Cordray’s Confirmation as Chief of CFPB Is Victory for Consumers

Senate Vote Ushers In New Era in Oversight of Lending Practices

New York Times, July 17, 2013

WASHINGTON — The Consumer Financial Protection Bureau was conceived by a Harvard professor, embraced by the Obama administration and pushed into law by Congressional Democrats determined to expand the federal government’s authority to protect borrowers from abusive lending practices — all in the space of just three years.

Richard Cordray was confirmed as the Consumer Financial Protection Bureau chief almost two years after his nomination.

But even after the agency opened its doors in July 2011, almost exactly two years ago, its legal authority remained uncertain so long as Republicans prevented the confirmation of a director to lead the agency, as required by law.

That barricade collapsed on Tuesday. Republicans agreed to allow the confirmation of Richard Cordray, by a vote of 66 to 34, cementing a new era of expansive federal oversight of companies that lend money to consumers.

Senator Elizabeth Warren, the Massachusetts Democrat who conceived the agency when she was a Harvard professor and supervised its creation as an Obama administration official, presided over the 66-to-34 confirmation vote, announcing the results with obvious satisfaction.

“It is a truly historic day,” Ms. Warren told reporters before the vote. “There’s no doubt that the consumer agency will survive beyond the crib. There is now no doubt that the American people will have a strong watchdog in Washington.”

Mr. Cordray, 54, and the agency are now set up to regulate interactions between borrowers and lenders, from the largest banks to mom-and-pop payday shops, and the terms of mortgages and student loans among other financial transactions.

He was confirmed one day shy of the second anniversary of his nomination by Mr. Obama. In January 2012, Mr. Obama installed Mr. Cordray at the agency when Congress was in recess, a move that the administration described as fulfilling the legal requirement for the agency to exercise the full measure of its powers. But some administration opponents did not agree.

Since then, the agency has begun to assert authority over nonbank financial companies, including mortgage and payday lenders, but its actions have been shadowed by uncertainty about the legality of Mr. Cordray’s appointment.

The Supreme Court agreed in June to hear a case regarding the legality of Mr. Obama’s recess appointments to the National Labor Relations Board. If the court rules against the administration, it would open the way for challenges regarding Mr. Cordray, who was appointed on the same day and in the same way. The vote on Tuesday, however, means any such ruling most likely would have limited consequences.

“Today’s action brings added certainty to the industries we oversee and reinforces our responsibility to stand on the side of consumers and see that they are treated fairly in the financial marketplace,” Mr. Cordray said in a statement.

Republicans had insisted they would block any nominee to lead the consumer agency, instead demanding that Democrats agree to eliminate the position and replace it with a board of directors. Forty-four Republican senators made that demand in a May 2011 letter, and 43 repeated it earlier this year.

Senator Rob Portman, an Ohio Republican, said Tuesday that he had agreed to allow a vote after speaking with Mr. Cordray in person on Monday night and again on Tuesday morning. Mr. Portman said that Mr. Cordray, who is also from Ohio, had promised to testify before the Senate Appropriations Committee, although the panel still would not have power over the agency’s budget. He also said that Mr. Cordray had promised to obtain cost-benefit analyses on proposed regulations. Mr. Portman and other Republicans said they would continue to pursue structural reforms of the agency.

The banking industry, which largely opposed the agency’s creation and then sought to prevent Mr. Cordray’s confirmation, found a silver lining on Tuesday in the prospect that the government would increase its oversight of other financial institutions.

“What we’re looking for now is full steam ahead to level the playing field between banks and nonbanks,” said Richard Hunt, president of the Consumer Bankers Association. He cited payday lenders and Wal-Mart as particular examples of the kind of nonbank lenders that banks would like to see subjected to additional regulation.

Mr. Hunt emphasized that his group had always been concerned about the agency’s structure, not about the particular choice of Mr. Cordray.

“I think it would have been much better for the American people” if the structure had been changed, he said. “But I think that train has left the station after today’s vote.”

Ms. Warren proposed the creation of a federal agency to protect consumers of financial products in a 2007 article, memorably arguing that the government put more effort into ensuring the safety of toaster ovens than the safety of mortgage loans. The idea resonated with Mr. Obama and his senior advisers, and it became a centerpiece of the administration’s proposal to overhaul financial regulation.

Mr. Obama named Ms. Warren to oversee its creation, and she brought in Mr. Cordray after he lost a bid for re-election as Ohio attorney general, where he had pursued a series of investigations of financial companies.

When Mr. Obama passed over Ms. Warren to nominate Mr. Cordray, she decided to run for the Senate instead. She has remained a vigorous advocate for the agency and for Mr. Cordray. “I can’t think how many times people said to me that this agency has no chance, none at all, that it will be killed in the crib,” she said. “I just couldn’t be more pleased.”