As a follow-up to our recent post on Director Cordray’s plans on whether to pursue political office, we offer the highlights below from last week’s Politico Morning Money Breakfast Briefing. During the event, Politico Chief Economic Correspondent Ben White discussed a variety of issues with Director Cordray.
Consumer protection: Mr. Cordray provided three examples of the CFPB’s progress toward protecting consumers: (1) the new mortgage rules; (2) implementation of the CARD Act; and (3) the current debt collection rulemaking.
Rulemaking: Mr. Cordray stated that the potential impact of CFPB rules on the availability of credit will inform future CFPB rules. He noted that this analysis was one of the “lessons learned” after issuing the recent mortgage rules. Mr. Cordray asserted that even the strongest consumer protections are not enough if the result is less opportunities for consumers to borrow and less ability for consumers to consume. Mr. Cordray also indicated that the CFPB would not hesitate to re-visit its own rules, and the CFPB would not defend rules that are not working.
With regard to the qualified mortgage rule, Cordray noted that the rule will go into effect on January 10, 2014. He stated, however, that the CFPB will focus on whether covered entities are making a good faith effort at compliance, and the CFPB will not expect perfection in the early months after the rule goes into effect.
Supervision & Enforcement: Mr. Cordray briefly discussed the CFPB’s decision to no longer include enforcement attorneys during the examination process. He stated that the CFPB is constantly looking at how to best deploy its resources and personnel. He noted that early decisions made when the CFPB was working on integrating the CFPB’s supervisory and enforcement authorities had been re-visited and changes made to prevent supervised entities from getting the “wrong message.” Mr. Cordray also characterized the CFPB’s supervisory authority as an alternative to achieving enforcement results.
Non-bank priorities: Mr. Cordray indicated that in the past the CFPB was bound by the Dodd-Frank Act on what non-bank priorities to focus on, but the CFPB now has the discretion to pursue other non-bank areas, such as debt collection. Although he noted that the CFPB considers many factors in setting priorities, he discussed three specific factors: (1) risk to consumers; (2) scope of the market; and (3) consumer harm.
Best practices: Mr. Cordray commented that the CFPB has no authority to enforce industry best practices, but the CFPB has other tools at its disposal.
Consumer complaints: Mr. Cordray described how the CFPB pays close attention to consumer complaints in order to identify risk to consumers. He also noted that companies that are responsive to consumer complaints minimize legal, regulatory, and reputational risk.
Auto loans: Mr. Cordray asserted that it is a fundamental American principle that consumers should be able to obtain a car without facing discrimination. He did not elaborate on specific evidence of such discrimination, but he noted that the CFPB had seen indications of problems during the examination of unspecified financial institutions.
Congressional relationships: Mr. Cordray commented that he has reached out to all Members, whether Democrat or Republican, who are willing to sit down with him, especially the chairmen and ranking members of the relevant oversight committees. Mr. Cordray stated that he believes that congressional oversight is advantageous to the CFPB as the CFPB should be attentive to these concerns. Mr. Cordray detailed two instances when the CFPB made changes to CFPB operations in response to congressional concerns:
- Rep. Patrick McHenry (R-NC) requested that the CFPB provide a forward-looking regulatory agenda, similar to the Federal Trade Commission. In response, the CFPB began to post its unified agenda on the CFPB website in advance of the release by the Office of Management and Budget.
- Sen. Mike Crapo (R-UT) expressed concern about the CFPB’s data collection of consumer information. In response, the CFPB is engaged in discussions with the Senator and other concerned Members while staying mindful of data security and the sensitivity of consumer information. Mr. Cordray noted that nothing would undermine the CFPB more than for people to think that the CFPB does not take privacy into consideration.
Employee turnover: Mr. Cordray responded to a question about the alleged “brain drain” occurring at the CFPB. He noted that many of the recent high-profile departures are individuals with a history of devoting their lives to something for only a few years and then moving on. He argued that the talent at the CFPB remains of the highest caliber and that the CFPB continues to receive a tremendous number of applicants for every open position.
A recording of the event is available here.