Tuesday, January 24, 2012

Cordray Outlines to House Panel His Vision for a CFPB with Full Enforcement Authority

Director Richard Cordray’s vision is that the new Consumer Financial Protection Bureau will make consumer financial markets operate fairly in order to protect consumers, support honest businesses, and play a crucial role in helping to safeguard the overall economy. In testimony before a House oversight panel chaired by Rep. Patrick McHenry (R-NC), he said that the Bureau will benefit consumers by clarifying the prices and risks of consumer financial products and services.

When consumers know the true costs, benefits, and risks of competing products, he reasoned, they will be better able to make informed decisions. It will also help people avoid being ambushed by costly surprises buried in the fine print, he continued, so that they can have proper confidence that the terms of the deal stated today are the terms they will actually be living with down the road. The Bureau will benefit honest businesses by leveling the playing field and ensuring that financial institutions play by the same set of rules.

He also noted that Bureau has launched the first federal nonbank supervision program, one of the central new authorities provided by the Dodd-Frank Act. There are thousands of nonbank providers of financial products and services that make up a significant portion of the consumer financial marketplace, including mortgage lenders, mortgage servicers, mortgage brokers, payday lenders, consumer reporting agencies, debt collectors, and money services corporations.

The Director said that the nonbank supervision program will include conducting individual examinations and may also include requiring reports from businesses to determine what areas need greater focus. The Bureau will determine what degree of supervision to perform based on an analysis of the risks posed to consumers, including factors such as the nonbank’s volume of business, types of products or services, and the extent of state oversight for consumer financial protection.

Now that the CFPB has a Director, the Bureau has full authority to investigate and bring enforcement actions to ensure that financial providers are held accountable if they violate the law, and that the rules of the road governing banks and nonbanks are applied evenhandedly to all participants. In this area, observed Director Cordray, the Bureau is also cooperating closely with other law enforcement agencies to avoid any duplication of work and to coordinate limited resources. The Bureau has many tools to address problems in the financial markets, he said, including supervision, rulemaking, and enforcement. The Director emphasized that filing lawsuits or administrative actions will be necessary at times to ensure that the law is followed and respected, and that harm to consumers from unlawful conduct is remedied.