Consumer Bureau's Cordray Quickly Makes His Mark with Supervision Program

Richard Cordray is wasting no time as the newly appointed head of the Consumer Financial Protection Bureau.

In a speech today at the Brookings Institution in Washington, he announced that the agency has officially launched its program for supervising non-banks. "We will begin dealing face-to-face with payday lenders, mortgage servicers, mortgage originators, private student lenders and other firms that often compete with banks but have largely escaped any meaningful federal oversight,” he said to a standing-room-only crowd.

Cordray also defended his recess appointment, stating, “The appointment is valid.” Republicans in Congress protested that the Senate was not in adjournment long enough for President Obama to make the recess appointment yesterday.

With a director in place, the CFPB now has the authority to turn its attention to financial services provided by non-banks. According to the agency, nearly 20 million consumers use payday loans, roughly 200 million Americans rely on credit reporting agencies to report their credit histories accurately, 14 percent of consumers have one or more debts in collections, and nonbank lenders originated almost 2 million new mortgages in 2010.

“Since most of these businesses are not used to any federal oversight, our new supervision program may be a challenge for them. But we must establish clear standards of conduct so that all financial providers play by the rules,” Cordray said.

He hinted at enforcement actions in the pipeline. “We took over a number of investigations from other agencies in July, and we are pursuing some investigations jointly with them,” he said. “We have also started our own investigations. Some may be resolved through cooperative efforts to correct problems. Others may require enforcement actions to stop illegal behavior.”

According to the CFPB, the non-bank supervision program will include conducting individual examinations and “may also include requiring reports from businesses to determine what businesses need greater focus. How often and to what degree the examinations are performed will depend on CFPB’s analysis of risks posed to consumers based on factors such as the non-bank’s volume of business, types of products or services, and the extent of state oversight.”

Under the Dodd-Frank Act, the CFPB has specific authority to oversee mortgage companies (originators, brokers, and servicers including loan modification or foreclosure relief services); payday lenders; and private education lenders.

It can also oversee “larger participants” in other financial services markets. Defining what that means and determining who will be covered is likely to emerge as a major battle going forward. Last summer, the CFPB sought public comment on developing an initial rule for larger participants in six areas: debt collection, consumer reporting, prepaid cards, debt relief services, consumer credit and related activities, and money transmitting, check cashing and related activities. The agency said it “will soon propose its initial rule on this issue.”

The non-bank supervision office at the CFPB is headed by Peggy Twohig, formerly the associate director of the Federal Trade Commission’s Financial Practices Division.

Comments

[Joe Jefferis]

The controversial appointment process chosen by the President has set the tone for the agency as a whole - bad and getting worse.

No wonder Ohio Senator Brown was able to attend the launch of this hoax.

[Barry Cutler]

Howard Klein's comment ("gutted the Constitution...Do NOT try this if you're a Republican)" sounds like unfiltered Rush in its factual simplification. Where does he think this power comes from in the first place? And in fact, the two Bushes and Bill Clinton each had several HUNDRED recess appointments. Obama has under 40, I believe. The Republic will survive.

[A Facebook User]

Don't understand the objections to this appointment. The Senate has been in recess since December 23, 2011. Mitch McConnell coming into the Senate chambers every other day to read his grocery list into the Senate Record does not change that reality. Those that oppose this appointment have had plenty of time to go to court and seek an injunction, but they haven't done so because they recognize the so-called "pro forma" proceedings are a sham.

[Tom]

Simple abuse of power. When the president dictates his wishes against the constitution you are a dictator. Welcome to the new Socialist Republic of America.

[Susan Rowley]

Unprecedented, unconstitutional, because Cordrey is not sufficiently rude to be mistaken for John Bolton

[Howard Klein]

Mr. Cordray's appointment was a novel and unprecedented exercise of the recess appointment power, essentially gutting the Constitutional limitations on this power. Do NOT try this if you're a Republican president.

[David]

Section 1066 of the Dodd-Frank bill requires the director to be confirmed by the Senate. how can he move forward and make changes without Senate confirmation?