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Fourth-Generation Community Banker Makes Recommendations on CFPB

Says CFPB should focus efforts on the shadow financial services industry

Washington, D.C. (April 6, 2011)-Noah Wilcox, fourth-generation president and CEO of Grand Rapids State Bank, Grand Rapids, Minn., and a member of the Independent Community Bankers of America (ICBA) Executive Committee, today made recommendations regarding the structure and procedures of the Consumer Financial Protection Bureau (CFPB) before the House Financial Services Subcommittee on Financial Institutions and Consumer Credit. 

"Community banks didn't engage in the abusive practices that contributed to the crisis.  Instead, community banks are deeply rooted in the communities we serve.  We practice relationship banking as opposed to one-off, transactional banking," said Wilcox.  "Getting consumer protection policy right is one of the most important things we can do to prevent a repeat of the financial crisis.  The best thing we can do to improve consumer protection is to focus on the ‘shadow' financial services industry that has been most responsible for victimizing consumers while avoiding serious regulatory scrutiny." 

Wilcox also said that the recent financial crisis showed in dramatic fashion how broad the consequences of abusive consumer practices are.  "Poorly underwritten loans packaged into collateralized debt obligations and dispersed through the financial markets caused the credit markets to freeze up, shuttering businesses, destroying wealth and causing levels of unemployment not seen in over a generation," Wilcox said.   

While the Dodd-Frank Wall Street Reform and Consumer Protection Act exempts banks with less than $10 billion in assets from primary examination and enforcement of the CFPB, community banks are subject to CFPB rules and to examination on a sampling basis.  Wilcox went on to recommend the following:

  • Restructure the new CFPB so that it is governed by a five-member commission rather than a single director
  • Strengthen review of CFPB rules
  • Postpone transfer of functions to the CFPB until its director is confirmed
  • Issue CFPB regulations jointly with the federal banking agencies
  • Ensure that all fair-lending laws belong with the prudential regulator
  • Eliminate sampling examination authority
  • Relieve community banks from CFPB reporting and data collection

Wilcox concluded his testimony by saying that ICBA's recommendations will improve the operations of the CFPB by creating internal checks and balances, better focus its resources on the true sources of risk and exempt community banks from requirements where the cost is disproportionate to any consumer benefit.

To read Wilcox's testimony, visit the ICBA website at www.icba.org.