt of foreclosures and lost wealth. Clearly, federal laws providing protections from discrimination are still needed.
“Whether by accident or design, discrimination still hurts,” noted Rep. Al Green of Houston, ranking member of the subcommittee on Financial Institutions and Consumer Credit. “When your neighbors deny you what the constitution affords, it can be very painful.”
“There are a good many number of people in this society who will never suffer any pain if we make this change,” Green continued. “But there is a good many number of other people who will be subject to harm if we do so. The only way to combat structural discrimination and exclusion is to have the same opportunities in this society.”
Charlene Crowell is the Deputy Communications Director for the Center for Responsible Lending. She can be reached at email@example.com.