After a slow start for a few years because Republicans in the Senate blocked confirmation of its director, the Consumer Financial Protection Bureau (CFPB) has in the last several months vigorously pursued its mandate to protect individuals from predatory lending and banking practices. Its enforcement actions resulted in big settlements for consumers from credit card companies and refinancing firms engaging in deceitful marketing practices. The Bureau has pursued credit ratings agencies to ensure false credit information is corrected in a timely fashion. (Previously individuals had to resort to their own personal legal actions under the Fair Debt Collection Practices Act as the only likely avenue for such relief.)
But some critics believe that the CFPB may allow its zealousness to undermine its own mission. As part of its purview to regulate consumer mortgage lending, it has issued reams of regulations, many discretionary and others filled with exceptions. Analysts of the housing market worry that the complexity of rules relating to qualifications may dissuade mortgage companies from lending to some potential borrowers. As violations by the lenders can draw penalties ranging from reimbursement of all payments made on a mortgage to losing the legal right to foreclose on a home, they may balk at taking a chance on a loan that may run afoul of the hard-to-gauge regulations.
These same critics cite the case of Ally Bank as an example of how difficult compliance can be. The Bureau investigated the bank for discriminating against minority applicants for home loans. While Ally Bank does not track the race of its applicants, the CFPB contended that lenders can project the probability of an applicant’s race from their home address. The Bank, a former financing arm of General Motors settled with the Bureau for $98 million, in the wake of allegations that it charged interest rates approximately 0.29% higher to people from areas likely to be inhabited by minorities as compared to those not from such locales.
Whether this retards home financing remains to be seen. As its Director, Richard Cordray, only took office last July, many of its rules and regulations remain to be fixed at this time.
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