Back in January we developed a blog post called “More Chaos from the CFPB.” The Consumer Financial Protection Bureau (CFPB) developed new regulations through the Truth in Lending Act. Under the new regulations, community banks could offer rural markets balloon payment loans, only if their entire county in which the property was located was considered to be a rural region by the CFPB. Many parties were worried that this rule would limit borrowers from having access to credit through traditional community banks.
Since the initial development of this rule back in January, the CFPB has realized that their Truth in Lending Act and Dodd-Frank Act does limit borrowers in rural regions. Sub sections of a county can not be defined by one general statement. The CFPB has therefore decided to make amendments to some requirements for lending.
The changes would use current Urban Influence Codes (UICs) developed by the Department of Agriculture’s Economic Research Service (USDA-ERS). Using these codes the CFPB would be able to define what housing locations are considered to be rural and thus eligible for a loan.
The question is, why is the CFPB rushing to make changes, only to realize they were ineffective, and then using an existing system to correct inadequacies? The USDA already has a rural designation system in place to determine whether a property is in a rural region or not. They divide counties into rural and non-rural areas to get a more accurate reading on the actual demographic of the property.
The CFPB seems to think that working harder, is better than smarter. They are trying to make systems more efficient by getting their hands dirty. But at the end of the day, all they are really doing is making a mess and sending tax payers the bill.