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
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
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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