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Data protection, QM concerns lead CFPB hearing
WASHINGTON (1/29/14)--Consumer data protection and qualified mortgage regulations were two main themes of Tuesday's House Financial Services Committee hearing on the progress of the Consumer Financial Protection Bureau.

CFPB Director Richard Cordray also delivered his semi-annual report on agency activities during the hearing. He also fielded questions on some of the major rules coming down the pike, including:
  • Rules addressing credit ratings for small business owners;
  • Prepaid card regulations; and
  • Overdraft protection rules.
Committee members during the hearing raised concerns regarding the security of consumer data that is collected by the CFPB, the agency's collection of that data, and the ability of the bureau to reverse-engineer that data to tie it to a particular consumer. Cordray was adamant that the CFPB aggregates the data and has no reason to reverse engineer the information.

The Credit Union National Association has supported the Consumer Right to Financial Privacy Act (H.R. 2571), which would prohibit the CFPB from requesting, accessing, collecting, using, retaining or disclosing nonpublic personal information about a consumer unless proper disclosures are provided to the consumer, and H.R. 3183, which would require the CFPB to provide at a consumer's request one free annual report disclosing all of the information about the consumer held by the CFPB.

Rep. Ed Perlmutter (D-Colo.) during Tuesday's hearing asked what actions the CFPB has taken to address recent merchant data breaches. Cordray said the CFPB issued an alert to consumers on what they should do if their credit or debit card has been compromised, and acknowledged that there are broader issues regarding how retailers keep data secure.

Regarding QM rules, several legislators said they are concerned by the rigid nature of the regulations. Rep. Bill Huzienga (R-Mich.) spoke on points-and-fees issues created by the regulation, noting that nearly 60% of loans under $60,000 would not qualify as QMs if an affiliate's title policy was included on the CFPB's points-and-fees calculation. Current CFPB regulations dictate that for a mortgage to be considered a "qualified mortgage," total points and fees generally may not exceed 3% on a loan of $100,000 or greater. These fees include affiliate and non-affiliate charges such as title insurance, surveys, appraisal fees, underwriting, processing and application fees. Rep. Huizenga has introduced legislation to change the overly restrictive definition of points and fees, which CUNA supports.

Cordray reiterated that the CFPB gives lenders three QM options, and noted that thousands of credit unions and community banks are allowed to take advantage of provided small issuer adjustments. CUNA has suggested to the Committee that credit unions should be exempt from the ability-to-repay/qualified mortgage rule.

For CUNA comment letters on consumer data security and QM issues, use the resource links.
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