The birthday of the 2010 Dodd-Frank Wall Street Reform and Consumer Protection Act is coming up Sunday, and an early present has already arrived.
Richard Cordray, director of the Consumer Financial Protection Bureau — which was created by Dodd-Frank — was confirmed by the Senate Tuesday. He has headed the agency since early 2012 by virtue of a shaky procedural maneuver.
The 66-to-34 vote capped a political battle over the consumer protection agency and shored up its authority to bring crackdowns against credit card issuers and others. Cordray was sworn in Wednesday, two years to the day after his nomination for the job.
It was a day Republicans and business groups fought hard against. They wanted to restructure the bureau as a commission and subject its budget to congressional control. Consumer advocates howled against this plan, saying it would put the agency under the thumb, indirectly, of the big businesses that funnel money into congressional campaigns.
In its short tenure the CFPB has taken on costly and unfair practices by credit card issuers, debt collectors and payday lenders — whether they operate from storefronts or from the marble corridors of major banks.
“If you’ve noticed some credit card forms are becoming easier to understand than they used to be, that’s because of the work of Richard’s team,” President Obama said Wednesday during Cordray’s swearing-in ceremony.
Moving forward, the agency is studying how arbitration agreements affect consumers and how the Credit CARD Act of 2009 has panned out.
All these initiatives were under a cloud. Cordray has been leading the agency under a recess appointment that was vulnerable to legal challenge, and the challenge could have extended to the agency’s actions on his watch. That uncertainty is wiped out by the Senate’s vote.
“Hooray for Cordray,” crowed ConsumerReports.org in a news posting. resident Jim Guest called the vote “a big win for consumers,” echoing the elated reaction of consumer groups generally.
Some banking groups are darkly predicting that the bureau will wish it had knuckled under to restructuring, and Republicans in Congress say the effort will continue in other avenues.
But after the confirmation vote, those avenues look like a dead end.
“People are talking about it, but obviously they’ve given up their biggest bargaining chip,” said Lauren Saunders, managing attorney of the Washington office of the National Consumer Law Center. She and other Washington watchers predict the CFPB is safe from further attacks, at least until there’s a big shift in power. It will take a new Congress and administration to pass a law and sign it to restructure — or dismantle — the consumer bureau.
We’re used to watching financial regulators chase problems from behind. Scammers, falsely flying the flag of legitimate business, get taken down after ripping people off for months or years. The agency responsible issues a press release, congratulating itself for shutting the barn door long after the horse got out.
The CFPB is taking a different approach. It is studying how financial products work, and what they’re costing us. This way, it can get out front of rip-offs and go after scams on a system-wide basis — even ones that operate under the auspices of large, well-established businesses.
The agency set the tone with its first big enforcement actions, penalizing big credit card issuers for deceptive marketing of their costly and ineffective “protection” products. Its study of payday lending found that borrowers who are hooked on a cycle of expensive loans generate most of the industry’s profits.The complaint system it set up works to resolve individual consumers’ problems — but more than that, it provides a look into emerging threats on a nationwide basis.
“I think the agency has had its nose to the grindstone and been able to ignore the hysteria on Capitol Hill,” Saunders said.
Now there’s no cause for distraction.