The Consumer Advisory Board (“CAB”) held its inaugural meeting on September 27th in St. Louis. Composed of bank and credit union executives, consumer advocates and community development officials (click here to view the biographies), the CAB is required by the Dodd-Frank Act, which mandates that the CAB “provide information on emerging practices in the consumer financial products or services industry” to the Consumer Financial Protection Bureau (“CFPB” or the “Bureau”). The CAB replaces the Consumer Advisory Council, which for 35 years advised the Federal Reserve Board on consumer financial services matters.
CFPB Director Cordray and Deputy Director Date were in attendance and gave opening and closing remarks. Director Cordray stressed that the Bureau must remain “close” to the public and that the CAB would help it to do this. While noting some positive signs of economic recovery, Deputy Director Date emphasized that those least well off face a bleak picture. For example, he said, the 10th percentile FICO score for GSE originations is now above 700, which could mean that “less credit-worthy borrowers have been . . . eliminated from the market.”
During the meeting, CAB members clashed regarding how the CFPB should pursue its objectives. Some board members expressed concern over the challenges faced by financial institutions due to the current regulatory complexity. Many, though, appeared to agree with Professor Prentiss Cox (former head of the Consumer Enforcement Division of the Minnesota Attorney General’s Office) that “the lack of access to credit today is due to lack of regulation, not too much regulation.”
Another apparent point of conflict concerned whether the CFPB should prioritize financial literacy and disclosure reforms or instead target enforcement actions. Director Cordray observed that approaches to financial literacy have been “bad and need to improve” and that disclosure reforms went “the wrong way,” focusing incorrectly on exhaustive disclosures instead of highlighting key information that consumers really need. Several board members, though, proposed heightened enforcement efforts. For instance, Professor Cox urged that the CFPB wield a “gigantic hammer . . . bringing enforcement actions” when products are sold that consumers do not understand.
Overall, this first meeting illustrates the difficulty in achieving agreement among 25 individuals. Although the CAB has not yet announced when its next meeting will be, the Board is required to meet at least twice a year. Perhaps the next meeting will provide more insight as to what the nature of the CAB’s initial recommendations to the CFPB will be.