Cordray One Massive Step Away From Becoming Director Of The Consumer Financial Protection Bureau, Facing Battle In The Senate
After receiving party-line approval from the Senate Banking Commitee, Richard Cordray is preparing for an uphill battle on the Senate floor, as the former Ohio Attorney General continues his journey towards becoming director of the Consumer Financial Protection Bureau.
from The Hill:
Before Cordray was even tapped by the White House, 45 GOP senators vowed to block any nominee to head the agency unless several changes were made to its structure. Republicans, who opposed the creation of the agency during the drafting of the Dodd-Frank financial-reform law, argued that it hs too much power and lacks proper oversight.
“Current financial regulators already evade accountability by claiming independence or recusing themselves when they fail,” Sen. Richard Shelby (R-Ala.), who has led the GOP blockade, said Friday. “The CFPB is unaccountable by design. We will continue to fight for accountabilty from regulators.”
Among the changes GOP senators want to see made before considering any nominee is replacing the director position with a multimember board, subjecting the agency’s budget to the appropriations process and making it easier for other regulators to veto actions taken by the bureau.
Because it only takes 41 Senators to de-rail a nomination, President Obama, Mr. Cordray, and Senate Democrats have an uphill battle for them. Few, if any, were surprised by the delays though, after Republicans spent nearly 12 months blocking Elizabeth Warren’s nomination to head the same bureau.
Getting back to this point with Cordray’s nomination has taken nearly 3 months, but now Democrats face a Republican bloc willingly to do just about anything to make President Obama look like a failure.
For it’s part, the Obama Administration is attempting to lean on Senate Republicans by appealing directly to the public. A white paper, released on Sunday by the White House, detailed specific reasons the Senate needs approve a leader for the Consumer Financial Protection Bureau.
- Payday Lenders: Before Dodd-Frank, payday lenders were not subject to federal supervision, enabling them to engage in predatory practices with little oversight or regulation. I had a look at payday lenders in California, a state which presumably has some limits on how far they can go. On one lender’s website, they reported their APR as 460.16 percent! Predatory seems like an understatement, particularly when those most likely to take a payday loan are those who are already struggling to feed their families and pay bills.
- Credit Reporting Agencies: Right now, credit scores are governed by the Fair Credit Reporting Act (FCRA). Oversight of credit score agencies is not pro-active; that is, you can file a complaint under the FCRA if you believe your credit is unfairly tarnished, but there is no agency actively looking at how scores are developed, whether they are discriminatory, whether there are unacceptable levels of error or other factors which negatively harm consumers. Under the Dodd-Frank Act, oversight of credit reporting agencies would be part of CFPB duties.
- Debt Collectors: As anyone who has faced debt collections knows, debt collectors are relentless, despite laws to rein them in. The debt collection industry is lucrative with $1.2 trillion in consumer debt currently delinquent (and $834 billion past 90 days), yielding collectors about $40 billion from consumers out to collect the debt. This 2008 Kiplinger article describes what the inside of a debt collection operation is like. It isn’t pretty. Death isn’t even an escape hatch.
- Prepaid Debit Cards: You can’t walk into a market or anywhere else this time of year without seeing a display loaded with prepaid gift cards alongside American Express, MasterCard and Visa cards. But prepaid cards are a very expensive way to give a gift. Loading the card and activating it will trigger a fee, as will reloading it. According to this article, branded debit cards are expected to be worth $440 billion by 2017. That’s a substantial chunk of consumers’ money that is unregulated at this time.
- Independent Non-Bank Financial Institutions: As the report notes, those most vulnerable to predatory practices by non-bank financial institutions are young military service members, the elderly, students and Latinos. Anyone who has college-age children has seen the storm of mail that hits the house as soon as the first SAT is taken, offering them the moon on a platter for the low, low price of 21% interest or thereabouts. Private student loans, credit cards, financial investment scams and overseas transfers are currently monitored by no one particular agency. While individuals might be able to challenge certain schemes, there isn’t any kind of proactive oversight of schemes and scams that harm ordinary Americans.
While the Consumer Financial Protection Bureau, leaderless or not, continues to protect consumers through a wide variety of regulations, the regulations mentioned above do not go into effect until a director is appointed. Will Democrats be able to change the minds of their Republican counter-parts? Will the Occupy Movement, and a new wave of anti-Wall Street sentiment help the CFPB finally get a director?
Only time will tell.
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