New consumer finance watchdog vows to regulate predatory lenders

Introduction

The newly appointed director of the Consumer Financial Protection Bureau pledged Thursday to keep a close eye on so-called “non-bank” lenders, a supervisory role the agency was denied as it awaited the appointment of a full-time boss.

“Nearly 20 million American households use payday lenders, and pay roughly $7.4 billion in fees every year,” Richard Cordray, the 52-year-old former Ohio attorney general told a crowd at the Brookings Institution. “Many subprime loans during the housing bubble were made by non-bank mortgage brokers. We must establish clear standards of conduct so that all financial providers play by the rules.”

Even though the hour-long talk was only announced the night before, the new director had no problem filling the room. It was easy to see why. The power of his position and the politics of his appointment had the overflow crowd of consumer advocates and Washington reporters abuzz with interest.

The CFPB, created by the 2010 Dodd-Frank financial reform bill, has the power to regulate the non-bank financial sector, a relatively lawless corner of the financial universe. But a Republican filibuster kept Cordray from being confirmed in the Senate. Without a director, the agency did not have the power to regulate non-bank lenders.

Members of the Washington press corps in attendance seemed more interested in how Cordray would deal with a combative Congress.

President Obama angered Republicans Wednesday when he used a “recess appointment” to install Cordray as the first head of the watchdog agency – even though Congress had technically not gone into recess. The House and Senate have continued to hold so-called pro forma sessions every three days, lasting seconds at a time.

In addition to Cordray, three new members to the National Labor Relations Board, also targets of Republican filibustering, were appointed.