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New Consumer Czar: 'This Is A Valid Appointment'

Jan 5, 2012
Originally published on January 5, 2012 6:27 pm

Richard Cordray, the new head of the Consumer Financial Protection Bureau, defended his appointment in an interview with All Things Considered today.

"This is a valid appointment," he told NPR's Robert Siegel. "But, again, I'm not going to be distracted by the details of that. My job is to be the director of this consumer bureau, to look out for consumers across the country and I'm going to focus 100 percent on that job."

Robert asked if he was just going to "ignore whatever litigation might develop from that" and Cordray said, "that's correct."

Yesterday, President Obama bypassed the Senate and named Cordray using a maneuver known as a recess appointment. But, as we reported, the move was controversial because Senate Republicans argue the body was not in recess because they had set up pro-forma sessions every third day in order to keep the president from making such appointments.

Robert also asked Cordray if his controversial appointment would affect the enforcement power of the agency.

"It's likely that some lender whose wings you might clip will sue and claim that your agency has no authority to do it, because you weren't legally confirmed. Will that color your actions? And do you welcome that challenge?" Robert asked.

"It won't affect our actions," Cordray said, adding that he wasn't saying that to be cavalier. "The important thing here is that the bureau now has a director and that will level the playing field between banks and non-banks."

Cordray also talked to Robert about the role of the new agency. He said the agency will not say for example whether a consumer can take out a certain kind of loan.

"We're not going to be dictators in the market," he said. "We won't be making people's judgements for them. People have to make their own judgements and they have to take responsibility for those decisions, but if consumers aren't clear on what the options are, if they don't really understand the terms of the deal, because there's lots of fine print and it's confusing and it's complex, then the markets don't work very well and we saw that in so many ways [during the financial crisis.]"

We'll post the as-aired version of Robert's interview with Cordray a little later tonight.

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MELISSA BLOCK, HOST:

This is ALL THINGS CONSIDERED from NPR News. I'm Melissa Block.

ROBERT SIEGEL, HOST:

And I'm Robert Siegel. Now, a talk with Richard Cordray, whom President Obama named yesterday to run the Consumer Financial Protection Bureau. The bureau was created by the Dodd-Frank Act that overhauled federal regulation of financial services. And while the bureau extends federal regulation to many non-bank lenders, it hasn't been able to do much of anything without a director.

BLOCK: The manner of Mr. Cordray's appointment is controversial. Senate Republicans, who say they want more oversight of the bureau, blocked it. So President Obama sidestepped the Senate by declaring a recess appointment. Republican senators say they're not in recess. They're technically in session, even though very few of them are here in Washington, too few to conduct any legislative business. The White House sees that as a recess in all but name, and a challenge in uncharted legal waters is likely.

SIEGEL: Richard Cordray is a former attorney general of Ohio, and indecently back in 1987, he was a five-game winner on "Jeopardy" as well. He joins us now from the Commerce Department. Welcome to the program.

RICHARD CORDRAY: Thank you.

SIEGEL: Whatever you do at the bureau, it's likely that some lender whose wings you might clip will sue and claim that your agency has no authority to do it because you weren't legally confirmed. Will that color your actions, and do you welcome that challenge to your authority?

CORDRAY: No, it won't affect our actions, and I don't say that in any sort of militant or challenging way. But the important thing here is that the bureau now has a director. That means that we can level the playing field between banks and non-banks. Many non-banks were not supervised at all before the financial crisis. Some of the mortgage brokers engaged in unscrupulous activities that undermined the markets and helped lead to the financial meltdown that hurt millions of Americans. Part of what we will do is make these markets work better for consumers, and that will also strengthen the economy as well.

SIEGEL: I want to ask you about another class of non-bank lender. That's payday lenders...

CORDRAY: Yes.

SIEGEL: ...who would be regulated by the bureau. Would the outcome of effective regulation be that loans would be available from payday lenders at lower interest rates to borrowers with no credit? Or would it likely be that there would be no loans for those people?

CORDRAY: Well, the key for us is that part of our job is to make prices and risks clear for consumers so that they can make good, better informed judgments for themselves. That doesn't mean that we're prejudging any particular product. We will be regulating payday lenders, mortgage brokers, private student lenders, and that's a very important step forward for us.

SIEGEL: But one thing that a bureau could do is, say, if the monthly mortgage payment you're looking at from the mortgage broker is going to be 60 percent of your monthly income, some amount you're very unlikely to be able to afford, you could be told that and shown the numbers, or you could be denied that loan because that's simply an irresponsible loan for someone to make. You don't have that authority, do you?

CORDRAY: No. We're not going to be dictators in the markets. We won't be making people's judgments for them. But if consumers aren't clear on what the options are, then the markets don't work very well. And we saw that in so many ways, and we all have stories about people who have lost their homes, who are drowning in debt. And sometimes, it was because they made bad choices, and sometimes, it was because they didn't understand the choices they were making because this marketplace had grown too complex, too confusing.

SIEGEL: There are many Republicans in Congress who say that your bureau is remarkably free of congressional oversight. Why shouldn't Congress oversee the spending of taxpayer dollars?

CORDRAY: Yeah. I don't agree that the bureau lacks oversight. We have to both make reports to Congress regularly. We have a veto over our rules by the other agencies that doesn't exist for any other bureau or agency. So there's plenty of oversight here. In addition, I've talked to the congressional leaders, and I will make sure that they have the input they need to understand how we're working to help protect their constituents.

SIEGEL: How do you answer the argument, though, that while payday lenders say may be predatory lenders and while mortgage brokers may have originated a lot of unscrupulous deals, the real big money in the financial crisis was through subprime loans or alt-A loans that were bundled into high-risk securities by very big banks that did have regulators. The regulators, they existed, they just didn't do a very job of it.

CORDRAY: You know, I saw that, Robert, firsthand in local communities in Ohio. There was a ton of fraud in the mortgage market around that time. None of it was supervised. A lot of it was not banks. It was non-banks. And because those folks were totally unregulated, they were pushing aside our good community banks and credit unions who were losing market share and it ultimately led to the collapse of the economy.

SIEGEL: The Los Angeles Times recently did some very good reporting on buy-here-pay-here used car dealerships, which are really much more in the business of making high interest car loans, it seems, than just selling cars. I gather they've been carved out. You have no jurisdiction over those dealerships. Is that correct?

CORDRAY: No. It's actually a little more complex than that, but we've been hearing a lot from service members who are abused at times by the buy-here-pay-here auto dealers. Our job is to examine the problems, to think carefully about how they're affecting people. We're hearing from people right now on our consumerfinance.gov website, and that helps us understand what are the serious problems we should address, and there are many of them.

SIEGEL: Well, Mr. Cordray, we thank you very much for talking with us.

CORDRAY: I appreciate it.

SIEGEL: Richard Cordray, who was named yesterday by President Obama as the first director of the Consumer Financial Protection Bureau. Transcript provided by NPR, Copyright NPR.