Yesterday, the Senate voted to proceed with the nomination of Richard Cordray to direct the Consumer Financial Protection Bureau (CFPB), then approved him later in the day on a 66-34 vote. The move has the potential to benefit everybody with a mortgage, credit card or private student loan. In other words: you.
The vote to approve Cordray was a long time coming. The CFPB opened its doors almost exactly two years ago and operated without a director until January 2012, when President Obama installed Cordray as the agency’s head in a controversial recess appointment. A pair of similar recess appointments were ruled unconstitutional by a federal appeals court this past January, raising questions about the future of Cordray, as well as the bureau in general. Yesterday’s vote seems to have resolved those concerns.
In general, the 44 Senate Republicans who had earlier blocked a vote on the appointment didn’t have a major gripe with Cordray, a former Ohio attorney general. Their beef was with the structure of the bureau, which was created at the behest of the Dodd-Frank Wall Street Reform and Consumer Protection Act, the 2009 law passed in the immediate wake of the financial crisis. Critics have said they prefer a committee to lead the CFPB rather than a single leader, arguing that one director would have too much power.
“There will be a day the Democrats will wish they passed a commission and not put all the power in the hands of one individual,” Richard Hunt, president and CEO of the Consumer Bankers Association, told the Washington Post.
Consumer advocates, of course, were thrilled with Congress’s vote to confirm Cordray. Elizabeth Warren, the Harvard professor-turned-Senator from Massachusetts who initially conceived of the CFPB, said Cordray’s appointment would let the agency continue ”looking out for middle class families, getting rid of tricks, traps, and fine print, and holding financial institutions accountable when they break the law.”
In the brief period of time that the CFPB has been operational, it has done a decent job of fulfilling the simple pledge “to stand on the side of consumers … and see that they’re treated fairly,” as Cordray put it earlier this year. The CFPB fined three credit card companies for sneaky marketing tricks last year, and most other card issuers have backed off using similar underhanded tactics, like out of fear the agency would take action on them too. Just over a year ago, the CFPB launched a public credit card complaint database that allows consumers to see which companies receive the most gripes.
The agency is starting to oversee companies like payday lenders, credit reporting agencies and debt collectors as well. Since these kinds of businesses aren’t banks, they previously fell through the regulatory cracks. The FTC can investigate and fine companies if enough people complain (which it’s done over and over), but it can’t preemptively step in and stop abusive practices from happening in the first place. Now, these businesses can be reined in by the CFPB.
The CFPB also re-wrote mortgage rules to prevent people from getting burned by “exploding” mortgages with payments that increase sharply after an initial teaser period — which contributed to the foreclosure crisis still nagging the housing market today.
Now that Congress has officially approved Cordray, and the future of the agency is no longer up in the air, the CFPB can go ahead and continue on with the work it’s begun.