The House of Representatives this week passed legislation that protects confidential information banks and thrifts submit to the Consumer Financial Protection Bureau – but it appears nonbanks operating in certain states are not covered under the language.
"It's a huge legal problem for nonbanks, including independent mortgage banks, finance companies and payday lenders," said Glen Corso, managing director of the Community Mortgage Banking Project.
Various trade groups, including the CMBP, have been trying to address the problem that leaves confidential information unprotected because nonbanks are supervised by a state consumer agency as opposed to a state banking supervisor.
A provision to shield nonbank information was left out of the House bill that passed this week on a voice vote.
Legislative action now moves to the Senate Banking Committee where 10 members have co-sponsored a bill similar to H.R. 4014. But the Senate bill still leaves confidential information submitted to the CFPB by nonbanks that operate in 15 states unprotected. If an independent mortgage bank is sued, the plaintiff's attorney can subpoena the CFPB for the company's documents.
"We want to make sure there is confidentially protection for all consumer lenders and a level playing field between banks and finance companies," said Bill Himpler, executive vice president of the American Financial Services Association.
