The Consumer Financial Protection Bureau marks its first birthday tomorrow as an independent agency, a year in which it remained a potent political target but also made considerable headway implementing its agenda.
"They're not messing around," said Venable counsel Jonathan Pompan, a consumer financial products specialist. "A year ago, we said there was a new sheriff in town. It's not just a sheriff - it's an army."
Alan Kaplinsky, who heads Ballard Spahr's consumer financial services practice, agrees. "Their impact has been absolutely extraordinary," he said.
When the White House on July 17, 2011 announced that Richard Cordray had been nominated to head the agency, President Obama promised Cordray would be "looking out for ordinary people in our financial system."
In the intervening year, Cordray has faced withering scrutiny from Congress over the legality of his January recess appointment, which some argue occurred when the U.S. Senate was not in recess. Undeterred, he's moved forward on CFPB priorities, including those involving nonbank financial companies, where the agency would otherwise be barred from acting without a director.
As Cordray put it in hearing before the House Oversight Committee earlier this year, "I understand the controversy about the appointment....I'm in a job. It's an important job."
To Pillsbury Winthrop Shaw Pittman financial services partner Joseph Lynyak III, the biggest question mark a year ago was "whether the CFPB would act more as an enforcer or a regulator."
Lynyak points to the CFPB's settlement earlier this week with Capital One Bank as "very, very troubling" signal that the agency may be inclined to "shoot first...rather than working with the regulated entity to achieve compliance."
Capital One agreed to pay $210 million to settle charges brought by the CFPB along with the Office of the Comptroller of the Currency for deceptively marketing credit cards.
Kaplinsky of Ballard Spahr said the Capital One case is "just the tip of the iceberg....There are dozens of ongoing investigations."
"We are going to see a level of enforcement activity that's daunting, to say the least," he said, en route to a meeting at the CFPB to discuss one such investigation. "They are investigating what seems like the entire consumer financial industry, and the investigations are sweeping. They're asking for every shred of paper, every piece of electronic data ever generated."
The CFPB has been active on other fronts as well.
Earlier this month, the consumer watchdog announced rules for supervising credit reporting agencies. It's also proposed a standard "penalty fee box" to make checking account overdraft fees clearer to consumers and is working with other agencies on loan-modification and foreclosure-relief programs for military members.
Public inquiries are underway on mandatory arbitration clauses in consumer financial products and payday lending. The CFPB put its database of consumer complaints online and is considering ways to require mortgage servicers to provide clearer information to borrowers. Student loans have come under scrutiny as well.
To Venable's Pompan, the CFPB's "consistency in approach rivals a political campaign." He notes that the agency has embraced "the power of the bully pulpit," and that "non-rulemaking guidance and other pronouncements seem to be far more prevalent than actual substantive rules."
Pompan praised the agency for seeking input from industry stakeholders, though he added, "Whether they'll actually incorporate it into the final decision remains to be seen."
Looking ahead, the mortgage market will be a major focus for the CFPB in the coming year.
As CFPB deputy director Raj Date told a House Financial Services subcommittee yesterday, "The mortgage market will recover when we have restored transparency, when we have restored fairness, and when we have restored financial incentives that reward people for making smart decisions," he said. "As we approach the bureau's one-year anniversary, that is what we are working toward — not just in the mortgage market, but across other financial services markets as well: transparency, fairness, and incentives for responsible behavior."