CU and Bank Groups: CFPB Has No Authority Over ‘Relationship Banking’
CUNA, NAFCU and a credit union association joined banking groups in raising concerns over CFPB regulations on relationship banking. Learn why.
CUNA, NAFCU and credit union association join banking groups in raising concerns over regulations on customer service.
The CFPB does not have the authority to define and regulate “relationship banking” at financial institutions, credit union and banking trade groups told the agency this week.
“Nowhere in the [request for information] does the Bureau clarify its legal basis for extending a provision related to the ability to obtain information to scrutinizing the quality of customer service financial institutions provide to consumers broadly,” said Lisa Althoff-Simmons, interim CEO at the Heartland Credit Union Association, which represents credit unions in Kansas and Missouri.
In June, the CFPB relied on Section 1034(c) of the Dodd-Frank Act to seek information about customer service at financial institutions with more than $10 billion. However, bureau officials have since indicated they are interested in customer service and relationship banking in general.
CUNA, NAFCU, the Heartland association, and a coalition of banking groups are crying foul and contending that the request for information appears to be the first step in a CFPB move to regulate customer service.
Response From Credit Union Groups
Dodd-Frank does not allow the agency to regulate customer service, Alexander Monterrubio, senior director of advocacy and counsel for consumer protection at CUNA, told the CFPB.
“Contrary to the Bureau’s characterization, Section 1034(c) does not prescribe any specific methods through which covered entities are required to comply with this provision except that the information requested must be provided ‘in a timely manner,’” he wrote, adding that there is no mention of customer service or relationship banking. “Yet, the Bureau seems to leap from this provision to an assertion that there exists a ‘legally enshrined right to obtain basic customer service.’”
He said further that the CFPB’s effort “in a general sense is legally dubious.”
Andrew Morris, senior counsel for research and policy at NAFCU, said the agency should be careful not to discourage the use of digital channels for responding to questions from consumers.
“Instead, the CFPB should accommodate the use of new technologies that allow smaller community financial institutions, such as credit unions, to make the most of limited resources while still offering high quality customer service,” he wrote.
He additionally called on the agency to ensure that nonbank technology companies offering payment services are “appropriately supervised.”
Banking Groups Weigh In
Three banking groups also strongly attacked the agency’s effort.
“Section 1034(c) is not a customer service provision and does not authorize the CFPB to regulate customer service or set the terms of how, when, or where banks serve their customers,” the American Bankers Association, the Consumer Bankers Association and the Bank Policy Institute told the agency. “The CFPB would exceed the authority Congress gave the agency were it to attempt to do so.”
And they concluded, “Nevertheless, it appears that the CFPB is attempting to use this [request for information] to create a legal authority that it does not have: the right to dictate the type of customer service banks provide and the manner in which they do so.”