Cordray Defends Rulemaking Delays to Senate Panel

June 11, 2014
American Banker 
payday lending news
The Consumer Financial Protection Bureau (CFPB) has taken longer than expected to issue a final report on arbitration clauses and to develop rules for prepaid cards, payday loans, and student loans. But director Richard Cordray told a Senate Banking Committee hearing June 10 that the agency would address many of those areas within the year.

The CFPB will miss a tentative deadline to release rulemaking on prepaid cards this month but expressed optimism that it would be ready by the end of summer. Cordray also said he expects a final report to come out this year on the arbitration clauses often imbedded in account and credit agreements that prevent customers from disputing claims in court.

With the CFPB yet to regulate payday loans, senators urged Cordray to ensure that the final regulation it not overly narrow. "Targeting only traditional payday loans allows lenders to move into other products that trap consumers in a cycle of debt," warned Sen. Sherrod Brown (D-Ohio). "As the bureau considers new oversight for the high-cost loan market, how do you ensure that new rules will protect consumers through the whole range of products, including obviously traditional payday loans, but online payday loans, auto title loans, installment loans?"

During the hearing, Sen. Robert Menendez (D-N.J.) introduced a bill that would require student lenders to clearly define the obligations of borrowers and cosigners in case of death or disability. Although the CFPB has released a report identifying these issues to Congress, it was unclear whether the bureau needed legislation to pursue student lenders that were not letting borrowers release co-signers in circumstances such as death.

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