Date Says Consumer Bureau May Find Need for Overdraft Rules
The Consumer Financial Protection Bureau is considering whether additional supervision or regulation might eventually be needed on bank overdraft programs to ensure rules are being applied “in an even-handed way,” said Raj Date, the adviser running the new agency.
U.S. regulators including the Federal Reserve have imposed rules on overdraft programs, and that may lead to inconsistent supervision of different kinds of financial institutions, Date said today in a Philadelphia speech.
“We will be monitoring the impact of the recent regulatory and supervisory interventions,” he said. “If we find that these interventions are not working as intended, we will adjust. And if we find that additional action is needed, we will act.”
The bureau, created by the Dodd-Frank Act, has jurisdiction over consumer financial products including checking accounts and authority to impose industrywide rules where it deems them necessary. The Fed, the Federal Deposit Insurance Corp. and the Office of the Comptroller of the Currency have issued separate rules aimed at limiting use of checking-account overdraft protection, which regulators say are essentially high-interest short-term loans.
In his speech, Date’s outlined the agenda for the consumer bureau, which officially started work on July 21. In addition to checking accounts, the agency is working on issues related to credit cards, mortgages and student loans, he said.
Shopping Sheet
The bureau is developing a two-page “mortgage shopping sheet” to help homebuyers determine what a mortgage costs and whether they can afford it. The agency is also looking at changes to mortgage regulations, he said.
“We want to establish some common-sense safeguards to prevent bad practices from harming consumers,” Date said. “That’s why we’re developing new rules to help borrowers get loans that make sense for them -- loans that they can reasonably expect to repay.”
The bureau is working with other federal regulators to develop basic standards for mortgage servicing, he said.
“Sometimes ordinary, responsible people deal with difficult financial times,” Date said. “When that happens, it is simply not acceptable to cut corners. The law still applies.”
‘Fair-Minded’
The 2009 CARD Act, which revamped credit card rules, has made costs “more transparent and more reliable,” Date said. Even with the improvements, the bureau’s bank supervision program will have to be “tough-minded” in protecting consumers, he said.
“Make no mistake: When we find unjustified practices that cause substantial consumer harm, we will take the necessary action to put an end to them,” Date said. “
Date said the consumer bureau would collaborate with the Department of Education on a Dodd-Frank mandated study of the student-loan market that would include recommendations that it submits to Congress next year.
The bureau will be ‘‘on the lookout’’ for practices in the student-loan business that might run afoul of the law, Date said. Those might include loans that lenders ‘‘know many students won’t realistically ever be able to repay,’’ for-profit institutions that push their own high-cost loans, and ‘‘questionable tactics’’ used to sell to military veterans, he said.
‘‘We owe more to our young people, and especially to those who risked their lives in the service of our country,’’ Date said. ‘‘If problems in this market warrant action, we will not hesitate to use the tools that Congress has given us,’’ he said.
Date replaced Elizabeth Warren as the special adviser to the treasury secretary on the consumer bureau on July 26, when the Harvard University law professor stepped down after setting up the agency. Richard Cordray, the bureau’s enforcement director, has been nominated to become the agency’s first director.
To contact the reporter on this story: Carter Dougherty in Washington at cdougherty6@bloomberg.net.
To contact the editor responsible for this story: Lawrence Roberts at lroberts13@bloomberg.net.
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