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CFPB Director Kathy Kraninger testified before the Senate Banking Committee Thursday and provided lawmakers with insights into the bureau's ongoing efforts related to consumer protection and education, innovation, and more.

Kraninger was providing the bureau's semi-annual report to Congress this week; she testified before the House Financial Services Committee Wednesday. Ahead of both hearings, NAFCU Vice President of Legislative Affairs Brad Thaler shared with lawmakers NAFCU's support of CFPB efforts to target bad actors and encouraged more regulatory relief for credit unions.

During Thursday's hearing, Kraninger emphasized the bureau's work to prevent harm to consumers through consumer education initiatives, clear rules of the road for financial institutions, and strong supervision and enforcement that still support dynamic markets.

Kraninger touted the bureau's commitment to innovation in order to increase consumer access to financial products, including safe credit through the use of alternative data, and improve its approach to supervision. The CFPB recently issued a proposal to use "tech sprints" as a way to encourage innovation and address regulatory compliance challenges.

In addition, Kraninger gave an update on a number of issues that could impact credit unions, including:

• Consumer complaint database: The bureau recently announced that it would continue to publish the database, but with some enhancements. Kraninger told committee members that it is vital tool for them to use in creating "competitive, fair and transparent markets." NAFCU remains concerned about reputational risks unverified narratives could have on credit unions.
• Payday lending: Sen. Pat Toomey, R-Pa., raised concerns about the bureau's payday lending rule being too broad and encompassing products that weren't meant to be covered. Kraninger said while the bureau is aware of those concerns, its priority is the rule's underwriting standards. As the NCUA recently expanded its payday alternative loans (PALs) program, NAFCU has called on the bureau to extend its safe harbor under the rule to protect all PALs products.
• Ability-to-repay (ATR)/qualified mortgage (QM) patch: Kraninger discussed the potential expiration of the QM patch and said the bureau is working to ensure a smooth transition. The bureau has released an advance notice of proposed rulemaking to address the issue. NAFCU has urged the CFPB to adopt viable alternatives that allow credit unions "the same protections and benefits, including access to the secondary market, and the ability to provide credit for their members" if the CFPB decided not to extend the patch.
• Unfair, deceptive, or abusive acts and practices (UDAAP): Lawmakers asked Kraninger about the definition of "abusive" and how the bureau is working to protect consumers from these practices. Kraninger said the CFPB has only provided a definition through enforcement, but took feedback at a recent symposium on the issue and will have an update soon. NAFCU has long advocated for the bureau to issue specific guidance on prohibited practices so financial institutions have more clarity on this issue, and has asked the bureau to provide guidance to clarify its UDAAP standard.
• Constitutionality: The bureau recently announced it will no longer defend its single-director structure. Kraninger at Thursday's hearing said the issue would need to be resolved by Congress or the Supreme Court, which is currently considering whether to take up a case challenging the bureau's structure. NAFCU is supportive of reforming the bureau's structure as it looks to ensure multiple perspectives are represented in the decision-making process.

In addition, Kraninger shared an update regarding the bureau's creation of a financial law task force as a means to harmonize and modernize federal consumer financial laws. Those interested must apply by Oct. 25 and can contact NAFCU Director of Regulatory Affairs Ann Kossachev for additional information.