CFPB: Staff Controversy, Credit Invisibility, Disclosure Sandbox, Meetings Renewed

Financial Services Law

The Bureau of Consumer Financial Protection (CFPB or Bureau) continues in the news, as the CFPB released a report on credit invisibility, met with advisory groups for the first time this year and proposed a policy for its new “sandbox” program.

Staffers at the CFPB also expressed unhappiness with the past writings of a political appointee at the Bureau, which writings have stirred up concerns about the adequate enforcement of fair lending laws.

What happened

Credit Invisibility—titled “The Geography of Credit Invisibility,” the CFPB’s new Data Point explores patterns of “credit invisible” consumers, those who do not have a credit record maintained by a national credit reporting agency or have a record but the information has been deemed insufficient or too outdated to be treated as “scorable” by credit scoring models.

The importance of geography in accessing credit has been a “long-standing concern for policymakers,” the Bureau noted. To better understand geography and credit invisibility, the study examined “geographic patterns in the incidence of credit invisibility to assess the extent to which where one resides is correlated with one’s likelihood of remaining credit invisible. While determining the underlying factors that cause sustained credit invisibility is difficult and beyond the scope of this study, highlighting geographic variation in credit invisibility can aid policymakers and advance the conversation around potential causes and solutions.”

According to the Data Point, rural areas had the most credit invisibility per capita, with invisibility higher in areas with less Internet access. Geographic areas near universities demonstrated a higher rate of credit invisibility, the CFPB found, which is likely due to the concentration of adults under the age of 25 who have yet to establish a credit record.

Little relationship exists between the distance to the nearest bank branch and credit invisibility, according to the study, and consumers are less likely to use a credit card as an entry product to establish a credit record in rural and low-to-moderate income areas.

Committees Meet—In other Bureau news, after first canceling all meetings and then disbanding all three advisory groups earlier this year, the CFPB held meetings with the newly revamped Consumer Advisory Board, Community Bank Advisory Council and Credit Union Advisory Council in September.

The new committees “are providing a wide array of new perspectives to consumer protection,” Acting Director Mick Mulvaney said in a statement about the meetings. “We look forward to hearing high-quality feedback from these experts in consumer finance markets to inform the Bureau’s decision-making going forward.”

Newly appointed members of the advisory committees—who will serve a one-year term—include experts in a variety of financial industry fields, the CFPB said, from fintech to fair lending, along with representatives of community banks and credit unions.

Proposed Disclosure Sandbox—Addressing policy, the newly established Office of Innovation recently issued a proposal for the creation of a “Disclosure Sandbox,” aimed at encouraging trial disclosure programs. Amending a policy established in 2013, the proposal would allow the Bureau to deem a covered person conducting a trial disclosure program to be in compliance with or exempt from a requirement of a CFPB rule or certain federal laws.

To encourage companies to test new disclosures, the revised policy would streamline the application and review process “to focus on the quality and persuasiveness of the application,” the Bureau said, with a grant or denial of the application within 60 days of submission.

A two-year time frame for the testing of disclosures would be established, with procedures in place to permit companies to continue to use disclosures that test successfully. Coordination with state regulators would allow entities within a state regulatory sandbox to participate in the Bureau’s Disclosure Sandbox without a separate application process.

The proposed policy is open for public comment until October 10.

Blankenstein’s Writings—Finally, controversy is growing over the past writings of a senior CFPB political appointee, Eric Blankenstein, policy director of supervision, enforcement and fair lending, who has faced criticism for blog posts where he discussed racial slurs and seemingly suggested that most hate crimes were “hoaxes.”

“The language used, and sentiments expressed, are completely unacceptable and call into question Eric’s ability to lead the fair lending program specifically, and the division generally,” Kirsten Donoghue, assistant director of enforcement, wrote in an email to Bureau staff obtained by American Banker.

Not the first to object to Blankenstein’s writings—concerns were also voiced by Patrice Ficklin, the CFPB’s assistant director of fair lending and equal opportunity—Donoghue said she had the support of the entire enforcement team, or approximately 100 attorneys at the Bureau. “It is an issue for all of us,” Donoghue wrote.

Emails from other staffers agreed. “This is intolerable,” wrote a CFPB enforcement attorney, asking that Mulvaney call for Blankenstein’s resignation. “I have spoken with several colleagues—many of them women and people of color—who were deeply offended by Mr. Blankenstein’s language. They can’t fathom continuing to work under Mr. Blankenstein’s direction; and they have lost all faith in his ability to carry out the Bureau’s enforcement of our fair-lending laws in a manner that credibly ensures the protection of women, people of color, and other historically disadvantaged political minorities.”

The blog posts appeared in 2004 and 2005 under a pen name, using racial slurs and questioning whether those who use them are “inherently racist,” as well as stating that hate crimes were far more likely to be hoaxes than real events.

Blankenstein’s response was to criticize the criticism. “The need to dig up statements I wrote as a 24-year-old show[s] that in the eyes of my critics I am not guilty of a legal infraction or neglect of my duties, but rather just governing while conservative,” he told The Wall Street Journal.

To read the Data Point on credit invisibility, click here.

To read more about the advisory groups, click here.

To comment on the proposed Disclosure Sandbox policy, click here.

Why it matters

News from the CFPB runs the gamut from legal work (the issuance of a new report on credit invisibility and a proposed policy for a sandbox program) to politics at the Bureau, with the first meeting of advisory groups since Acting Director Mulvaney took the helm and controversy surrounding a political appointee with objectionable past writings.



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