Consumer Law & Policy Blog

Senate Banking Committee Votes to Confirm Cordray Nomination, 12-10

Here.  The action now moves to the floor where the 44 Republican Senators are expected to block confirmation unless something shifts.

Senate Banking Committee Expected to Vote on Cordray Nomination Next Thursday

Here.  Reuters says Democrats "have the votes to move Cordray's nomination out of the committee to the Senate floor, but that will likely be as far as it gets for the foreseeable future. . . ."

CFPB Expected to Propose New Mortgage Rules Next Year

Here.  The rules would change the Truth in Lending disclosure forms and implement the Dodd-
Frank provisions barring mortgage loans consumers can't repay.

Nat'l Law Journal Report on Cordray Testimony/Cordray Bio

Here.

CFPB Unveils New Honors Program

The CFPB has a brand-new attorney honors program. The first class of "Louis D. Brandeis Fellows" will start in fall 2012 and after two years will be converted to full-time positions. That should be a tempting proposition for future consumer advocates.

CFPB Nominee Richard Cordray About to Testify Before Senate Banking Committee

Here.

Fair shake for Obama consumer protection nominee

The Pittsburgh Post-Gazette generously ran an essay I wrote today.  They cut it a bit, so I'm inserting most of the original version below:

President Obama has nominated former Ohio Attorney General Richard Cordray to head the Consumer Financial Protection Bureau, but 44 Republican Senators have declared that they will oppose any nominee because the Bureau's director will have "far too much power."  The Senators complain that the Director will have a five-year term, will not be subject to the congressional appropriation process, and will have extensive authority over financial institutions, among other businesses.

You might think that the Bureau is the only federal agency whose head has a five-year term.  But no: to pick just one agency, the Office of the Comptroller of the Currency's chief,  the Comptroller of the Currency also has a five-year term and can be removed only for cause.  Similarly, the OCC is funded outside the congressional appropriation process.

Well then, is the OCC less powerful than the Bureau?  While their authority is not congruent (otherwise, we wouldn't need the Bureau), the OCC indeed has sweeping power.  It regulates and supervises all national banks, and also supervises federal branches and agencies of foreign banks.  And, unlike the Bureau, the OCC's regulations cannot be set aside by the Financial Stability Oversight Council.  The OCC has even outmuscled states; when states passed laws to prevent predatory lending in the years preceding the subprime crisis, the OCC announced that the laws did not apply to the banks it regulated.  Moreover, under the Dodd-Frank Act, the OCC will be even more powerful, assuming responsibility for regulating federal savings and loans.

Nor is the explanation for the differing treatment simply that the issue of the Bureau has arisen because the President has nominated its director and the Senators will address the Comptroller of the Currency when that position falls vacant.  The last Comptroller, John Dugan, left office last summer, and the President recently nominated a new one.  Yet the Senators have not said they will oppose confirming a new Comptroller until that office's powers are constrained; in fact, when John Dugan was confirmed in 2005 by a Republican Senate, his confirmation was so uncontroversial it was decided on a voice vote.

So how to explain the difference?  Only the Senators know what their motivations are, but when the evidence of pretext is so strong, it is difficult to resist more cynical conclusions.  Perhaps the answer for the differing treatment of the two agencies lies in their politics: the Bureau promises to protect consumers, while the OCC has been thoroughly captured by the banks.  Indeed, former Comptroller Dugan was a bank lobbyist before his appointment.  That may explain why, when New York's Attorney General sought to investigate whether banks had violated fair lending laws, the OCC went to court to protect the banks, ultimately litigating the case to the Supreme Court.    By contrast, it is difficult to imagine the Bureau suing to protect banks from a state trying to determine if banks have engaged in discriminatory practices.

The Senators properly have a role in advising and consenting to appointments, but they should recognize that if they want to challenge Congress's decision in structuring the Bureau as it has, the appropriate way to do so is to pass legislation, not hold up filling a job that is needed, and amply supported by precedent.

Articles on the CFPB

by Jeff Sovern

Mark W. Olson, former Federal Reserve Board governor, and former chairman of the American Bankers Association predicts here a compromise on appointment of a CFPB director.  He writes:

Expect a compromise that will please very few. It is hard to believe that many members of Congress running for reelection will support the repeal of a regulatory entity designed to "protect consumers."

On the other hand, that sort of a concentration of authority is unlikely to stand over multiple changes in administrations. Look for the single "director" to be replaced at some point by a board, which would require its re-designation from an executive agency to a commission.

Meanwhile, Alan Charles Raul attacks the independence of the Bureau while Clyde Mitchell, formerly a partner at White and Case, and an adjunct professor at Fordham has a piece in the New York Law Journal (behind a paywall) agreeing with Republicans that the Bureau should be run by a commission instead of a director (he doesn't refer to the problems with the House bill providing for a commission) but arguing that the Bureau's funding should be left as is, contrary to Republican demands.

None of these writers explains why it is ok for the Office of the Comptroller of the Currency to have an independent director rather than a commission, not be subject to the congressional appropriation process, and (unlike the CFPB), not be subject to overruling by the Financial Stability Oversight Council.

Rob Blackwell Predicts that the CFPB Will be Leaderless for Years

Here (behind the American Banker's paywall, unfortunately).  He thinks a compromise between the administration and the Republicans is unlikely; a recess appointment would mean a lengthy court battle during which the Bureau would operate under a cloud; and that the administration might prefer to be able to paint the Republicans as anti-consumer obstructionists in 2012.  It's a depressing but worthwhile read.

Ballard Spahr Blog on CFPB: CFPB Monitor

by Jeff Sovern

I have been remiss in not drawing readers' attention to the very interesting and informative Ballard Spahr blog on the Consumer Financial Protection Bureau CFPB Monitor,  which started up last month.  Among the posts that especially caught my eye: Alan Kaplinsky's observation that Comptroller of the Currency-nominee Thomas Curry's Senate testimony  "gave the impression that he is a strong advocate of the national bank charter and that he is unlikely to make any changes regarding preemption," and his post about whether the Bureau will bar the use of arbitration clauses in consumer financial contracts.  CFPB Monitor looks like a valuable addition to consumer law blogs.