Political Disagreements over the CFPB Dominate Cordray’s Hearing and Delay Confirmation

Political Disagreements over the CFPB Dominate Cordray’s Hearing and Delay Confirmation

by Troutman Sanders CFPB Team

On September 6, 2011, Richard Cordray, former Ohio Attorney General and current nominee to become the first Director of the Consumer Financial Protection Bureau (CFPB), appeared before the Senate Banking Committee for a hearing on his nomination.  However, even before Mr. Cordray took his seat in the committee room on Tuesday, political battle lines were being drawn.  In May the majority of Republican Senators endorsed a letter to President Obama calling for a board of directors or commision to oversee the CFPB, as opposed to a single director, and seeking additional checks on the CFPB's power.  Over the Labor Day weekend, in a Washington Post Op-Ed, Senator Barney Frank (D - Mass) accused Republicans of "blatantly distorting the Constitution" and equated their opposition "to an arsonist having set a fire and objecting to a building's inhabitants using the fire exit." 

The hearing would not disappoint those expecting a continuation of the significant political division over the CFPB.  Committee Chairman, Senator Johnson (D - SD), started the finger pointing while reading his prepared remarks, accusing the "vocal minority" of engaging in "political gamesmanship" by "rehashing the same debate Congress had last year when it created the CFPB as an accountable yet independent regulator."  Anticipating Republican opposition, Senator Johnson highlighted some of the checks placed on the CFPB including the Financial Stability Oversight Counsel's power to overturn CFPB regulations, the CFPB's capped budget and the power of the President to removed the CFPB director.  

Senator Shelby (R - Ala.), the ranking Republican member, shot back, saying a hearing on any nomination for a director was premature and blaming the President and Democrats for refusing to work with Republicans to improve the accountability of the CFPB.  Senator Shelby accused the majority of structuring the CFPB in such a way as "to grant its Director unprecedented authority over the lives of the American people without any effective checks." Shelby futher stated "The Administration's heavy-handed regulatory agenda is crippling the economy" and "there could not be a worse time to give an unelected and unaccountable bureaucrat a blank check to impose even more ill-considered rules that could further undermine our weak economy."

Mr. Cordray, while highlighting his qualifications for the position, attempted to mollify Republican concerns about the enforcement actions of the Bureau by noting the CFPB's "more flexible toolbox" and saying that in his "experience . . . lawsuits can be a very slow, wasteful, and needlessly acrimonious way to resolve a problem."  Mr. Cordray's statements, however, had little effect on the debate.  Other than a brief discussion of his time as Ohio Attorney General and Senator Schumer's (D - NY) notation that Mr. Cordray once worked at McDonalds, little time was spent actually discussing Mr. Cordray's potential as the CFPB Director.  Instead a general back and forth developed concerning the oversight of the CFPB and whether a board of directors or commission would be more appropriate to head the Bureau.  Almost apologizing to Mr. Cordray near the end of the proceedings, Senator Shelby said, "I am sure you have a good background and have a fine family . . . but you are caught between a big substantive debate . . . and that is going to have to be resolved, I think, before we move this nomination further."

As expected, the hearing concluded without any vote being held on Mr. Cordray's nomination, and it does not appear that Republicans are ready to move towards confirmation until a number of issues are resolved.  While the CFPB has considerable power without a Director, the Bureau is significantly restricted in its ability to regulate in many areas, especially nonbank financial institutions and product providers including payday lenders, private education loan providers and mortgage servicers.  The CFPB continues to move forward on a number of initiatives, but until a director is confirmed its limitations are substantial.

Read more at Consumer Financial Protection Bureau Report by Troutman Sanders LLP. 

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