With director in place, CFPB begins supervision of nonbanks
Richard Cordray, installed as head of the Consumer Financial Protection Bureau by President Obama this week, said with a director in place, the new regulator can now supervise firms previously outside federal oversight. On Thursday, the former Ohio attorney general said he will use authority granted to the CFPB by the Dodd-Frank Act and enforce regulations that impact payday lenders, mortgage servicers and originators, private student loan lenders. "In the run-up to the financial crisis, many unsupervised firms led a race to the bottom that pushed aside responsible businesses, including community banks and credit unions, and greatly harmed consumers," Cordray said. "Now, for the first time, we can exercise the full authorities granted to us under the new law. That is the specific difference that having a director makes," he said. "Today, we are launching the bureau's program for supervising nonbanks. We will begin dealing face-to-face with payday lenders, mortgage servicers, mortgage originators, private student lenders, and other firms that often compete with banks but have largely escaped any meaningful federal oversight." Cordray was officially named to the post by President Obama in a recess appointment that will be contested by congressional Republicans. Lawmakers who opposed the structure of the bureau stalled the appointment of a single director and want a panel to run the CFPB. Cordray made his first official speech as director at the The Brookings Institute in Washington Thursday. "These are important markets," Cordray said. "Many provide valuable services to customers who lack access to other forms of credit. And they are big markets. Nearly 20 million American households use payday lenders, and pay roughly $7.4 billion in fees every year." Cordray also directed statements at subprime lenders who wrote risky loans during the housing bubble, saying nonbank mortgage brokers who issued them are not used to federal oversight, and "our new supervision program may be a challenge for them." "But we must establish clear standards of conduct so that all financial providers play by the rules," he said. Write to Kerri Panchuk.