Cordray’s Ascent Expands Consumer Bureau Reach
Joshua Roberts/Bloomberg
Richard Cordray, President Barack Obama’s choice to run the U.S. Consumer Financial Protection Bureau, testifies at his nomination hearing before the Senate Banking Committee in Washington, D.C., U.S. on Tuesday, Sept. 6, 2011.
Richard Cordray, President Barack Obama’s choice to run the U.S. Consumer Financial Protection Bureau, testifies at his nomination hearing before the Senate Banking Committee in Washington, D.C., U.S. on Tuesday, Sept. 6, 2011. Photographer: Joshua Roberts/Bloomberg
Cordray’s Ascent Expands Consumer Bureau Reach
Mark Wilson/Getty Images
U.S. President Barack Obama speaks during a press conference to announce his nomination of former Ohio Attorney General Richard Cordray, right, as head of the in the Consumer Financial Protection Bureau at the White House in Washington, D.C. on July 18, 2011.
U.S. President Barack Obama speaks during a press conference to announce his nomination of former Ohio Attorney General Richard Cordray, right, as head of the in the Consumer Financial Protection Bureau at the White House in Washington, D.C. on July 18, 2011. Photographer: Mark Wilson/Getty Images
President Barack Obama’s decision to
install Richard Cordray as director of the Consumer Financial
Protection Bureau expands the agency’s reach into non-bank firms
blamed for helping to spark the 2008 credit crisis.
The consumer bureau, which started work on July 21, needed
to have a director to carry out the full authority bestowed by
the Dodd-Frank Act. Obama’s recess appointment of Cordray, the
former Ohio attorney general, activates responsibilities for
supervising and regulating companies such as loan originators
and credit bureaus as well as traditional lenders.
“With a director finally in place and no question about
its powers, the Consumer Financial Protection Bureau can start
scrutinizing unfair practices by debt collectors, mortgage
brokers, credit reporting agencies, and predatory payday
lenders,” Lauren Saunders, managing attorney at the National
Consumer Law Center, said in an e-mailed statement.
Obama pushed for creation of the consumer bureau after
lawmakers accused existing regulators of doing too little to
protect the public before credit markets collapsed in 2008.
Congressional Republicans, who opposed Democrats’ plans for the
agency in talks leading to passage of Dodd-Frank in 2010, sought
to block the seating of a director until changes were made in
its funding and structure.
‘Top Priority’
Oversight of non-bank financial firms is a “top
priority,” Cordray said yesterday in a blog post on the
bureau’s website.
“Over the coming weeks we’ll be announcing more
information about this program and how it will help to improve
the consumer finance markets,” he said in the statement.
The bureau already has initiatives in place that suggest it
will remain focused on improving disclosure for mortgages,
credit cards and student loans — the major sources of credit
for most Americans, said Reid Cramer, director of the asset-
building program at the New America Foundation.
“The bureau will continue to roll out its agenda,
initially focusing on the big products,” Cramer said in an e-
mail. “But they will now be able to shed any lingering timidity
as a startup agency.”
Since before its official start on July 21, the bureau has
pursued work mandated by Dodd-Frank, such as a streamlined
mortgage shopping form, while exercising its discretionary
powers sparingly, if at all.
No Lawsuits
The bureau has yet to outline priorities for enforcement,
the unit that Cordray headed before being appointed as director.
It has brought no lawsuits, even though it has had authority
over traditional banks, and responsibility for a range of
federal laws, such as the Truth In Lending Act. Now it can act
against non-banks, though the circumstances of Cordray’s
appointment may complicate that work, said Mark Calabria, a
former Senate Republican aide who serves as director of
financial regulation studies at the Cato Institute.
“Anything you do on non-bank finance, you throw into
questionable legality,” Calabria said in an interview. “If I
was a payday lender or check casher that got an enforcement
action over the next year, I would sure as hell sue.”
As part of its enforcement work, the consumer bureau could
bring lawsuits under Dodd-Frank’s strictures against “unfair,
deceptive and abusive” practices. That standard, created and
defined in Dodd-Frank, remains untested in the courts.
Formal Rulemaking
The bureau has had supervisory authority over the largest
banks — those with assets over $10 billion — since July 21,
and examinations of some of them have already started.
Supervision of non-bank firms awaits a formal rulemaking that
specifies which companies will be examined in detail. That
process could take another year.
Richard Hunt, president of the Consumer Bankers
Association, said in an interview that the nomination would at
least even out the regulatory burden faced by depositories and
non-bank firms like payday lenders.
“One of the few great aspects of the CFPB is that you get
a level playing field between banks and non-banks,” said Hunt,
whose group has supported Republican demands to alter the
bureau’s structure.
The agency has already indicated that supervision of the
major credit bureaus — Equifax Inc. (EFX), Experian Plc (EXPN) and
TransUnion Corp. (TRUN) — is all but certain.
Information-Sharing
Federal officials may also lean heavily on state regulators
and supervisors to oversee non-bank firms. Elizabeth Warren, the
Harvard University law professor who set up the agency while
serving as an aide to Obama and the Treasury Department,
completed an information-sharing agreement in January 2010 that
will influence oversight in the face a patchwork of existing
state rules.
The bureau had a series of meetings with companies and
consumer groups last year, and must propose a rule by July 21,
the anniversary of its official start date. After a regulation
is proposed, agencies typically then invite public comment
before completing the rule and putting it into force.
“The agency can’t act rashly, but it can get the ball
rolling prominently and firmly,” Travis Plunkett, director of
legislative affairs for the Consumer Federation of America, told
reporters in a conference call.
By later this year, the agency “should be well under way”
in its work in areas such as mortgage servicing, overdraft
charges, prepaid cards and payday lending of various types,
Plunkett said. This work could come under its supervisory,
research or enforcement functions, he said.
Senate Race
Obama declined to nominate Warren, who is credited with
conceiving the agency, amid questions over whether she could win
the 60 votes needed to ensure confirmation by the 100-member
Senate. She left shortly after Obama nominated Cordray, and is
running as a Democrat aiming to unseat Senator Scott Brown of
Massachusetts, one of three Republican senators to back Dodd-
Frank when it was passed in 2010.
Senate Republicans said in May they would block an up-or-
down vote on any nominee until the bureau’s funding and
structure were changed to make it more accountable to Congress.
The House passed legislation to that effect, but the Obama
administration refused to negotiate changes viewed by Democrats
as efforts to undermine new consumer protections. The Senate
then rejected Cordray on a procedural vote, setting the stage
for today’s appointment.
To contact the reporter on this story:
Carter Dougherty in Washington at
cdougherty6@bloomberg.net.
To contact the editor responsible for this story:
Lawrence Roberts at
lroberts13@bloomberg.net.
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Article source: http://www.bloomberg.com/news/2012-01-04/cordray-appointment-activates-full-powers-of-new-consumer-bureau.html