WASHINGTON (Legal Newsline) - A federal agency tasked with regulating lenders refuses to actually explain its rules, causing uncertainty that can choke consumers' access to credit.
That's how the president of the American Financial Services Association, Bill Himpler, feels as he embarks on a mission that he hopes will help his group's members understand the meaning of "risk."
The word has become the subject of controversy in the wake of the Consumer Financial Protection Bureau's decision to regulate nonbanks that engage in conduct that "poses risks" to borrowers.
"If you have this ominous figure over my shoulder and you don't know when it will pounce, you might help someone a little less than you'd regularly be inclined to help," Himpler said in a recent interview with Legal Newsline.
AFSA's members aren't the only ones worried about the CFPB's language. Both Republicans and Democrats in Congress wrote the agency in January, claiming lenders in compliance with local and federal regulations could face consequences that "could lead to confusion in the marketplace."
"As acknowledge in the final rule, CFPB did not address industry's calls to clearly define 'risks to consumers' in this procedural rulemaking," says the letter, signed by six members of Congress.
"However, we believe providing a clear definition or specific examples is critical to educating both consumers and financial institutions, such as small, mid-size, and emerging operators, on what the CFPB considers inappropriate conduct."
Companies providing personal, vehicle and home loans face enforcement actions from the CFPB if their products are deemed risky. Drop-down menus, long hold times and contracts filled with legalese that some consumers might not understand are among complaints the CFPB addresses in its enforcement actions.
The agency, which was created in 2011, has been more active in the Biden Administration under director Rohit Chopra than during Donald Trump's time in office, though Himpler has complained there are no "clear rules of the road."
"What we're calling on the CFPB to do is not operate regulation by enforcement or press release or blog, but to use (Administrative Procedures Act) rulemaking authority," he said.
A press release from AFSA included several examples of what he thinks is overreach by the CFPB:
-Limiting arbitration, despite one of its studies showing the process is more beneficial to consumers than the tort system.
-A focus on press releases and rhetoric rather than formal rules; and
-Changing the Truth In Lending Act and misinterpreting the Military Lending Act.
It all causes confusion in the marketplace as companies attempt to operate responsibly, Himpler feels.
"It's like being pulled over for speeding and there's no speed limit sign," he said. "We have members of the association and companies that join who want to be compliant and work with regulators and be seen as good corporate citizens," he said.
"If that's what they're left with, they want to stay very clear of the line and keep out of trouble, but they don't know where the line is."