It took two years for the U.S. Senate to confirm Richard Cordray as the nation’s consumer protection chief. Now, the House is trying to eliminate his job.
The House Financial Services Committee voted recently to reorganize leadership of the Consumer Financial Protection Bureau from a director to a five-member bipartisan commission.
The panel also passed legislation that would subject the CFPB to congressional oversight as a stand-alone agency instead of a Federal Reserve bureau; have the bureau disclose financial information it collects on consumers; and prevent the bureau from collecting such data without consumers’ knowledge and consent.
Those measures and two others designed to defang the CFPB were approved by the committee along party lines, with Republicans supporting the proposals and Democrats opposing them.
The issue I have with the CFPB is the unaccountability factor and just the sweeping authority that they have that goes unchecked. They’re pretty independent, the panel’s Rep. Marlin Stutzman, R-3rd, said in a Capitol Hill interview ahead of the votes.
Stutzman was more emphatic after the committee advanced the package of bills to the entire house. He said in a statement that the CFPB is disgracefully unaccountable and may as well be the fourth branch of government.
The day before the committee’s votes, Cordray announced the CFPB’s first enforcement action regarding a payday lender: $14 million in customer refunds and a $5 million fine against Cash America, a Fort Worth, Texas-based company accused of consumer abuses.
Among the bureau’s complaints: Cash America had charged members of the military more than the maximum 36 percent interest on loans allowed under federal law, robo-signed thousands of debt-collection lawsuits against borrowers in Ohio and destroyed records sought by the CFPB.
Before the bureau’s creation in 2010, payday lenders had never before been supervised at the federal level, Cordray said in a statement about the Cash America case.
In other recent matters, the bureau released new mortgage disclosure forms meant to simplify and replace disclosure forms used for decades by lenders. It has been investigating alleged automobile loan bias against minorities. And it has begun seeking public input on possible new rules affecting debt collectors.
The bureau was established by the Dodd-Frank Act, which increased federal oversight of lenders in the wake of the 2008 financial crisis. President Barack Obama nominated Cordray for director in July 2011 and installed him as a recess appointment in 2012 after his confirmation was blocked by Republican senators opposed to the CFPB and Dodd-Frank.
Sen. Joe Donnelly, D-Ind., was a member of the House Financial Services Committee when Dodd-Frank became law.
What we tried to do is put in some guideposts so we never found ourselves in the financial straits we found ourselves in in 2008, he said during a visit to Fort Wayne.
The GOP effort to dump the director’s position is misguided, Donnelly said.
In September, the Financial Regulatory Reform Institute of the nonprofit Bipartisan Policy Center released a 59-page progress report on the CFPB, based in part on interviews with bureau staff, consumer advocates, federal and state bank regulators and financial industry workers.
In its interviews, the Task Force found that most people agreed that the agency had about the right amount’ of authority. Nevertheless, the CFPB may need additional authority in certain areas, such as auto financing, the report stated.
As for the bureau’s accountability, the task force supported the agency’s substantial independence, including its funding source – fees and assessments on regulated entities – as well as a Dodd-Frank requirement that it report to Congress twice each year.
The task force said Congress does have oversight for the bureau, similar to that over other bank regulators.
The report did not address whether the bureau’s director should be replaced with a commission.
Donnelly said the CFPB’s independence is vital because that independence enables it to act and enables it to be insulated from the whims of politics, whether it’s from the left or from the right. Its only function and focus should be to make our citizens better protected financially.
The Independent Community Bankers of America has endorsed switching the CFBP’s leadership to a five-member commission.
Commission governance would allow for a greater variety of views and expertise at the bureau, build in a system of checks and balances, help ensure the actions of the CFPB are measured and nonpartisan, and support balanced and high-quality rules and consumer protection, the bankers group said in a statement.
The Independent Community Bankers of America represents the interests of nearly 7,000 community banks, including a dozen in northeast Indiana and two based in Fort Wayne: STAR Financial Bank and Tower Bank & Trust Co.
I think there is more balance when you have a commission, Stutzman said. I think there is better counsel amongst a commission. Look at how the Fed works.
The Federal Reserve’s board of governors consists of seven people nominated by the president and confirmed by the president. Terms last 14 years.
Cordray, a former Ohio attorney general, treasurer, state solicitor and state representative, was confirmed as CFPB director by the Senate in July after Democrats vowed to take away the GOP’s power to delay, or filibuster, presidential appointments (a threat that Senate Democrats made good on this month).
Sen. Sherrod Brown, D-Ohio, a member of the Senate Financial Institutions and Consumer Protection Committee, had pressed for the confirmation of his fellow Buckeye. The day the Senate did so, in a bipartisan 66-34 vote, Brown said on the chamber floor, This is the first time in American history when one party refused to confirm a nominee because they didn’t like the agency.
Stutzman last summer called Cordray one of Washington’s most powerful unelected bureaucrats and certainly the least accountable.
More recently, Stutzman said, There are obviously philosophical differences over Cordray and in the way the CFPB is structured.
Brown thinks the GOP philosophy is wrong-headed.
The Consumer Financial Protection Bureau stands up for average Americans and members of Congress should always do the same, Brown said in an email. But some members of the House voted to put Wall Street special interests ahead of American consumers. Their votes would not only weaken the CFPB, but would also undermine its ability to help Americans with their mortgages, college loans, and credit cards.
Stutzman sees it differently.
Republicans want to be sure that consumers are protected and that consumers have the availability to credit, access to markets, he said. But when you have a very powerful agency that steps in between the marketplace and consumers on so many different levels, it inhibits what the original intent was.
Assuming they pass the Republican-controlled House, the CFPB bills are unlikely to be considered by the Democratic majority in the Senate. That won’t stop the GOP from trying to revamp the bureau.
In a statement issued after the House Financial Services Committee’s votes on Nov. 21, Chairman Jeb Hensarling, R-Texas, said: We know that this is an agency that was designed to be unique, if not perhaps rogue; it is an agency like no other. Arguably it is the single most powerful and least accountable Federal agency in the history of our nation.