This week, President Obama used his executive authority to enable Richard Cordray, the former Attorney General of Ohio, to begin his work as Director of the Consumer Financial Protection Bureau (CFPB). The president made the right call by refusing to give in to Republicans who were holding Mr. Cordray's nomination hostage in an attempt to defang America's consumer watchdog agency.
The Dodd-Frank financial reform bill, which I worked to pass, created the CFPB to make financial transactions fairer, most honest, and more open for the American consumer. Its aim is to put an end to the kind of predatory practices that contributed so heavily to the near-collapse of our financial and banking systems.
In July, President Obama nominated Cordray to become the CFPB's first director, but Senate Republicans blocked the nomination, refusing to allow a confirmation vote on the Senate floor. They took this action not because they believed Cordray to be unqualified, but because they objected to the very idea of a consumer protection agency. As the price for allowing a vote on Cordray's nomination, Republicans demanded that the CFPB's consumer protections (which passed both houses of Congress overwhelmingly) be watered down.
The enemies of financial reform had an additional incentive to block Cordray's nomination: without a director, the CFPB wasn't able to exercise the full range of authority granted to it under the Dodd-Frank law. Until now, the CFPB was unable to fully supervise non‐bank financial institutions, such as independent payday lenders, non‐bank mortgage lenders, debt collectors, credit reporting agencies, and private student lenders. While many companies in these sectors are good corporate citizens, before the advent of the CFPB, we had little or no way to go after bad apples in the industry.
Borrowers who turn to financial products from unscrupulous lenders can end up paying annual percentage rates as high as 400 percent -- often when they are already struggling with other debt, creating a debt‐and‐fee‐spiral that can be extremely difficult to escape. Now, with Cordray at the helm of a fully-functioning CFPB, Americans will be better-protected from falling victim to harmful practices.
Cordray will also continue many of the successful initiatives the CFPB has already put in place in just its first few months of operation. The bureau has begun by looking out for groups that have been especially hard-hit in the past by unfair and deceptive practices: members of the military, students, homeowners, and seniors.
To help the brave men and women in our military, the Office of Service Member Affairs has been established under the CFPB, headed by Holly Petreaus. Petraeus has responded swiftly to complaints that mortgage servicers were illegally foreclosing on the homes of service members while they were deployed. She also reached out to the CEOs of the 25 largest mortgage servicers to stop these abusive practices directed at members of our armed forces.
To help students, the CFPB has drafted a new financial aid form that is easy to read and understand. It breaks down the real costs of student loans and, as the program's title states, encourages students to "Know Before You Owe." The Financial Services Roundtable has praised this move, saying: "This initiative will help students know the cost of their education before borrowing by increasing transparency."
To help homeowners, the "Know Before You Owe" program has also combined two federally-required mortgage disclosures into a single, redesigned, simpler form.
To help seniors, Hubert H. ("Skip") Humphrey III has been named to head up the newly-established Office of Older Americans. This office is tasked with improving the financial decision-making of seniors and preventing unfair, deceptive, and abusive practices targeted at seniors.
The CFPB is leveling the playing field between consumers and the financial industry, making markets work more efficiently, and helping prevent the kind of financial crisis that brought on the Great Recession. The CFPB has been with us for only a few short months. While it has already made a significant difference in making financial-product risks and prices clear, it will be able to do much more with a strong director in place.
Mr. Cordray is eminently well-qualified to be the first CFPB director. Prior to his appointment as director, Cordray served as the CFPB's Chief of Enforcement. As the Attorney General of Ohio, Cordray recovered more than $2 billion for Ohio's retirees, investors, and business owners and took major steps to help protect consumers from fraudulent foreclosures and financial predators. Cordray also served as Ohio's State Treasurer and as an adjunct law professor at Ohio State University.
I wish Mr. Cordray the very best in his new position -- and I thank President Obama for taking decisive action to make sure that the American people have a strong financial watchdog on their side.