The Consumer Federation of America, Americans for Financial Reform, Center for Responsible Lending, and National Consumer Law Center (on behalf of its low-income clients) sent the following letter to Hon. Andy Barr, Chair Subcommittee on Financial Institutions and Monetary Policy House Committee on Financial Services & Hon. Bill Foster, Ranking Member Subcommittee on Financial Institutions and Monetary Policy House Committee on Financial Services Regarding a Congressional Hearing, “Politicized Financial Regulation and its Impact on Consumer Credit and Community Development”:

Dear Chairman Barr and Ranking Member Foster:

As consumer protection and civil rights organizations, we write to express our concerns with two legislative proposals being discussed at today’s hearing, namely H.R. 6789, the Rectifying UDAAP Act and a still unintroduced bill to amend the Truth in Lending Act to allow covered entities to offer small-dollar credit products and for other purposes.  These proposals are deeply misguided, and our organizations urge Committee Members to oppose and prevent their advancement.

H.R. 6789, the "Rectifying UDAAP Act"

 This bill would narrow the scope of UDAAP under the Consumer Financial Protection Act and hinder the ability of the CFPB to determine when an activity is an unfair, deceptive and abusive practice. It would hamper the CFPB’s ability to identify UDAAPs and significantly raise the threshold for abusiveness. The bill accomplishes the long-standing goal of preventing the CFPB from defining discriminatory practices as UDAAPs, even though discrimination is inherently unfair and harmful.

It would slow down the CFPB's efforts to implement enforcement actions. For example, because it permits entities that self-report violations to have special notification rights, it extends delays between the identification of a UDAAP and an enforcement action to prevent it. It would also introduce new hurdles to providing monetary relief.

By requiring the CFPB to conduct unnecessary rulemaking to establish policies and procedures for issuing penalties, it could leave consumers at risk of being harmed by UDAAPs. It is also concerning that the bill would require the rulemaking to include a cost-benefit analysis, as such a step could lead to the result where the profits derived by an unfair or discriminatory practice are weighted as a benefit.

We strongly oppose this bill.

 H.R. ___, a bill to amend the Truth in Lending Act to allow covered entities to offer small-dollar credit products and for other purposes.

In the guise of adopting safeguards for small-dollar credit, this bill would exempt any bank or other creditor that offers specified small-dollar loans from any civil penalties or damages for violation and law in the entire Title 15 of the United States Code in connection with the small-dollar product. That title covers 122 chapters, including the entire Chapter 41, which includes the Truth in Lending Act, the Restrictions on Garnishment of Social Security and other federal benefits, the Credit Repair Organizations Act, the Fair Credit Reporting Act, the Equal Credit Opportunity Act, the Fair Debt Collection Practices Act, and the Electronic Fund Transfer Act, as well as the antitrust provisions of Chapter 1 and many other laws. Lenders would be able to violate these laws with impunity.

We strongly oppose this bill.

Americans for Financial Reform

Center for Responsible Lending

Consumer Federation of America

National Consumer Law Center (on behalf of its low-income clients)