Consumer Law & Policy Blog

WaPo Portrait of Cordray

Here.  The Times had earlier assessed Cordray: "Mr. Cordray has the credentials and skills for the job."

Times's "Deal Professor" Davidoff: "To Buttress Consumer Bureau, a Compromise"

Here.  The compromise: a self-financed commission, as opposed to a director.  An interesting excerpt about Cordray:

Mr. Cordray is a solid nominee for consumer advocates. As attorney general of Ohio, he brought a number of consumer protection suits — which his Republican successor, Mike DeWine, is continuing. This is a bipartisan endorsement if there ever was one. And for those who say Ms. Warren or no one, I suspect Mr. Cordray will not be much different from Ms. Warren.

If the confirmation of Mr. Cordray is the goal, then a compromise with the Republicans is probably the best for the bureau as well as Mr. Cordray’s own chances. The trick is to get such a compromise in the current mess that is Washington.

Meanwhile, WaPo reports Raj Date to replace Elizabeth Warren at consumer bureau

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http://www.washingtonpost.com/business/economy/raj-date-to-replace-elizabeth-warren-at-consumer-bureau/2011/07/26/gIQAHAvvbI_story.html?hpid=z12

Why the House Bill to "Improve" the CFPB Would Cripple It

by Jeff Sovern

H.R. 1315, the so-called Consumer Financial Protection Safety and Soundness Improvement Act passed by the House last week displays an extraordinary number of seemingly neutral "improvements" that would collectively have the effect of crippling the Consumer Financial Protection Bureau, or even tipping it over to an agency that would be more protective of banks than consumers.  Unfortunately, because of the complexity of the issues, explaining all that briefly in a way that can be easily understood is not easy.   That's probably the point. The bill is diabolically clever. 

Let's start with the commissioners.  Of the five commissioners, one has to be the Vice Chairman for Supervision of the Federal Reserve System.  That would be the same Fed that Congress gave the power to prevent predatory lending to in 1994 that the Fed didn't use until 2008, far too late to prevent the subprime fiasco.  It would also be the same Fed that sometimes seems unduly influenced by the banks it regulates.  So let's count that commissioner as a vote against consumer protection.  No more than two of the remaining four commissioners can be members of the same political party. If the president appoints two Democrats and two Republicans, say, that leaves us with a majority of the commissioners who are either Republicans or who work for the Fed.  Of course, it doesn't have to work that way. The president could appoint independents instead of Republicans.  But remember also that the Commissioners have to get through the Senate. It's easy to imagine the same 44 Senators who have opposed any nominee for director saying they will oppose nominees for the Commission unless two are Republicans.  So instead of a director who will protect consumers, we end up with a significant chance of an agency that protects banks, even with a democratic president.  You can also imagine combinations that end up replicating the same kind of partisan gridlock we have in Congress already.  For example, suppose we have four commissioners seated, split between pro-consumer and pro-bank factions, and the Senate refuses to confirm a fifth commissioner who would break the tie.  See how clever this is?

But that is far from all.  The bill also provides for staggered terms, so that in four out of every five years, a term ends and the president gets to nominate a new commissioner.  If President Obama loses in 2012, that will give the new president a nomination fairly quickly.  The president also gets to name the chair of the Commission, so once that nominee is confirmed, the president could designate that person the chair.  And voila: a Bureau that is supposed to protect consumers instead protects banks.

But, of course, President Obama could win re-election.  Perhaps the Bureau, despite the restraints described above, will propose a regulation to protect consumers that would reduce financial institution profits.  Banks still may avoid worry because the Financial Stability Oversight Council could overrule the regulations  Current law says such overruling requires a two-thirds majority, but the House bill would reduce that to a simple majority and take away the Bureau's vote.  Remember that the FSOC includes several bank regulators, including the Comptroller of the Currency, an agency that the banks essentially own.  The House bill also lowers the standard for the FSOC to overrule the Bureau by requiring it to overturn (currently, it's discretionary) Bureau regulations which are "inconsistent with the safe and sound operations of United States financial institutions"  (currently the standard is that it would put safety and soundness at risk).  So suppose the Bureau proposes a regulation which would have the effect of reducing bank profits.  Would that be inconsistent with the safety and soundness of banks? If so, no matter how wonderful the regulation, the FSOC would have to reject it. 

There's more.  Before adopting new regulations the Bureau has to conduct not one but two new analyses.  That can slow things down.

I have a feeling I haven't even found everything that would affect the Bureau's functioning.  As I say, it's diabolical.

Debt Settlement Under Fire

The Center for Public Integrity's iWatch News tells the story of a retired teacher who paid a "debt settlement" firm $7000—none of which went toward paying off her debts. West Virginia's attorney general sued the firm on behalf of her and 400 other consumers who paid up-front fees for debt-settlement services. The industry is also on the CFPB's rulemaking agenda.

Wall Street Lobbying to Opt Out of Dodd-Frank

A Public Citizen report released today analyzes the efforts of 24 financial-services companies and trade groups to opt themselves out of Dodd-Frank's limits on incentive-based compensation. The report finds that, "[c]ollectively, the organizations have spent $242.4 million on lobbying since the beginning of 2010" and "have deployed 712 lobbyists, of whom 387 previously worked for the federal government, either as congressional staffers or in executive branch positions." Most of the organizations are seeking to be partially or completely exampted from rulemaking on Section 956 of Dodd-Frank, which imposes disclosure requirements and substantive restrictions on incentive-based compensation.  

In addition, the report finds that the organizations made $15.6 million in campaign contributions to congressional candidates during the 2010 campaign cycle. 

Trying to Keep Up with the CFPB News

by Jeff Sovern

It's tough to keep up with the coverage of the Bureau this week, but here are a few noteworthy pieces.  Bloomberg reports: Republicans Target CFPB, Call Nomination ‘Dead on Arrival.’  A quote:

“It is unclear why the centerpiece of the president’s financial reform package has taken so long to materialize, but what is clear is that this nomination is dead on arrival because it does nothing to increase accountability or shed light on the operations of the CFPB,” Senator Jerry Moran said today at a Banking Committee hearing on consumer protection, referring to Obama’s selection of Richard Cordray to serve as the bureau’s director.

I love it when people opposed to the Bureau criticize the President for taking a long time to nominate a director, but putting that aside, how could any nomination increase (or decrease, for that matter) "accountability or shed light on the operations of" any agency? 

Here's another report, from Reuters: U.S. House to consider consumer agency bill. And here's an interview Elizabeth Warren gave on Rachel Maddow (about eight minutes in), in which she says that the reason she can't run the agency is because of its Republican opponents.  She added "we are not, not, not going to let the minority come in and dictate the terms of this agency – rip its arms and legs off before it is able to help a single family.”  Finally, the Wall Street Journal describes Richard Cordray as "Mrs. Warren without the charm."

Elizabeth Warren in HuffPo on Richard Cordray and the CFPB

Here.  An excerpt:

Rich will be a strong leader for this agency. He has a proven track record of fighting for families during his time as head of the CFPB enforcement division, as Attorney General of Ohio, and throughout his career. He was one of the first senior executives I recruited for the agency, and his hard work and deep commitment make it clear he can make many important contributions in leading it. Rich is smart, he is tough, and he will make a stellar Director. I am very pleased for him and very pleased for the CFPB.

WSJ: President to Nominate CFPB Head Next Week; It's Not Warren

The report is at http://blogs.wsj.com/washwire/2011/07/15/obama-to-nominate-consumer-bureau-chief-next-week/?KEYWORDS=elizabeth+warren.

The Hill: GOP gets one last shot at Consumer Protection bureau before it opens

by Jeff Sovern

Here.  The article is mostly about Elizabeth Warren's upcoming appearance before the House Oversight Committee on Thursday.  A couple of quotes:

“This hearing will give Professor Warren an opportunity to provide clear information – which has so far not been articulated in public statements, budget justification, FOIA responses, or previous congressional testimony – about how the administration intends to go about protecting consumers,” said an Oversight spokesperson.

* * *

In perhaps a taste of what is to come, Raj Date, the CFPB’s associate director of research, markets and regulations – and a potential candidate for the agency’s director – got his share of GOP grilling at a House Financial Services Committee hearing last week. Date faced several questions from Republicans, yet again, about the CFPB’s role in ongoing settlement negotiations between federal and state investigators and mortgage servicers over widespread documentation problems.

Perhaps the Committee spokesperson should take a look at the Bureau's web site: the spokesperson might see there how the Bureau has already started working on mortgage disclosures.  I wish the Committee would hold itself to its own standards and explain how interrogating Bureau personnel about its role in advising attorneys general helps consumers.

Politico on the CFPB's "Soft Launch"

Here.