Cordray Expands CFPB Oversight and Promises A Tough Approach

Cordray Expands CFPB Oversight and Promises A Tough Approach

Cordray Expands CFPB Oversight and Promises A Tough Approach

On his first day on the job, Richard Cordray expanded the scope of the CFPB’s regulations to include many highly predatory financial outfits. 

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Richard Cordray addresses a crowd at the Brookings Institution on January 5, 2012. Photo credit: George Zornick/The Nation.

Richard Cordray took control of the Consumer Financial Protection Bureau under controversial circumstances, but on his first full day on the job, he sought to assure people that it won’t affect the bureau’s vigorous agenda. “The appointment is valid. I’m now director of the CFPB,” he told a packed house at the Brookings Institution this morning. “The consumer bureau will make clear that there are real consequences to breaking the law.”

Cordray also announced the bureau’s program to supervise non-bank financial institutions like payday lenders, check-cashing operations, debt collectors, and other outfits that don’t have FDIC backing—something the bureau wasn’t able to do without a director.

That marketplace collects $7.4 billion in fees every year, and has not been subject to direct federal regulation until today. “Our new supervision program may be a challenge for them,” Cordray noted dryly. “But we must establish clear standards of conduct so that all financial providers play by the rules.”

Cordray devoted some of his remarks to telling the stories of Americans who reached out to the bureau for help: there was a woman in Louisiana who had a payday lender attempt to force her into bankruptcy, and another in North Carolina who missed one mortgage payment when her husband died and then saw years of penalty increases.

“In just a short time, we have heard thousands of these kinds of stories. Some are outrageous. The problems are welling up everywhere, from small towns to big cities, from coast to coast. These nightmares are happening to people from all walks of life—from people who have fallen on hard times to people who still consider themselves financially secure,” Cordray said. “They do not expect any special favors. They just want a fair shake. They want a consumer financial system that actually works for consumers. That is exactly what the consumer bureau is here to do.”

The bureau’s website prominently features opportunities for Americans to report difficulties with financial institutions, and Cordray said he views this outreach and response as the central template for the CFPB’s mission. He also recorded a plea for more stories yesterday and released it on YouTube.

Asked specifically about the danger of regulatory capture when soliciting input from the financial industry—something Cordray pledged to do in his speech—he said that the antidote is this communication with consumers.

“The thing that helps us avoid regulatory capture, or any kind of capture, is having that direct pipeline to the individual who feels free to talk to us about the problems they face, the individual problem they experienced,” he said. “I think as long as we can maintain a direct link, that we’re building now—all the other links are important, but it also provides a corrective, so we don’t end up with a skewed view of how we’re actually doing.”

The financial industry has of course spent the past seventeen months trying to capture the bureau, through deep-pocketed lobbying efforts and political gamesmanship to deny the CFPB a director. Though that effort was unsuccessful, the industry isn’t likely to give up. The American Bankers Association blasted Cordray’s appointment as evidence of a “lack of accountability,” and Cordray has already been summoned to testify before one House subcommittee. Extensive legal challenges are also likely.

Cordray was asked if such opposition and challenges will lead to a more cautious agenda at the CFPB—and he replied with a direct “no.” He added: “The law of the land gives us certain responsibilities.”

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