Compliance Blog

Written by Steve Van Beek

Raj Date, the Special Advisor to the Treasury for the CFPB, gave a speech at the Mortgage Bankers Association on October 10, 2011.

In the speech, Date emphasizes the CFPB's focus on smart regulation:

"To us, smart regulation means being relentlessly evidence-based, participatory, and precise in fixing whatever needs to be fixed. Evidence-based. Participatory. Precise. Let me spend a minute on each of those things.

First, smart regulation means making research and market analytics core to everything that we do. We are committed to basing our decisions on the best available research and data analysis...................

Smart regulation also means being as participatory as possible in everything we do. We don’t plan on hiding behind closed doors. We will be engaged with the public, sharing with them not only what we are doing but how we are doing it.

A good example of how we are already doing this is with our “Know Before You Owe” initiative to create a single, shorter, more useful mortgage disclosure form that combines disclosures required by TILA and RESPA. Before we began designing the sample forms, we reached out to the public, industry participants, and market experts to find out what on the current disclosure forms is helpful for consumers, what is not, and what is information overload. What do consumers really need to know? And what approach makes the most sense for the industry?

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Finally, smart regulation means being precise in how we address problems. The CFPB will diagnose problems carefully and intelligently after examining all the evidence. We will have different tools to choose from when we address a problem. Maybe it is best addressed through education. Maybe it is best addressed through rule writing. Or maybe it is best addressed by examining relevant market actors and shining a brighter light on the issue.

In short, we won’t shoot from the hip. We won’t reason from ideology. We won’t press a political agenda. Instead we are going to be fact-based, transparent, and measured. We’ll bring this approach to any new regulations we issue. And we’ll bring this same approach to the task of re-examining the extensive corpus of consumer financial protection regulations that we are inheriting."

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Date's focus on Smart Regulation meshes with a recent speech by NCUA Chairman Debbie Matz on NCUA's Regulatory Modernizing Initiative.

Essentially, both Date and Matz are saying they are focused on better, more effective regulation.  However, the problem comes when the CFPB and NCUA take steps to implement these initiatives.  The result is regulatory change.  No matter how smart or modern the regulatory approach, continued regulatory change will continue to place a large compliance burden around all institutions - especially smaller institutions.  

While smarter, modern regulations - written in plain English - sounds good, what credit unions really need right now is a slow-down in the pace of regulatory change.