CBA’s Johnson to Congress: Unintended Consequences of Regulations Harm Consumers

WASHINGTON, D.C. - Testifying before the U.S. House Financial Services Committee at a hearing entitled "Dodd-Frank Turns 15: Lessons Learned and the Road Ahead," today, Consumer Bankers Association (CBA) President and CEO Lindsey Johnson highlighted how unintended consequences of regulation can harm consumers and reaffirmed the need for a whole-of-government approach to combat fraud and scams.

Key excerpts from Johnson's responses to questions from the Committee are below.

On how burdensome regulations could inadvertently harm consumers:

"Banks really want to be able to provide lending in their communities to the small businesses that fuel the overall economy. The requirements under Dodd-Frank [Act Section 1071] were really for 13 data points to be collected. The CFPB went far beyond that [...] in the final rule. It was almost impossible for a lot of banks to actually collect that data [...] I heard multiple times many lenders say they may have to stop small business lending altogether [which would] be a hamper on the overall economy as well."

On the need to reform the CFPB into a credible, durable regulator:

"We've seen over the last 15 years that the CFPB has been political, driven by polling at times. The biggest [reforms] we can do is better define our UDAAP authority so that companies, banks in particular, have certainty about how to comply and what it means to comply. I think the second thing would be creating a rigorous cost benefit analysis for the CFPB. [Right now, the CFPB doesn't] take into account the true cost to consumers when [its] issuing different rules. I think those would be two very significant steps. There are a number of other things that we recommend in our testimony, too."

On the need for a whole-of-government approach to combat fraud and scams:

"[The U.S. House Financial Services Committee] have been a phenomenal lead in heeding consumers' plea for help on being scammed out of their own money. For far too long, it's often been finger pointing from the CFPB when they actually have as one of [its] six core missions to help educate consumers so that the consumer can make informed financial decisions. [The Committee is] taking a leadership role in this. [...] Banks spend billions of dollars and millions of man-hours to help protect consumers from being scammed out of their own money. But these [scams] are often originating outside the banking system [...] We need a whole-of-government approach. I really commend [the Committee] for taking a lead here."

On the importance of facts-based policymaking:

"Facts matter. Facts matter when you're writing rules. And one of the things - so we could talk about the Complaints Database being structurally flawed. We actually think it could be beneficial for consumers. If the CFPB had wanted to rely on facts and even leaned on the Complaints Database to do so, it would have known that credit cards are very minimal in terms of the complaints from consumers. It would have focused instead on things like fraud and scams that are happening."

To watch Johnson's full opening remarks, click HERE. To read Johnson's full written testimony, click HERE.

CBA Advocacy

To read CBA's "Vision for America - A Bank Policy Agenda for All," which outlines the retail banking industry's priorities, beliefs, and positions on a number of consumer-focused financial services policy issues, click HERE.

To read CBA's white paper calling for CFPB reforms to transform the CFPB into the credible, durable regulator that consumers deserve, click HERE.

To read CBA President and CEO Lindsey Johnson's letter to the editor in The Wall Street Journal calling for a reboot at the CFPB, click HERE.

To read CBA President and CEO Lindsey Johnson's op-ed on the need for financial regulations to focus on sound policy, not partisan politics, click HERE.