Consumer Financial Protection Bureau Director Richard Cordray, center,… (Haraz N. Ghanbari / Associated…)
Richard Cordray, the new head of the Consumer Financial Protection Bureau, promised Thursday that his controversial recess appointment won't slow down the agency.
And he demonstrated it by announcing the agency would begin using its new powers immediately to start supervising payday lenders and other financial firms outside the banking system.
"The appointment is valid," Cordray said after a speech at the Brookings Institution, a liberal-leaning Washington think tank. "I'm now director of the bureau."
The agency was created by the 2010 financial reform law and took responsibility from other banking regulators for previously existing consumer protection laws. But the bureau had been unable to exercise new powers under the law -- specifically to oversee financial firms that are not banks -- until a Senate-confirmed director was in place.
Frustrated by Republican opposition to filling the position, President Obama broke with two decades of precedent and installed Cordray on Wednesday while the Senate was in a short recess. The move probably will lead to lawsuits challenging whether Cordray's appointment was legal.
But in his first public comments -- and first day in the new job -- Cordray said he didn't take the opposition personally and that the legal cloud wouldn't affect how the agency does its job protecting consumers in the financial marketplace.
"The most important thing we can do as a bureau is keep our nose to the grindstone and keep doing our work," Cordray said. "I think the work that we're doing is so important and can make such a difference for people in this country that as we attack this problem ... we will prove our own case both to the people who represent the public and to the public at large."
Cordray got rolling in his first full day on the job. The bureau launched its program to supervise non-bank firms such as mortgage companies, including brokers, loan servicers and foreclosure relief services -- the first time any of those entities have faced federal oversight. The agency last year began supervising large banks for consumer protection compliance.
"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," Cordray said.
"These are important markets," he continued. "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."
The bureau so far has focused on improving the clarity and transparency of some financial products, such as proposing streamlined mortgage and credit card disclosure forms. But Cordray said the agency's examiners will be looking to make sure financial companies are following the law.
"The consumer bureau will make clear that there are real consequences to breaking the law," he said. The agency has taken over some investigations from other banking regulators and have started some of its own.
The bureau has been soliciting input from whistle-blowers. And Cordray appealed to consumers in a video on the agency's website to share their stories to help the agency identify problems. Since opening in July, the agency has received thousands of comments about issues such as exorbitantly expensive payday loans and abuses by mortgage servicers.
"Some are outrageous," he said of the stories. "These nightmares are happening to people from all walks of life -- from people who have fallen on hard times to people who still consider themselves financially secure."
"They do not expect any special favors. They just want a fair shake," he said. "They want a consumer financial system that actually works for consumers. That is exactly what the consumer bureau is here to do."
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