By Sarah Morgan
Consumers will get a new chief watchdog today, when President Barack Obama taps Richard Cordray as the first director of the Consumer Financial Protection Bureau. Though the appointment was made while Congress is in recess, because Republicans refused to back the nomination, advocates say most Americans should welcome the news.
The CFPB, which was created by the Dodd-Frank financial reform legislation passed in 2010, has been operating for nearly six months. But without a director in place, it was unclear if the agency had any authority over certain non-bank institutions, says Laura Saunders, the managing attorney at the Washington office of the National Consumer Law Center. “It’s a technical point, but there was ambiguity about whether it had the new power to supervise payday lenders, debt collectors and credit reporting bureaus before a director was in place,” Saunders says.
Even with Cordray in the top job, changes to the way the financial industry deals with consumers will not come easily, advocates say. “Of course there’s going to be challenges and resistance by the financial services industry,” says Kathleen Day, a spokeswoman for the Center for Responsible Lending. And although Republicans oppose the new agency, consumers across party lines support financial services reform, Day says, citing a survey by the Center for Responsible Lending which found that consumers supported financial reform and a strong CFPB at a rate of 5 to 1.
The CFPB’s new powers are crucial because problems are rampant in some of the industries the agency will now be able to regulate, Saunders says. Debt collectors, for example, generate the most consumer complaints of any industry, according to the Federal Trade Commission (for more on what those complaints are about, see our story, “10 Things Debt Collectors Won’t Say.”) Other consumer advocates have highlighted problem areas the new agency should focus on: The Consumer Federation of America, for example, has called for tighter oversight of prepaid debit cards, foreclosure proceedings, and payday loans.
The appointment is important because the CFPB is the only federal regulator whose sole responsibility is to protect consumers in the financial arena, says Ruth Susswein, the deputy director of national priorities for Consumer Action. “We are really pleased to see that someone who’s proven himself as a real advocate for consumers as the Ohio Attorney General is now going to run this very important agency,” Susswein says. “This is really good news for consumers, and it’s a really long time coming,” she says.
A spokeswoman for the CFPB didn’t immediately respond to a request for comment.