Bankers and the Bureau have a long way to go

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There was a lot of fanfare about the opening of the Consumer Financial Protection Bureau, much of it from the Bureau itself. Now, more than three months later, it is time for bankers, and especially the compliance fraternity, to ask how things are going.

Actually, how things are going is a bit of a mystery--because it is difficult to hear anything from the Bureau. If you have tried calling the Bureau, you will know that it is difficult to get through, much less get a call back. And have you tried to find any information on the Bureau's website? Good luck!

Starting from scratch, at the Bureau and in banks

Granted, the Bureau staff faces a huge challenge. Setting up a new government agency is no easy feat. The administrative requirements can be overwhelming, but must be dealt with before the new agency can get down to business. Hiring and placing all the staff required to conduct research, write regulations, develop policy, and examine institutions is a daunting prospect.

And besides the administrative requirements, there is the issue of getting to the substantive work that all the structure should be supporting. We haven't seen a lot of new regulations since the Bureau's July 21, 2011 start date.

On one level, this has given banks a bit of a break after the slew of regulatory changes that have landed in the past several years. It's nice to have a break, but there is a price tag attached: We aren't getting any help either.

This is precisely the problem with the way things are going. All responsibility for interpretations and answers to questions has been transferred to the Bureau. We can't call the Fed any more. Providing clarification for issues arising under the consumer protection regulations is no longer the Fed's responsibility. Answers should come from the Bureau. But the Bureau isn't ready to handle the load of calls and letters.

How do we get our questions answered? In the banking industry, we are used to the traditional, prudential regulators taking our phone calls--or at least returning them within a reasonable period of time. We have come to expect call-backs within a day or two at the latest. But weeks?  Months?  How do we run a compliance program when there is a murky area of regulation that cries out for regulatory guidance?

Perhaps a matter of mission

What this all comes down to is who the Bureau serves.

What does the Bureau consider its primary mission?  Providing protections to consumers? Or regulating the industry?

Based on statements issued by the Bureau leadership, the Bureau sees its primary role as protection of consumers. That means placing a priority on responses to consumers who have questions, concerns, or complaints. This is clearly how the Bureau is currently operating. All you have to do is look at the Bureau's website for proof. LINK: www.consumerfinance.gov

On the website, everything is designed to solicit input from consumers or provide information to consumers.

Where is the icon or tab to click on to get answers to regulatory questions? There isn't one.

Helping banks can help consumers, too

But here's the big question. How do you protect consumers, using regulations, without providing guidance and supervision to the industry?  

What happens when you don't return calls or answer questions from the industry but you encourage consumers to submit complaints? 

Answer: You get complaints from consumers and mistakes from the industry.

Elizabeth Warren and the staff she selected have described the new Bureau as the cop on the beat. They plan to arrest speeders. Great. This may deter some speeders, but when someone is stopped for speeding, they have already been speeding. When a customer is allegedly harmed by something a creditor does, the harm has already occurred.

The goal of supervision is to prevent the harm. It is a regular check to be sure that programs and systems are in place to make things happen the way they should. Stopping the speeder after the speed has been clocked is too late. If there is an incorrect Truth in Lending statement or an unfair denial of an application, the harm has been done by the time it is reported to and confirmed by the cop on the beat.

The problem the industry is facing right now is that responsibility for traffic signs has been transferred to the Bureau but it is doing nothing to monitor or facilitate the flow of traffic. When a bank needs to know what the speed limit is for a specific location, there is no sign. And no response when the bank calls the Bureau.

This leaves those who want to comply in a dreadful limbo. Because of all the recent regulatory developments, there are lots of questions.

 Just think about risk-based pricing notices or credit score notices or payment schedule disclosures for mortgages. Do you have questions?  Lots. Who answers them?

If something goes wrong, such as a challenge to a credit score notice, who will get blamed?  Do we really expect someone at the Bureau to step forward and apologize for their delay in responding?  We know that banks will once again get the blame-- this time for trying but operating without adequate guidance.

We can sit back and wait for the blame game to darken the name of banking once again, or we can start to demand responses from the Bureau.

Let's talk theoretically for a moment. What would happen if everyone who has a question and fails to get a response complains to their Senator or Representative?  What would happen if we notify the Bureau when a finance company runs a noncompliant or deceptive ad--and when the Bureau does nothing we again complain to Congressmen and Senators?*

Let's face it. We have nothing to lose. Why not try what has worked so well for consumers?  Stand up and be heard.

* Please note that the Bureau's supervisory jurisdiction doesn't cover mortgage brokers, payday and small loan lenders, sales finance companies, and certain other providers until an official Director takes control.

On Nov. 1 in congressional hearings Raj Date, Special Advisor to the Secretary of the Treasury for the Consumer Financial Protection Bureau, presented "The First 100 Days." To read his written testimony, click here.

Disclaimer: Views in Common Sense Compliance do not necessarily reflect the viewpoint of the American Bankers Association.

• About Lucy Griffin "Lucy and Nancy's Common Sense Compliance" is blogged by both Lucy Griffin and Nancy Derr-Castiglione, both longtime ABA Banking Journal contributing editors on compliance.

• Lucy, a Certified Regulatory Compliance Manager, has over 30 years experience in compliance. She began as a regulator, including stints with the Federal Reserve Board, the Federal Trade Commission, and the Federal Home Loan Bank Board. For many years she managed the ABA Compliance Division. Since 1993 she has served as a compliance consultant as president of Compliance Resources, Inc., Reston, Va. She is also editor of Compliance Action newsletter and senior advisor with Paragon Compliance Group, a compliance training firm. 
   
  In addition to serving as a Contributing Editor of ABA Banking Journal, Lucy serves on the faculty of ABA's National Compliance Schools board. For more than a decade she developed and administered the case study at ABA's National Graduate School of Compliance Management. She can be reached at lucygriffin@earthlink.net