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Two Steps Forward, One Step Back

Recent comments from federal officials indicate a desire to better support local banks and rely on state regulators, with one big exception. From Politico Pro reporting here, here and here (subscription required):

Federal Reserve Chairman Jerome Powell, at a recent congressional hearing: "As we move down to smaller and smaller institutions, down to community banks, we want to make absolutely sure we've tailored regulation so we're achieving our safety and soundness goals without creating excessive burden." 

Meanwhile: "CFPB Acting Director Mick Mulvaney on (February 28) urged states to take greater initiative in enforcement actions against financial companies and pledged that the consumer bureau would continue to police its beat under the Trump Administration. 'We are going to be looking at the state [regulators] and state attorneys general for a lot more leadership when it comes to enforcement,' Mulvaney told a gathering of attorneys general in Washington."

But then: "The Trump Administration is taking steps to shield student loan collection companies from state regulators, over the objections of consumer advocates and even some Republican attorneys general. Education Secretary Betsy DeVos is preparing to issue a declaration that companies collecting federal student loans are off limits for state lawmakers and regulators. The 'notice of interpretation' argues that only the federal government, not the states, has the authority to oversee federal student loan servicers, according to a draft of the document obtained by Politico."

In a letter from CSBS President and CEO John Ryan, CSBS quickly responded to the Secretary Devos: "This effort at preemption by regulatory fiat runs counter to the Congressionally mandated state-federal balance in financial regulation and exceeds the Department's authority...Responsibility for regulating and supervising debt collectors -- like other nonbank financial services -- has historically resided at the state level...Consumers benefit because the proximity of the state regulatory framework has proven to be more accountable to local concerns...State regulators firmly oppose this attempt at preemption through a mere interpretive notice. This decision rests with Congress, and not with a federal agency." 

Stay tuned. 

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