Richard Cordray spoke at the Brookings Institution today, on his first day as director of the Consumer Financial Protection Bureau. He laid out the mission of the agency as he sees it, and how it will use its expanded authorities over non-bank financial institutions.
Cordray started by bearing witness to financial predators who have destroyed the lives of many Americans. “I have seen senior citizens defrauded of their savings,” Cordray said. “And I have seen families bankrupted by complex mortgages with spiraling interest costs they did not understand and could not afford.” He highlighted some of the testimony that the agency has already received from consumers who have been ripped off by financial institutions, through call centers and complaint hotlines set up prior to his appointment. Cordray noted that thousands have called in to complain, and this story sounds eerily representative:
We also heard from Rebecca in North Carolina. She told us she missed a mortgage payment nine months after her husband lost his job. In the two years since, her mortgage servicer has increased her monthly payments even though she believed that a trial modification was supposed to reduce them. She said she was charged for inspections and appraisals she did not ask for and that have never occurred, leading to increased debts and repeated threats of foreclosure. Rebecca says she has been frantically complying with these demands because she is so afraid of losing her home.
The CFPB has worked to bring clarity to mortgage, student loan and credit card statements with their “Know Before You Owe” program. But with the appointment of Cordray, now they get the full regulatory authorities of the agency. Here’s Cordray’s pitch on that:
Today, we are launching the Bureau’s program for supervising nonbanks. We will begin dealing face-to-face with payday lenders, mortgage servicers, mortgage originators, private student lenders, and other firms that often compete with banks but have largely escaped any meaningful federal oversight.
These are important markets. Many provide valuable services to customers who lack access to other forms of credit. And they are big markets. Nearly 20 million American households use payday lenders, and pay roughly $7.4 billion in fees every year. Many subprime loans during the housing bubble were made by nonbank mortgage brokers. Since most of these businesses are not used to any federal oversight, our new supervision program may be a challenge for them. But we must establish clear standards of conduct so that all financial providers play by the rules.
In a separate fact sheet, the CFPB lays out their non-bank financial institution regulatory plan, the nation’s first. They plan to oversee mortgage lenders and servicers, payday lenders, consumer credit reporting agencies and debt collectors. Other services like debt relief agencies, money remitters and prepaid card issuers could come under their purview as well, under a rulemaking process that CFPB will soon initiate. They can examine these businesses (here’s the examiner field guide), and they can request documents and reports from them as well. And CFPB has standing agreements to work with state consumer protection regulators on all of these businesses. Like other federal regulators, CFPB can seek consent agreements with businesses out of compliance, as well as take appropriate legal action.
Because the agency had a year to ramp up, they are pretty well-staffed with examiners to overlook these businesses, with four field offices across the country.
There’s more on this at the New York Times. Overall, this is a pretty solid agenda, the very one that Republicans spent months trying to block through their nullification strategy. Obviously, we’ll have to wait and see how aggressive Cordray is against servicers and other scam artists before pronouncing this a success.