Saturday, January 07, 2012 6:49:12 AM
Obama’s Consumer Watchdog Targets Mortgage, Payday Lenders
Richard Cordray, director of the Consumer Financial Protection Bureau, speaks at the Brookings Institution in Washington on Jan. 5. The speech was Cordray’s first since President Barack Obama used a recess appointment to give him the top job.
Photographer: Andrew Harrer/Bloomberg
By Carter Dougherty - Jan 6, 2012 2:00 PM CT
Richard Cordray’s appointment as director of the U.S. Consumer Financial Protection Bureau moves the new agency nearer to fulfilling its intended role as a one- stop shop for borrower safeguards.
Unlike the historically patchwork oversight of consumer finance, the bureau centralizes the federal government’s authority and in some cases extends it. Consumers may benefit from its reach whenever they take out a payday loan, negotiate a mortgage rate, borrow money for school or pay a credit card fee. For those who think they’ve been wronged, there will be a complaint system to help them fight back.
Cordray, 52, who was seated by President Barack Obama on Jan. 4 over Republican objections, takes over a bureau created under the Dodd-Frank Act in response to complaints that existing regulators didn’t do enough to protect consumers before the 2008 credit crisis. The rules overhaul shifted consumer protection from regulators responsible for banks’ financial stability, removing a potential source of conflict.
“Consumers deserve to have someone who will stand on their side, who will protect them against fraud, and who will ensure they are treated fairly in the financial marketplace,” Cordray said yesterday in a Washington speech. “The new consumer bureau was created to make sure these things are achieved for all Americans.”
Obama lauded the agency today as the way “to make sure the rules of the road are enforced” on behalf of consumers. “You’ve finally got a great director who was tailor-made to lead this agency in Richard Cordray,” Obama said during a visit with bureau staff in Washington.
Elizabeth Warren
Elizabeth Warren, the Harvard Law School professor credited by Obama with conceiving the bureau, viewed it as a “cop on the beat” to protect Americans against unscrupulous lenders by -- among other things -- eliminating jargon-filled loan documents in favor of plain-English paperwork.
“It is impossible to buy a toaster that has a one-in-five chance of bursting into flames and burning down your house,” Warren wrote in the journal Democracy in 2007. “But it is possible to refinance an existing home with a mortgage that has the same one-in-five chance of putting the family out on the street -- and the mortgage won’t even carry a disclosure of that fact to the homeowner.”
The consumer bureau was envisioned as a bulwark against the kind of credit bubble that inflated from 1999 to 2007, when household debt tripled to more than $12 trillion, according to the agency.
Foreclosures
Warren said effective federal consumer protection might have kept banks from improperly foreclosing on homes after the collapse of the U.S. mortgage market. The 14 largest mortgage servicers entered a consent decree with the Office of the Comptroller of the Currency that cost JPMorgan Chase & Co. (JPM) $1.1 billion. Consumer protection rules might also have prevented the rise of so-called liar loans, mortgages that were given to borrowers without documented evidence of ability to repay, advocates for the bureau said.
The bureau’s creators also foresaw an agency that would replace inconsistent state regulation with more stringent federal rules on short-term, small-dollar lenders including payday firms, whose annual interest rates can top 400 percent.
Disclosure Form
The agency, which Warren shaped while serving as an Obama adviser, was churning out drafts of a model mortgage disclosure form as part of an initiative dubbed “Know Before You Owe” even before it officially began work on July 21. These forms are intended to help consumers understand the costs of a mortgage and shop around for the best deal.
Similar initiatives have been announced for credit cards and student loans, the other two leading types of consumer credit in the U.S.
The bureau’s direct supervision of mortgage servicers, payday lenders and private student-loan companies will give consumers a watchdog to protect their interests in dealings with nonbank firms “that often compete with banks but have largely escaped meaningful federal oversight,” Cordray said yesterday in a speech at the Brookings Institution in Washington.
“This is an important step forward for protecting consumers,” Cordray said in a statement on the bureau’s website. “Holding both banks and nonbanks accountable to consumer financial laws will help create a fairer, more transparent market.” The speech was Cordray’s first since Obama used a recess appointment to give him the top job.
Legality Questioned
Republican lawmakers are questioning the legality of the move. Senator Charles Grassley of Iowa, the top Republican on the Judiciary Committee, asked the Department of Justice for information on the appointment in a letter signed by seven other Senate members.
Representative Spencer Bachus of Alabama, the chairman of the House Financial Services Committee, has begun an inquiry into the appointment. He has requested from Attorney General Eric Holder any information on the Justice Department’s role, as well as its opinion on the legal basis for the decision.
“The rule of law and Congress’ constitutionally grounded authority to conduct oversight of the executive branch requires that the administration explain the basis for its actions,” Bachus wrote to Holder in a letter dated today.
‘Jeopardy’
Cordray, a Democrat who served as Ohio’s attorney general, was tapped by Warren to run the bureau’s enforcement arm a month after he lost a re-election bid in November 2010. Cordray had previously served as Ohio’s treasurer, a state representative and as a law clerk to the U.S. Supreme Court (1000L), and has personally argued seven cases before the high court, according to his official biography. He was also a five-time winner on the television quiz show “Jeopardy.”
Congressional Republicans opposed the creation of the consumer bureau during negotiations that led to enactment of Dodd-Frank in 2010. Senate Republicans last year vowed to block confirmation of any director nominee while seeking changes including replacing the top job with a five-member commission and subjecting the bureau’s budget to the congressional appropriations process.
Senator Richard Shelby of Alabama led a group of 45 Republicans who vowed to deny Obama the 60 votes needed to ensure confirmation by the 100-member Senate. He released a statement Jan. 4 faulting Obama for bypassing lawmakers with an “end run” to seat “an unaccountable bureaucrat who will have immense power over the economy.”
Needless Bureaucracy
Lobby groups representing financial firms including JPMorgan and Bank of America Corp. (BAC) fought against the creation of an independent consumer bureau, saying it would create needless bureaucracy. Payday lenders like Advance America Cash Advance Centers Inc. (AEA) won a rule preventing the agency from limiting interest rates, but couldn’t avoid being covered by its rules.
“It has been widely reported that we were against the creation of a Consumer Financial Protection Bureau (C (C).F.P.B.),” JPMorgan Chairman and Chief Executive Officer Jamie Dimon wrote in an April 4 letter to shareholders. “We were not -- we were against the creation of a standalone C.F.P.B., operating separately and apart from whatever regulatory agency already had oversight authority over banks.”
Complaint System
Consumers may benefit from the bureau’s complaint system, its coming regulations and the corps of examiners it is building to examine the books and practices of financial firms.
The bureau, which began taking complaints about credit cards on July 21, said it had fielded 5,074 inquiries as of Oct. 21. The bureau said it would make complaint information available -- without personal information -- to the public, bucking objections from credit card issuers.
“The complaint system has identified recurring scams and helped to obtain redress for defrauded consumers,” the bureau said in a Nov. 30 report.
Supervision of financial services firms could turn out to be a tactic for reducing the fees that consumers pay for overdrawing their checking account. A study by the Federal Deposit Insurance Corp. published in 2008 concluded that 9 percent of customers paid 84 percent of all overdraft fees.
Felt, Not Seen
Jo Ann Barefoot, a consultant with Treliant Risk Advisors in Washington, said the key tactic in reducing overdraft fees could be supervision, work that would be felt, but not seen, by consumers.
Traditionally, banking supervisors visit firms and examine their records, and prompt changes “every day of the week,” Barefoot said.
“Now for the first time, an agency is conducting examinations with a focus on harm to the consumer,” Barefoot said in an interview.
The existence of a new consumer bureau doesn’t mean that every mortgage will be refinanced, or every bad debt forgiven, Travis Plunkett, director of legislative affairs for the Consumer Federation of America, said in an interview.
“Americans have a right to expect that this new agency will start to address some of the financial problems that are affecting them,” Plunkett said. “That does not mean a startup agency can work miracles.”
The agency begins its work in earnest with a structure that will be largely invisible to the consumer.
Behind its website, consumerfinance.gov/ [ http://www.consumerfinance.gov/ ], lies the complaint system -- which can also be accessed by mail or telephone. Apart from the team that tends to that system, examiners will handle the day-to-day scrutiny of banks and other consumer finance companies.
Alleged lawbreakers will face its enforcement team, which Cordray set up over the past year. And a research and regulations team will both track industry developments, and write and revise the rules of the road for consumer finance.
To contact the reporter on this story: Carter Dougherty in Washington at cdougherty6@bloomberg.net
To contact the editor responsible for this story: Lawrence Roberts at lroberts13@bloomberg.net
©2012 BLOOMBERG L.P.
http://www.bloomberg.com/news/2012-01-06/obama-s-consumer-watchdog-targets-mortgage-firms-payday-lenders.html [with comments]
===
Obama tells consumer bureau to ensure Americans get a fair shake
President Obama shakes hands with Richard Cordray, director of the Consumer Financial Protection Bureau, during a visit to the agency Friday.
(Michael Reynolds-Pool/Getty Images)
By Jim Puzzanghera
Reporting from Washington
January 6, 2012, 10:49 a.m.
President Obama told employees of the new Consumer Financial Protection Bureau that their job was to make sure that Americans get a "fair shake" from banks and other lenders.
"They're not looking for a handout. They're not looking for special treatment," Obama said Friday of the feedback he gets from people in letters and on his travels. "They just want a fair shake. They just want a fair deal. And we have a chance to give it to them."
Obama made the comments in what amounted to part victory lap, part pep talk for the agency that was a cornerstone of the financial reform law enacted in 2010.
"Every one of you here has a critical role to play in making sure that everybody plays by the same rules: to make sure that the big banks on Wall Street play by the same rules as community banks on Main Street," Obama said, flanked by top officials at the agency.
"That's your mission," he continued, "to make sure that the American people have somebody in their corner, that American consumers have somebody who's got their back."
About 100 staffers were selected by lottery from the agency’s 800 employees to attend Obama's 10-minute speech. They crowded into the small amphitheater at the CFPB’s new offices, which the agency inherited from the shuttered Office of Thrift Supervision last year.
The White House wants to continue to highlight the controversial recess appointment of Richard Cordray to head the agency, which administration officials say show the president’s commitment to protecting consumers and overcoming Republican opposition in Congress.
Republicans and business leaders criticized the appointment as a violation of Obama’s constitutional powers and legal challenges are expected.
Cordray flew with Obama on Air Force One to Cleveland on Wednesday for the announcement of his appointment. On Thursday, Cordray gave a speech at the liberal-leaning Brookings Institution think tank and interviews to CNN and NPR.
On Friday, Obama made the short trip to the CFPB's offices, which are across the street from the White House complex, to tout its expanded role in the financial services marketplace.
Cordray said this was an important week for the agency and the country. With his installation as director, the consumer bureau received its full authority to police payday lenders, mortgage brokers and other financial firms outside the conventional banking system.
"Consumer financial products and services can help each of us achieve our dreams, but when risks are not clear and fees are hidden, they can make our lives much harder," Cordray said before introducing Obama.
Obama was greeted by rousing applause from agency workers, and lingered after his speech to shake hands. He praised Cordray, a former Ohio attorney general, as someone"tailor-made" to lead the agency.
And Obama gave "a special shout-out" to Elizabeth Warren, the Harvard Law professor who conceived of the agency and worked for a year as an administration adviser to set it up.
Strong Republican opposition to Warren led Obama to bypass her as his nominee to be the agency's first director. She is now running for the U.S. Senate in Massachusetts. Cordray was nominated in July, but nearly all Senate Republicans vowed to block his confirmation unless Obama agreed to changes to weaken the authority of the agency and its director.
Obama refused and on Wednesday broke with two decades of tradition and appointed Cordray during a short Senate recess. Obama said the appointment was an important milestone for consumers because it fully empowers the agency.
"Now that he's here, irresponsible debt collectors and payday lenders and independent mortgage servicers and loan providers -- they're all bound by the same rules as everybody else," Obama said. "No longer are consumers left alone to face the risk of unfair or deceptive or abusive practices. Not anymore."
*
Also
Richard Cordray appointment 'turns lights on' at consumer bureau
http://www.latimes.com/business/la-fi-cordray-consumer-bureau-20120105,0,2888288.story
Obama circumvents Congress to make appointments
http://www.latimes.com/news/nationworld/nation/la-na-obama-cordray-20120105,0,449661.story
Consumer bureau chief begins supervision of payday lenders
http://www.latimes.com/business/la-fi-cordray-consumer-20120106,0,3192945.story
Editorial: Obama's recess appointment challenge
http://www.latimes.com/news/opinion/opinionla/la-ed-recess-20120106,0,692272.story
Op-Ed: Washington standoff
http://www.latimes.com/news/opinion/commentary/la-oe-ackerman-recess-apointments-20120106,0,2673070.story
*
Copyright © 2012, Los Angeles Times
http://www.latimes.com/business/money/la-fi-obama-consumers-20120106,0,3110153.story [with comments]
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Why Obama Was Right to Pick a Fight Over the CFPB's Richard Cordray
Reuters
The president makes a needed, consumer-friendly act of defiance in appointing a new director of the Consumer Financial Protection Bureau.
James Warren
Jan 4 2012, 3:00 PM ET
It will be viewed by the Washington punditocracy as a tough-minded executive act defying Senate Republicans, playing to a worried liberal base, and raising a possible legal challenge with constitutional ramifications.
But President Obama's Wednesday selection of Richard Cordray, a former Ohio attorney general, to run the spanking-new Consumer Financial Protection Bureau is also just smart and necessary.
If our politics weren't quite so polarized, and folks stuck a bit more to the facts in public debate, maybe far more people would know what Cordray symbolizes. They would know that they should be happy that a frustrated White House has circumvented a Senate filibuster last month and will try to actually protect consumers.
And it's probably fitting that Cordray, who had a strong reputation in Ohio for investigating suspect mortgage foreclosure practices, is also a five-time "Jeopardy" champ. The mere existence of the agency he will head would probably stump most of the game show's contestants and viewers.
It was created out of the Dodd-Frank financial-reform legislation and inspired by the reality that seven different agencies performed at times overlapping functions in overseeing financial products involving Mr. and Mrs. Joe Citizen.
It's the agency which Elizabeth Warren, a Harvard University law professor and bankruptcy expert, was asked to set up by Obama. She was badmouthed by Wall Street as too tough and strident, while 44 Senate Republicans harrumphed about the agency being potentially too powerful and unaccountable and in need of a board of directors rather than a single chief.
Warren split to run for U.S. Senate in Massachusetts, now raising the wonderful prospect of her one day having cocktails with fellow Senate members who shafted her. Obama picked Cordray, who Warren had already tapped as the chief enforcement officer, to run the bureau.
That ultimately led to the Senate filibuster and Wednesday's recess appointment, which might become a legal dispute since Republicans are claiming Congress isn't technically in recess, thanks to some rather cynical and superficial pro forma sessions they've been holding, in a technical sense, over the holidays. They've constituted a legalistic and legislative sham.
So why should regular folks care about Cordray?
For one, we really do need some coordinated oversight of lending practices and financial products involving consumers. Creating the agency was quite a feat, especially given decades of bureaucratic drift that left multiple agencies feeling empowered to monitor bits and pieces of our consumer lives, albeit in often half-hearted and unfocused ways.
It's basic civics, but one of the more important things that a regulatory agency does -- especially a financial regulator -- involves supervision. It means having federal personnel inside financial institutions.
But in a Dodd-Frank quirk, the law splits the basic supervisory authority. One year after enactment, the agency could begin supervising banks. But it could not begin supervising non-financial institutions until after it had a permanent director.
That's why Cordray is really important.
Non-financial institutions include payday lenders, debt collectors, credit-reporting agencies like Equifax and Experian, and the whole non-bank mortgage lending sector, namely the many mortgage brokers and lenders not affiliated with some big bank.
Just take payday lenders. They are a huge sector with a notoriously questionable modus operandi, including deceptive interest-rate practices and payments that can balloon into the stratosphere. About 20 million Americans use payday loans, according to the White House, and there is no shortage of people who get stuck in deep debt tracks due to those sky-high interest rates.
The credit-reporting sector is another big area of concern, with most people clueless about the factors going into determining their ratings and, often, deteriorating credit. There are important questions about the information those firms give out to companies with which consumers deal as compared to what they might give the individual himself.
When Republicans realized they couldn't kill the agency outright, they sought to trim back its authority. They failed in most cases, but one minor success was implementation. That's how we got the oddity of its being unable to regulate large, important areas of consumer life until a permanent director was named.
It is notable that there were shifting alliances over Dodd-Frank and these important elements of implementation. For example, many community banks and credit unions saw the light and supported the law because they feared they would be at a competitive disadvantage if big institutions were supervised but non-bank counterparts, such as payday lenders, were not.
Republicans, who are often beholden to financial institutions that just don't like regulation, claimed that the agency should be run by a commission, not a director -- just like the Securities and Exchange Commission. The GOP also didn't like that the agency's funding is tied to fees paid into the Federal Reserve System, as opposed to the annual appropriations systems the politicians control.
Ultimately, they were throwing roadblocks at what history will likely underscore were a slew of needed financial reforms stemming from a financial mess culminating in the mortgage crisis.
You could even argue that after filling Supreme Court vacancies, the Obama Administration will make no appointment bigger than Cordray's. If the agency works as envisioned, it would bring citizens a lot more transparency about key portions of their financial lives -- and bring bad players to light well before a disaster like the mortgage collapse.
In an age where opinion rules, there are also facts. And, in the case of the Consumer Financial Protection Bureau, the facts seem to be on the side of a beleaguered president.
Copyright © 2012 by The Atlantic Monthly Group
http://www.theatlantic.com/politics/archive/2012/01/why-obama-was-right-to-pick-a-fight-over-the-cfpbs-richard-cordray/250866/ [with comments]
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Mitch McConnell Hopes You Won't Do the Math
James Fallows
Jan 4 2012, 7:58 PM ET
In response to President Obama's "what took him so long? [ http://www.theatlantic.com/politics/archive/2012/01/the-nullification-chronicles-at-last-obama-strikes-back/250878/ ]" recess appointment of Richard Cordray to head the Consumer Financial Protection Board, Senate Minority Leader Mitch McConnell responded thus, according to CNN [ http://money.cnn.com/2012/01/04/news/economy/consumer_bureau_cordray/ ]:
"President Obama, in an unprecedented move, has arrogantly circumvented the American people by 'recess' appointing Richard Cordray as director of the new CFPB," said Senate Minority Leader Mitch McConnell in a statement.
Let's take this in order:
"Unprecedented move"? There is some technical dispute about when the Congress is and is not in recess. But the only thing "unprecedented" about Obama's use of recess appointments is how rarely he has done it. According to the Congressional Research Service, Bill Clinton made 139 recess appointments in 8 years, and George Bush made 171. According to Wikipedia (only source I immediately found), Obama made 28 in his first three years -- or less than half of Bush's rate, 9+ per year versus 21+.
"Arrogantly circumvented"? At the moment, Obama is the elected president of the United States. The Consumer Financial Protection Board was approved by both houses of Congress and duly signed into law by the president. There is no doubt that Cordray would receive a majority Senate vote in favor of his appointment -- if the nomination were ever allowed to come to a vote. And Obama is the one "arrogantly circumventing" Constitutional processes and the American people? Seriously, this kind of thing need to be called out for what it is: nonsense.
Thanks to WRM of Louisiana.
Copyright © 2012 by The Atlantic Monthly Group (emphasis in original}
http://www.theatlantic.com/politics/archive/2012/01/mitch-mcconnell-hopes-you-wont-do-the-math/250897/
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Richard Cordray, director of the Consumer Financial Protection Bureau, speaks at the Brookings Institution in Washington on Jan. 5. The speech was Cordray’s first since President Barack Obama used a recess appointment to give him the top job.
Photographer: Andrew Harrer/Bloomberg
By Carter Dougherty - Jan 6, 2012 2:00 PM CT
Richard Cordray’s appointment as director of the U.S. Consumer Financial Protection Bureau moves the new agency nearer to fulfilling its intended role as a one- stop shop for borrower safeguards.
Unlike the historically patchwork oversight of consumer finance, the bureau centralizes the federal government’s authority and in some cases extends it. Consumers may benefit from its reach whenever they take out a payday loan, negotiate a mortgage rate, borrow money for school or pay a credit card fee. For those who think they’ve been wronged, there will be a complaint system to help them fight back.
Cordray, 52, who was seated by President Barack Obama on Jan. 4 over Republican objections, takes over a bureau created under the Dodd-Frank Act in response to complaints that existing regulators didn’t do enough to protect consumers before the 2008 credit crisis. The rules overhaul shifted consumer protection from regulators responsible for banks’ financial stability, removing a potential source of conflict.
“Consumers deserve to have someone who will stand on their side, who will protect them against fraud, and who will ensure they are treated fairly in the financial marketplace,” Cordray said yesterday in a Washington speech. “The new consumer bureau was created to make sure these things are achieved for all Americans.”
Obama lauded the agency today as the way “to make sure the rules of the road are enforced” on behalf of consumers. “You’ve finally got a great director who was tailor-made to lead this agency in Richard Cordray,” Obama said during a visit with bureau staff in Washington.
Elizabeth Warren
Elizabeth Warren, the Harvard Law School professor credited by Obama with conceiving the bureau, viewed it as a “cop on the beat” to protect Americans against unscrupulous lenders by -- among other things -- eliminating jargon-filled loan documents in favor of plain-English paperwork.
“It is impossible to buy a toaster that has a one-in-five chance of bursting into flames and burning down your house,” Warren wrote in the journal Democracy in 2007. “But it is possible to refinance an existing home with a mortgage that has the same one-in-five chance of putting the family out on the street -- and the mortgage won’t even carry a disclosure of that fact to the homeowner.”
The consumer bureau was envisioned as a bulwark against the kind of credit bubble that inflated from 1999 to 2007, when household debt tripled to more than $12 trillion, according to the agency.
Foreclosures
Warren said effective federal consumer protection might have kept banks from improperly foreclosing on homes after the collapse of the U.S. mortgage market. The 14 largest mortgage servicers entered a consent decree with the Office of the Comptroller of the Currency that cost JPMorgan Chase & Co. (JPM) $1.1 billion. Consumer protection rules might also have prevented the rise of so-called liar loans, mortgages that were given to borrowers without documented evidence of ability to repay, advocates for the bureau said.
The bureau’s creators also foresaw an agency that would replace inconsistent state regulation with more stringent federal rules on short-term, small-dollar lenders including payday firms, whose annual interest rates can top 400 percent.
Disclosure Form
The agency, which Warren shaped while serving as an Obama adviser, was churning out drafts of a model mortgage disclosure form as part of an initiative dubbed “Know Before You Owe” even before it officially began work on July 21. These forms are intended to help consumers understand the costs of a mortgage and shop around for the best deal.
Similar initiatives have been announced for credit cards and student loans, the other two leading types of consumer credit in the U.S.
The bureau’s direct supervision of mortgage servicers, payday lenders and private student-loan companies will give consumers a watchdog to protect their interests in dealings with nonbank firms “that often compete with banks but have largely escaped meaningful federal oversight,” Cordray said yesterday in a speech at the Brookings Institution in Washington.
“This is an important step forward for protecting consumers,” Cordray said in a statement on the bureau’s website. “Holding both banks and nonbanks accountable to consumer financial laws will help create a fairer, more transparent market.” The speech was Cordray’s first since Obama used a recess appointment to give him the top job.
Legality Questioned
Republican lawmakers are questioning the legality of the move. Senator Charles Grassley of Iowa, the top Republican on the Judiciary Committee, asked the Department of Justice for information on the appointment in a letter signed by seven other Senate members.
Representative Spencer Bachus of Alabama, the chairman of the House Financial Services Committee, has begun an inquiry into the appointment. He has requested from Attorney General Eric Holder any information on the Justice Department’s role, as well as its opinion on the legal basis for the decision.
“The rule of law and Congress’ constitutionally grounded authority to conduct oversight of the executive branch requires that the administration explain the basis for its actions,” Bachus wrote to Holder in a letter dated today.
‘Jeopardy’
Cordray, a Democrat who served as Ohio’s attorney general, was tapped by Warren to run the bureau’s enforcement arm a month after he lost a re-election bid in November 2010. Cordray had previously served as Ohio’s treasurer, a state representative and as a law clerk to the U.S. Supreme Court (1000L), and has personally argued seven cases before the high court, according to his official biography. He was also a five-time winner on the television quiz show “Jeopardy.”
Congressional Republicans opposed the creation of the consumer bureau during negotiations that led to enactment of Dodd-Frank in 2010. Senate Republicans last year vowed to block confirmation of any director nominee while seeking changes including replacing the top job with a five-member commission and subjecting the bureau’s budget to the congressional appropriations process.
Senator Richard Shelby of Alabama led a group of 45 Republicans who vowed to deny Obama the 60 votes needed to ensure confirmation by the 100-member Senate. He released a statement Jan. 4 faulting Obama for bypassing lawmakers with an “end run” to seat “an unaccountable bureaucrat who will have immense power over the economy.”
Needless Bureaucracy
Lobby groups representing financial firms including JPMorgan and Bank of America Corp. (BAC) fought against the creation of an independent consumer bureau, saying it would create needless bureaucracy. Payday lenders like Advance America Cash Advance Centers Inc. (AEA) won a rule preventing the agency from limiting interest rates, but couldn’t avoid being covered by its rules.
“It has been widely reported that we were against the creation of a Consumer Financial Protection Bureau (C (C).F.P.B.),” JPMorgan Chairman and Chief Executive Officer Jamie Dimon wrote in an April 4 letter to shareholders. “We were not -- we were against the creation of a standalone C.F.P.B., operating separately and apart from whatever regulatory agency already had oversight authority over banks.”
Complaint System
Consumers may benefit from the bureau’s complaint system, its coming regulations and the corps of examiners it is building to examine the books and practices of financial firms.
The bureau, which began taking complaints about credit cards on July 21, said it had fielded 5,074 inquiries as of Oct. 21. The bureau said it would make complaint information available -- without personal information -- to the public, bucking objections from credit card issuers.
“The complaint system has identified recurring scams and helped to obtain redress for defrauded consumers,” the bureau said in a Nov. 30 report.
Supervision of financial services firms could turn out to be a tactic for reducing the fees that consumers pay for overdrawing their checking account. A study by the Federal Deposit Insurance Corp. published in 2008 concluded that 9 percent of customers paid 84 percent of all overdraft fees.
Felt, Not Seen
Jo Ann Barefoot, a consultant with Treliant Risk Advisors in Washington, said the key tactic in reducing overdraft fees could be supervision, work that would be felt, but not seen, by consumers.
Traditionally, banking supervisors visit firms and examine their records, and prompt changes “every day of the week,” Barefoot said.
“Now for the first time, an agency is conducting examinations with a focus on harm to the consumer,” Barefoot said in an interview.
The existence of a new consumer bureau doesn’t mean that every mortgage will be refinanced, or every bad debt forgiven, Travis Plunkett, director of legislative affairs for the Consumer Federation of America, said in an interview.
“Americans have a right to expect that this new agency will start to address some of the financial problems that are affecting them,” Plunkett said. “That does not mean a startup agency can work miracles.”
The agency begins its work in earnest with a structure that will be largely invisible to the consumer.
Behind its website, consumerfinance.gov/ [ http://www.consumerfinance.gov/ ], lies the complaint system -- which can also be accessed by mail or telephone. Apart from the team that tends to that system, examiners will handle the day-to-day scrutiny of banks and other consumer finance companies.
Alleged lawbreakers will face its enforcement team, which Cordray set up over the past year. And a research and regulations team will both track industry developments, and write and revise the rules of the road for consumer finance.
To contact the reporter on this story: Carter Dougherty in Washington at cdougherty6@bloomberg.net
To contact the editor responsible for this story: Lawrence Roberts at lroberts13@bloomberg.net
©2012 BLOOMBERG L.P.
http://www.bloomberg.com/news/2012-01-06/obama-s-consumer-watchdog-targets-mortgage-firms-payday-lenders.html [with comments]
===
Obama tells consumer bureau to ensure Americans get a fair shake
President Obama shakes hands with Richard Cordray, director of the Consumer Financial Protection Bureau, during a visit to the agency Friday.
(Michael Reynolds-Pool/Getty Images)
By Jim Puzzanghera
Reporting from Washington
January 6, 2012, 10:49 a.m.
President Obama told employees of the new Consumer Financial Protection Bureau that their job was to make sure that Americans get a "fair shake" from banks and other lenders.
"They're not looking for a handout. They're not looking for special treatment," Obama said Friday of the feedback he gets from people in letters and on his travels. "They just want a fair shake. They just want a fair deal. And we have a chance to give it to them."
Obama made the comments in what amounted to part victory lap, part pep talk for the agency that was a cornerstone of the financial reform law enacted in 2010.
"Every one of you here has a critical role to play in making sure that everybody plays by the same rules: to make sure that the big banks on Wall Street play by the same rules as community banks on Main Street," Obama said, flanked by top officials at the agency.
"That's your mission," he continued, "to make sure that the American people have somebody in their corner, that American consumers have somebody who's got their back."
About 100 staffers were selected by lottery from the agency’s 800 employees to attend Obama's 10-minute speech. They crowded into the small amphitheater at the CFPB’s new offices, which the agency inherited from the shuttered Office of Thrift Supervision last year.
The White House wants to continue to highlight the controversial recess appointment of Richard Cordray to head the agency, which administration officials say show the president’s commitment to protecting consumers and overcoming Republican opposition in Congress.
Republicans and business leaders criticized the appointment as a violation of Obama’s constitutional powers and legal challenges are expected.
Cordray flew with Obama on Air Force One to Cleveland on Wednesday for the announcement of his appointment. On Thursday, Cordray gave a speech at the liberal-leaning Brookings Institution think tank and interviews to CNN and NPR.
On Friday, Obama made the short trip to the CFPB's offices, which are across the street from the White House complex, to tout its expanded role in the financial services marketplace.
Cordray said this was an important week for the agency and the country. With his installation as director, the consumer bureau received its full authority to police payday lenders, mortgage brokers and other financial firms outside the conventional banking system.
"Consumer financial products and services can help each of us achieve our dreams, but when risks are not clear and fees are hidden, they can make our lives much harder," Cordray said before introducing Obama.
Obama was greeted by rousing applause from agency workers, and lingered after his speech to shake hands. He praised Cordray, a former Ohio attorney general, as someone"tailor-made" to lead the agency.
And Obama gave "a special shout-out" to Elizabeth Warren, the Harvard Law professor who conceived of the agency and worked for a year as an administration adviser to set it up.
Strong Republican opposition to Warren led Obama to bypass her as his nominee to be the agency's first director. She is now running for the U.S. Senate in Massachusetts. Cordray was nominated in July, but nearly all Senate Republicans vowed to block his confirmation unless Obama agreed to changes to weaken the authority of the agency and its director.
Obama refused and on Wednesday broke with two decades of tradition and appointed Cordray during a short Senate recess. Obama said the appointment was an important milestone for consumers because it fully empowers the agency.
"Now that he's here, irresponsible debt collectors and payday lenders and independent mortgage servicers and loan providers -- they're all bound by the same rules as everybody else," Obama said. "No longer are consumers left alone to face the risk of unfair or deceptive or abusive practices. Not anymore."
*
Also
Richard Cordray appointment 'turns lights on' at consumer bureau
http://www.latimes.com/business/la-fi-cordray-consumer-bureau-20120105,0,2888288.story
Obama circumvents Congress to make appointments
http://www.latimes.com/news/nationworld/nation/la-na-obama-cordray-20120105,0,449661.story
Consumer bureau chief begins supervision of payday lenders
http://www.latimes.com/business/la-fi-cordray-consumer-20120106,0,3192945.story
Editorial: Obama's recess appointment challenge
http://www.latimes.com/news/opinion/opinionla/la-ed-recess-20120106,0,692272.story
Op-Ed: Washington standoff
http://www.latimes.com/news/opinion/commentary/la-oe-ackerman-recess-apointments-20120106,0,2673070.story
*
Copyright © 2012, Los Angeles Times
http://www.latimes.com/business/money/la-fi-obama-consumers-20120106,0,3110153.story [with comments]
===
Why Obama Was Right to Pick a Fight Over the CFPB's Richard Cordray
Reuters
The president makes a needed, consumer-friendly act of defiance in appointing a new director of the Consumer Financial Protection Bureau.
James Warren
Jan 4 2012, 3:00 PM ET
It will be viewed by the Washington punditocracy as a tough-minded executive act defying Senate Republicans, playing to a worried liberal base, and raising a possible legal challenge with constitutional ramifications.
But President Obama's Wednesday selection of Richard Cordray, a former Ohio attorney general, to run the spanking-new Consumer Financial Protection Bureau is also just smart and necessary.
If our politics weren't quite so polarized, and folks stuck a bit more to the facts in public debate, maybe far more people would know what Cordray symbolizes. They would know that they should be happy that a frustrated White House has circumvented a Senate filibuster last month and will try to actually protect consumers.
And it's probably fitting that Cordray, who had a strong reputation in Ohio for investigating suspect mortgage foreclosure practices, is also a five-time "Jeopardy" champ. The mere existence of the agency he will head would probably stump most of the game show's contestants and viewers.
It was created out of the Dodd-Frank financial-reform legislation and inspired by the reality that seven different agencies performed at times overlapping functions in overseeing financial products involving Mr. and Mrs. Joe Citizen.
It's the agency which Elizabeth Warren, a Harvard University law professor and bankruptcy expert, was asked to set up by Obama. She was badmouthed by Wall Street as too tough and strident, while 44 Senate Republicans harrumphed about the agency being potentially too powerful and unaccountable and in need of a board of directors rather than a single chief.
Warren split to run for U.S. Senate in Massachusetts, now raising the wonderful prospect of her one day having cocktails with fellow Senate members who shafted her. Obama picked Cordray, who Warren had already tapped as the chief enforcement officer, to run the bureau.
That ultimately led to the Senate filibuster and Wednesday's recess appointment, which might become a legal dispute since Republicans are claiming Congress isn't technically in recess, thanks to some rather cynical and superficial pro forma sessions they've been holding, in a technical sense, over the holidays. They've constituted a legalistic and legislative sham.
So why should regular folks care about Cordray?
For one, we really do need some coordinated oversight of lending practices and financial products involving consumers. Creating the agency was quite a feat, especially given decades of bureaucratic drift that left multiple agencies feeling empowered to monitor bits and pieces of our consumer lives, albeit in often half-hearted and unfocused ways.
It's basic civics, but one of the more important things that a regulatory agency does -- especially a financial regulator -- involves supervision. It means having federal personnel inside financial institutions.
But in a Dodd-Frank quirk, the law splits the basic supervisory authority. One year after enactment, the agency could begin supervising banks. But it could not begin supervising non-financial institutions until after it had a permanent director.
That's why Cordray is really important.
Non-financial institutions include payday lenders, debt collectors, credit-reporting agencies like Equifax and Experian, and the whole non-bank mortgage lending sector, namely the many mortgage brokers and lenders not affiliated with some big bank.
Just take payday lenders. They are a huge sector with a notoriously questionable modus operandi, including deceptive interest-rate practices and payments that can balloon into the stratosphere. About 20 million Americans use payday loans, according to the White House, and there is no shortage of people who get stuck in deep debt tracks due to those sky-high interest rates.
The credit-reporting sector is another big area of concern, with most people clueless about the factors going into determining their ratings and, often, deteriorating credit. There are important questions about the information those firms give out to companies with which consumers deal as compared to what they might give the individual himself.
When Republicans realized they couldn't kill the agency outright, they sought to trim back its authority. They failed in most cases, but one minor success was implementation. That's how we got the oddity of its being unable to regulate large, important areas of consumer life until a permanent director was named.
It is notable that there were shifting alliances over Dodd-Frank and these important elements of implementation. For example, many community banks and credit unions saw the light and supported the law because they feared they would be at a competitive disadvantage if big institutions were supervised but non-bank counterparts, such as payday lenders, were not.
Republicans, who are often beholden to financial institutions that just don't like regulation, claimed that the agency should be run by a commission, not a director -- just like the Securities and Exchange Commission. The GOP also didn't like that the agency's funding is tied to fees paid into the Federal Reserve System, as opposed to the annual appropriations systems the politicians control.
Ultimately, they were throwing roadblocks at what history will likely underscore were a slew of needed financial reforms stemming from a financial mess culminating in the mortgage crisis.
You could even argue that after filling Supreme Court vacancies, the Obama Administration will make no appointment bigger than Cordray's. If the agency works as envisioned, it would bring citizens a lot more transparency about key portions of their financial lives -- and bring bad players to light well before a disaster like the mortgage collapse.
In an age where opinion rules, there are also facts. And, in the case of the Consumer Financial Protection Bureau, the facts seem to be on the side of a beleaguered president.
Copyright © 2012 by The Atlantic Monthly Group
http://www.theatlantic.com/politics/archive/2012/01/why-obama-was-right-to-pick-a-fight-over-the-cfpbs-richard-cordray/250866/ [with comments]
===
Mitch McConnell Hopes You Won't Do the Math
James Fallows
Jan 4 2012, 7:58 PM ET
In response to President Obama's "what took him so long? [ http://www.theatlantic.com/politics/archive/2012/01/the-nullification-chronicles-at-last-obama-strikes-back/250878/ ]" recess appointment of Richard Cordray to head the Consumer Financial Protection Board, Senate Minority Leader Mitch McConnell responded thus, according to CNN [ http://money.cnn.com/2012/01/04/news/economy/consumer_bureau_cordray/ ]:
"President Obama, in an unprecedented move, has arrogantly circumvented the American people by 'recess' appointing Richard Cordray as director of the new CFPB," said Senate Minority Leader Mitch McConnell in a statement.
Let's take this in order:
"Unprecedented move"? There is some technical dispute about when the Congress is and is not in recess. But the only thing "unprecedented" about Obama's use of recess appointments is how rarely he has done it. According to the Congressional Research Service, Bill Clinton made 139 recess appointments in 8 years, and George Bush made 171. According to Wikipedia (only source I immediately found), Obama made 28 in his first three years -- or less than half of Bush's rate, 9+ per year versus 21+.
"Arrogantly circumvented"? At the moment, Obama is the elected president of the United States. The Consumer Financial Protection Board was approved by both houses of Congress and duly signed into law by the president. There is no doubt that Cordray would receive a majority Senate vote in favor of his appointment -- if the nomination were ever allowed to come to a vote. And Obama is the one "arrogantly circumventing" Constitutional processes and the American people? Seriously, this kind of thing need to be called out for what it is: nonsense.
Thanks to WRM of Louisiana.
Copyright © 2012 by The Atlantic Monthly Group (emphasis in original}
http://www.theatlantic.com/politics/archive/2012/01/mitch-mcconnell-hopes-you-wont-do-the-math/250897/
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