The White House this week is pushing U.S. Senators to approve the nomination of Richard Cordray as head of the new Consumer Financial Protection Bureau (CFPB) with the publication of a report that notes non-bank financial companies – such as debt collectors – are not currently being regulated at the federal level.
The report, Improving Americans’ Financial Security: The Importance of a CFPB Director, was published Sunday ahead of a Senate vote scheduled for Thursday December 8 on the confirmation of Cordray. At least 45 Senate Republicans have vowed to vote against Cordray; confirmation would require a 60-vote majority.
Detailing the business types that do not fall under the supervision of a directorless CFPB, the report notes, “Without a Director, the CFPB cannot fully supervise non-bank financial institutions such as independent payday lenders, non‐bank mortgage lenders, non-bank mortgage servicers, debt collectors, credit reporting agencies and private student lenders.”
The report notes that the debt collection industry does “create economic and social value,” noting that “Debt collectors received over $40 billion from American consumers for third party collections.” But the White House reports collection agencies “can also be a source of abuse,” highlighting the consumer complaints about debt collectors received by the FTC and other agencies.
Most of the strongest language in the report is saved for payday lenders. It also specifically identifies groups that are the most vulnerable to non-bank financial institutions: service members, older Americans, students, and Latinos.
Senate Republicans rejected most of the content of the report and noted that they still object to the CFPB’s structure of a powerful Director with what they say is little oversight. Many would prefer a panel of commissioners, much like the current FTC structure. With 45 Senators already vowing to reject any director nominee, Cordray’s confirmation is unlikely in the Thursday vote as a 60-vote supermajority is needed for passage.
“Current financial regulators already evade accountability by claiming independence or recusing themselves when they fail,” Sen. Richard C. Shelby (Ala.), the ranking Republican on the banking committee, said in a statement. “The [CFPB] is unaccountable by design. We will continue to fight for accountability from regulators.”
President Obama in July nominated Cordray to fill the CFPB Director spot, declining to tap the polarizing Elizabeth Warren for the position. Warren, a Harvard professor and current Senate candidate in Massachusetts, had been instrumental in the formation of the CFPB.
Cordray was formerly the attorney general of Ohio. In his brief stint in that position – he won a special election to replace the previous AG and served only two years – he took some pointed swipes at debt collectors in the state. In September 2009, he issued a public warning to collection agencies over complaints his office was receiving. In April 2010, his office announced a large settlement with a collection agency.
In March of this year, Cordray was named as the CFPB’s Chief Enforcement Officer, tasked with heading up the team that will investigate financial institutions and seek penalties for misconduct.