A year and half after the passage of Dodd-Frank created the Consumer Financial Protection Bureau, it will finally have a director.
President Barack Obama today announced he would bypass the Senate through a recess appointment to put former Ohio Attorney General Richard Cordray at the head of the CFPB. Senate Republicans had refused to put Cordray's confirmation up for a vote, citing disagreements with how the CFPB was structured.
While it may lead to some recrimination inside the Capitol because the recess appointment was made during what was technically not a recess for the Senate, Cordray's appointment is being hailed by consumer advocates as a big step toward fully implementing the financial services watchdog envisioned by Harvard professor Elizabeth Warren.
"The CFPB is a game changer for consumers, and having a director in place and the Bureau clearly having its full powers is incredibly important," says Lauren Sanders, managing attorney at the National Consumer Law Center.
Sanders says the appointment should resolve any questions about the legal authority of the CFPB to regulate nonbanks. Treasury and Federal Reserve officials had questioned whether the CFPB had the authority to regulate financial service providers, especially those not officially considered banks, without a director.
"Certainly there was some ambiguity and questions," Sanders says. "The appointment put those to rest."
That will mean financial service industries that have had little in the way of federal oversight before, including check-cashing services, payday lenders, prepaid card providers and credit bureaus such as ChexSystems, will now face scrutiny from regulators.
Beyond solving some complex legal questions over the CFPB's authority, having a clear leader will make the CFPB a more effective organization overall, says Travis Plunkett, legislative director for the Consumer Federation of America.
"The CFPB has been operating with one arm tied behind its back," says Plunkett. "Without a leader, it's hard for any federal agency to accomplish much in the face of consistent, strong opposition."
"Now it has a leader and it can show results for consumers," he says.
While the CFPB has put forward complaint processes for credit cards and mortgages, Plunkett says having a director will help the Bureau move forward with accepting complaints on more types of financial products and, most importantly, follow through with investigating them.
"Previously, federal bank regulators did a very bad job with helping with complaints. They would forward it to the banks and not follow up," Plunkett says. "This is a serious complaints process."
Overall, Cordray's appointment means it's more likely consumers will have someone to turn to when financial service providers engage in deceptive, unfair or abusive practices, says Plunkett.
"He's got serious problems in the marketplace that we'd like to see him address, and he now has fully legal authority to address those problems," he says.
Susan Weinstock, director of the Safe Checking in the Electronic Age Project for the Pew Health Group, hopes Cordray will put checking accounts at the top of his list of priorities.
In particular, she'd like to see the CFPB implement an easy-to-understand form that discloses fees and other terms for checking accounts, similar to the one Pew put forward a few months ago.
"The CFPB has a great role here to play to make these boxes uniform, so that consumers really can compare apples to apples and decide which really is the best checking account for them," Weinstock says.
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