January 4, 2012
Cordray's appointment gives CFPB instant clout
The Consumer Financial Protection Bureau became a much more powerful agency the minute President Obama appointed Richard Cordray the bureau’s director.
Today, in addition to gaining new authority, the bureau gets some added firepower just by virtue of having a chief.
"If you are a federal agency under constant attack, it's hard to do anything without a leader," observed Travis Plunkett, legislative director for the Consumer Federation of America. With Cordray's appointment, the bureau has "clear legal authority and moral authority" to do its work.
In addition, to gaining new powers, the bureau gets some added firepower just by virtue of having a leader. "If you are a federal agency under constant attack, it's hard to do anything without a leader," observed Travis Plunkett, legislative director for the Consumer Federation of America. With Cordray's appointment, the bureau has "clear legal authority and moral authority" to do its work.
What's different now:
• The bureau instantly has a larger reach. Without a director, the bureau could only oversee previously regulated financial institutions – mainly the big banks. It now can exercise its new authority to regulate not just banks but also other companies that sell financial products – including payday lenders, mortgage companies and private student lenders.
• The bureau can supervise big players in related industries. The bureau now has authority to supervise – do a deep dive into the practices of – credit bureaus and debt collectors.
• The bureau can take steps to ban unfair and deceptive practices. With a director, the bureau gains brand new authority to define and prohibit unfair and deceptive financial practices, points out Ed Mierzwinski of the Public Interest Research Group. Before, it was limited to tweaking existing lending laws. Don't expect speedy action on rules – rule-writing is a slow process, requires lots of public comment and Congress can head off rules if it doesn't like where an agency is headed – but you can expect the bureau to get busy defining exploitative practices.
• Gaps in regulation narrow. Under the old system of multiple regulators overseeing financial industries, there were huge gaps in regulation. For example, banks that issued credit cards had to follow rules regarding disclosures and fees, but companies that sell prepaid cards didn't. Additionally, you'd find banks having to adhere to some types of rules that their nonbank competitors could ignore. You can expect that to change as the bureau exercises its new muscle.
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