On March 30, Director Cordray gave his annual speech to the United States Chamber of Commerce’s 11th Annual Capital Markets Summit. His prepared remarks focused on the CFPB’s role in adopting regulations.
He spoke at length about the factors involved in the economic meltdown and how Congress responded, in part, by creating the CFPB. He trumpeted the CFPB’s promulgation of detailed regulations for the mortgage industry. He also mentioned the CFPB’s regulation dealing with international remittances. Finally, he mentioned, in passing, pending rulemakings pertaining to arbitration, debt collection, and small dollar lending. He curiously omitted mentioning the final prepaid cards regulation which is the only CFPB final regulation not mandated by Dodd-Frank. He shed no light on the status of any of the pending rulemakings.
Although Director Cordray’s prepared remarks did not address the consent orders and lawsuits arising from the CFPB’s enforcement initiatives, several media reports indicated that he was asked why the CFPB often decides to make law through consent orders rather than regulations. He stated that “rulemaking is prospective in nature and by definition then, in many respects, more evenhanded. But it does take time to fashion the rules, and it is a difficult process. It requires a lot of data, a lot of thought, a lot of input…. Enforcement is different. It’s meant to address particular situations that arise. It’s much more factually-based. It may be more unique to a certain circumstance than a rulemaking. It needs to be.”
As he has previously stated, Director Cordray indicated that under his “principle of equal justice,” non-parties to consent orders should still consider consent orders to be guideposts of activity which the CFPB considers to be unlawful. He stated that “[i]f we don’t enforce with the principle of equal justice in mind, then you’re taking random enforcement actions here and there that don’t have any generalized impact. That is why, when we take enforcement actions, we make a point to publish a detailed order describing what the facts were.” The Chamber of Commerce has previously criticized this type of “regulation by enforcement.”
We expect that during the remainder of Director Cordray’s term (which expires in July 2018), the CFPB will continue to focus on enforcement instead of rulemaking since it would face the risk of any new regulations it issues being overridden by Congress under the Congressional Review Act.