The Consumer Financial Protection Bureau, a New Tool to Fight Fraud

The Consumer Financial Protection Bureau, a New Tool to Fight Fraud

In the run-up to the 2012 election, much has been made about the newly formed Consumer Financial Protection Bureau (CFPB) and its Director, former Ohio Attorney General (and five-time Jeopardy champion) Richard Cordray. The CFPB was created to add another layer of regulation to the banking industry, as well as to regulate the practices of non-bank lenders, such as payday lenders. While most people agree Cordray is more than qualified to perform the duties of his new post, his appointment as Director of the new Bureau has caused an uproar,” notes Phil Cannella, a noted advocate for retired Ameicansa and founder and Ceo of REtirement media, Inc. “Unfortunately, politicians and the media seem to be more concerned with disputing the validity of Cordray’s appointment than with examining the possible benefit his Bureau could provide.”

The CFPB was formally created on July 21, 2011, but its Director slot stood vacant for more than five months. The Bureau’s lack of a director prevented it from performing many of its most essential duties, including regulation of non-bank lenders. President Obama had originally groomed former Harvard Law Professor Elizabeth Warren (who conceived the idea to create the CFPB) for the job, but withdrew her nomination, facing strong Republican opposition. The President’s next nominee was Cordray, who faced the same resistance in Washington. In fact, the Republican Party had vowed to block any attempts at appointing a Director for the CFPB until some of the Dodd-Frank reforms, concerning the CFPB, were watered down. Obama decided to press on and make the appointment during the holiday recess at the end of 2011.

Recess appointments have been used by a host of Presidents, from Teddy Roosevelt to Ronald Reagan (who made 243 recess appointments during his eight years) and beyond. During George W. Bush’s presidency, Democrats were able to block recess appointments by holding “pro forma” sessions during which no business was conducted. This strategy has now come to be used against President Obama to prevent many of his appointments; but, many were questioning whether Congress can be considered “in session” when no business is intended to be conducted. Obama made up his own mind on the subject during the holiday break and made his appointment of Cordray official, and went further, staffing positions at the National Labor Relations Board as well. “Some lawmakers disputed the validity of these appointments, claiming Obama wildly exceeded his authority and are questioning whether the CFPB has any actual authority to regulate,” says Phil Cannella. Shortly after the New Year, the President was vindicated in a decision by the Department of Justice which stated the appointments were constitutional and that pro forma sessions were not sufficient to break up the holiday recess.

Whether you agree with the President’s actions or not, the controversy over Cordray’s appointment raises questions about the politicians’ motivation for wanting to neuter the CFPB, an agency which will regulate industries currently operating with little to no oversight. These industries include mortgage lenders, credit cards, payday lenders, debt collectors and others who charge sky-high interest rates to consumers who have trouble borrowing money through conventional means. History has already shown that the relationship between those industries and Congress is way too close, and that too many politicians effectively have their hands in the till.

“If our aim as a country is to reduce consumer debt and promote responsible lending practices, the CFPB could be a strong ally in that fight,” says Cannella. “Without regulation, these types of lenders will continue to give out loans to people who can’t afford to pay them back, thus continuing the cycle of debt that has weakened our economy.”

Should we sacrifice our progress here in order to curtail “big government?” Many people would say that in these tough economic times, we need all the help we can get. “As long as Mr. Cordray takes his role seriously and is pure, The CFPB and its Director may be just the team we need on our side,” concludes Phil Cannella.