Policymakers have made little progress in figuring out how they might prevent another financial crisis from happening, a troubling reality highlighted at a conference that ended over the weekend at the Federal Reserve Bank of Boston, the New York Times reported today. The Fed has publicly committed itself to a strategy of so-called macroprudential regulation, meaning it is now focused on maintaining the stability of the financial system as well as the health of individual firms. But senior Fed officials at the Boston conference described such regulation as more of a goal than an achievement. “My own view is that while the use of macroprudential tools holds promise, we are a long way from being able to successfully use such tools in the United States,” said William C. Dudley, president of the Federal Reserve Bank of New York. In the meantime, the importance of prevention has only increased because the Fed’s ability to respond to the outbreak of a crisis has diminished. The 2010 Dodd-Frank Act prevents the Fed from repeating some aspects of its 2008 actions. More important, the Fed expects interest rates to remain below historic norms for the foreseeable future, leaving less room to cut rates, which has long been its first line of defense.
The House Financial Services Committee will start the markup process for two bills related to oversight of the Consumer Financial Protection Bureau during a hearing at 10 a.m. ET, ACAInternational.org reported yesterday. The committee will review U.S. Rep. Steve Stivers’ (R-Ohio) “Bureau of Consumer Financial Protection – Inspector General Reform Act of 2015” (H.R. 957) and U.S. Rep. Randy Neugebauer’s “Financial Product Safety Commission Act of 2015” (H.R. 1266). H.R. 957 ensures greater accountability at the CFPB by creating an Inspector General who is nominated by the president and confirmed by the Senate, according to a House Financial Services Committee news release. H.R. 1266 removes the CFPB from within the Federal Reserve System and re-establishes it as a standalone agency that is governed by a five-member, bipartisan commission.
The Consumer Financial Protection Bureau said yesterday that it is weighing new rules governing the $1.3 trillion student loan market after releasing a stinging report documenting "widespread failures" in an industry largely overseen by the Obama administration, the Huffington Post reported today. The consumer bureau's report describes student loan servicing, or the business of collecting borrowers' monthly payments and counseling them on their repayment options, as riddled with unfair practices. Many borrowers are trapped at companies that don't give them basic information, often mislead them, assess unexpected fees, make it hard for them to correct errors and frequently push them into default, the report says. The CFPB's report is particularly harsh in its examination of federal student loans, where many of the most egregious practices occur and are regulated and supervised by the U.S. Education and Treasury departments, and signal that the bureau will take a more aggressive stance in rooting out wrongdoing in the federally-backed market. Read more.
In related news, CFPB Director Richard Cordray testified before the House Financial Services Committee that the agencies’s enforcement activities have resulted in more than $11 billion in relief for more than 25 million consumers, ACAInternational.org reported yesterday. He cited examples like the CFPB’s actions against Corinthian Colleges, which resulted in $480 million in student debt relief. When asked specifically about the CFPB consumer complaint database, Cordray said that when it comes to debt collection complaints, different kinds of relief are more important to consumers than monetary relief. According to the CFPB, an overwhelming majority of consumer complaints against debt collectors are resolved amicably, and only 1 percent of debt collection complaints are closed with monetary relief. Read the prepared testimony.
To establish student loan borrowers’ rights to basic consumer protections, reasonable and flexible repayment options, access to earned credentials, and effective loan cancellation in exchange for public service, and for other purposes.
Rep. Scott Garrett (R-N.J.) reintroduced legislation on Friday aimed at increasing transparency of an interagency board of federal financial regulators, The Hill reported today. Garrett, a member of the House Financial Services Committee, said the legislation is needed to allow the public to see how the Financial Stability Oversight Council (FSOC) makes its decisions. The 2010 Dodd-Frank Act created the FSOC, which regulates risk for the financial markets and is made up of the nine heads of the financial regulatory agencies. Republicans and the business community have chided the agency as reckless and non-transparent and as a rogue regulator with little oversight. Democrats and other critics of the bill argue that the legislation would politicize what was meant to be an independent body. Garrett's bill would increase the number of representatives at the meetings, allowing for the participation of all members of the regulators' boards and commissions to attend — not just the heads. It would also require that the agencies' respective boards and commissions vote on how each regulator would cast a ballot on FSOC decisions.
