CBA Urges Congress to Take Action on CFPB UDAAP Authority and Small Dollar Lending Legislation

WASHINGTON, D.C. – The Consumer Bankers Association (CBA) today sent a letter to the U.S. House Financial Services Committee ahead of its markup of several pieces of legislation endorsing several pieces of legislation being considered, notably Rep. Andy Barr’s (R-Ky.) proposal to reform the CFPB’s unfair, deceptive, and abusive acts and practices (UDAAP) authority and Rep. Young Kim’s (R-Calif.) proposal to empower banks to innovate and expand access to small dollar loans.

Reforming the CFPB’s UDAAP Authority

CBA has long called for legislation to provide clarity on the Bureau’s UDAAP authority to ensure the agency is acting within its statutory bounds when enacting policy. As the letter outlines:

“By granting new and undefined UDAAP authority to the Bureau, the Dodd-Frank Act created an anomaly within the existing and well-documented regulatory regime. Many depository institutions are now supervised by the CFPB for UDAAP violations and by their prudential regulator for [unfair and deceptive acts or practices] violations, resulting in an overlapping and often confusing supervisory regime. Beyond that, Congress did not provide clarity as to why the additional ‘abusive’ prong was created, and it was not adequately defined when these powers were granted to the Bureau. This has placed all companies that the Bureau regulates at risk of inadvertent noncompliance because it is still unclear how or when the ‘abusive’ standard will be applied or how it is different from unfair or deceptive.”

Enabling Small Dollar Lending

A 2022 bipartisan report from the Government Accountability Office reaffirmed CBA’s longstanding position that excessive and ever-changing policies are stifling innovation and hampering the most vulnerable consumers’ access to credit, including short-term lending products.  For these reasons, long-term certainty on small dollar policy is needed to facilitate more banks being able to make these consumer-friendly loans, as the letter outlines:

“Empowering banks to offer viable short-term lending products will provide consumers with a valued emergency safety net and far greater protections than they might receive at other less regulated entities. Lending safeguards should be put in place to protect consumers and hold bad actors accountable. The answer, however, is not overly prescriptive rules that force consumers to borrow more money than necessary, stifle innovation, or place limitations on consumers who use these products responsibly and repay them on time. Small dollar loans offered by depository institutions have built-in controls intended to protect consumers – all designed to prevent reliance on such loans and support the ability to repay the loan. Most importantly, all of this is done within the well-regulated and well-supervised depository marketplace.”

To read the full letter, click HERE.

CBA Advocacy

• To read CBA President and CEO Lindsey Johnson’s recent testimony before the U.S. House Financial Services Committee on the increased politicization of financial regulatory policy, click HERE.
• To read CBA’s letter in support of Rep. Barr’s legislation to reform the CFPB’s UDAAP authority, click HERE.
• To read CBA’s letter ahead of the House Financial Services Subcommittee on Financial Institutions and Monetary Policy hearing last month entitled “Consumer Financial Protection Bureau: Ripe for Reform,” click HERE.
• To read Johnson’s RealClearMarkets op-ed, “Congress Should Get Head Start On CFPB Oversight and Reform,” click HERE.