The Director of the Consumer Financial
Protection Bureau (CFPB) finally got to present the Bureau's third Semi-Annual
Report to the House Financial Services Committee (FSC) today, five months after
it was first issued, but the committee's chair made it clear the Bureau is
still on his watch list.
Director Richard Cordray told the FSC
that the report, published on April 23, illustrates the way his bureau is using
the tools Congress has provided it to empower consumers and promote a fair,
transparent, and competitive marketplace for consumer finance. "We have taken steps," he said, "to improve
the workings of markets, particularly those in which consumers cannot choose
their financial service providers.
CFPB gained authority at the first of
the year to regulate debt collectors and also expanded its supervision to
include the larger credit reporting companies.
Cordray said that credit reports have a profound impact on people's
lives but that previously the companies controlling the credit data were not
subject to federal supervision and consumers often struggled to get problems
solved and errors corrected. With these
additions to its portfolio the Bureau can now evaluate whether federal consumer
laws are being followed throughout the process, from credit origination through
The Bureau's first enforcement actions
were taken during the reporting period which covered July 1 to December 31,
2012. These actions were against credit
card companies and secured $425 million in relief for 6 million customers. In the second half of 2012 CFPB also tackled
issues in the private student loan market and made recommendations for reforms.
Cordray said his agency had also
addressed more than 130,000 consumer complaints and adopted new mortgage
regulations mandated by the Dodd-Frank Act.
The Ability-to-Repay rule follows
the simple principle that lenders
should offer consumers mortgages they can
afford to pay back.
Neither Cordray nor any other senior
official of CFPB had been permitted by the Financial Services Committee to
testify about the Semi-Annual Report at the time it was issued. As reported in MND at
the time, Committee Chair Jeb Hensarling (R-TX) used a recent court ruling on
the legitimacy of interim presidential appointments made on the same day as the
Director's interim appointment to question the legitimacy of any work done by
the Bureau during his tenure. After a
two-year delay the Senate finally confirmed Cordray this summer.
Hensarling referred in passing to the
dated nature of Cordray's testimony before issuing a harsh general critique of
the Bureau's legal structure and authority.
He called it "arguably the single most powerful and least accountable
Federal agency in the history of America." Saying that it is an agency that
demands rigorous oversight Hensarling warned it will undoubtedly demand numerous
congressional hearings and inquiries, "So again not only do we welcome the
Director today," he said, "but we look forward to welcoming you to our hearing
room for many further appearances before us."
The Chairman said CFPB was designed to operate outside the usual system of
checks and balances that applies to almost every other government agency. It is effectively unaccountable to Congress
because it is exempted from the budgetary and appropriations process. It is unaccountable to the Executive Branch because
the director can only be removed from office for cause. It is also uniquely unaccountable to the
courts under Dodd-Frank which mandates that in any disagreement with another
agency the court must give deference to CFPB under the Chevron Doctrine.
The Chairman asks, "All of this does beg the question: who will
protect consumers from the Consumer Financial Protection Bureau?