CFPB: January Roundup

January was a remarkable month for the CFPB. On January 4, President Obama installed Richard Cordray as the CFPB's first Director. And, just a few short days later, the CFPB announced its supervision program over certain nonbank entities. Additionally, the Bureau continued to conduct its "Know Before You Owe" efforts for mortgage and student loans. A recap of the Bureau's January efforts follows.

Director Cordray

President's Recess Appointment

Taking the financial industry by surprise, on January 4, before an enthusiastic crowd in Shaker Heights, Ohio, President Obama announced the appointment of Richard Cordray as Director of the CFPB:

Now, I nominated Richard for this job last summer, so you may be wondering why am I appointing him today. It would be a good question. For almost half a year, Republicans in the Senate have blocked Richard's confirmation. . . . Every day that we waited was another day when millions of Americans were left unprotected. Because without a director in place, the consumer watchdog agency that we've set up doesn't have all the tools it needs to protect consumers against dishonest mortgage brokers or payday lenders and debt collectors who are taking advantage of consumers. And that's inexcusable. It's wrong. And I refuse to take no for an answer.1

Because the President made this appointment without the consent of the Senate (even though Congress was in a pro forma session) reactions have been varied. Many have questioned both the President's authority to appoint Cordray as a recess appointee as well as Cordray's ability to wield his full power as Director. In light of these questions, Venable has published an analysis of the appointment, which is available here: http://www.venable.com/president-uses-recess-appointment-authority-to-install-cordray-as-cfpb-director-01-09-2012/

In response to these concerns and questions raised regarding the appointment, on January 6, the Administration released a memorandum opinion from the Department of Justice analyzing the lawfulness of recess appointments during a pro forma session. The memorandum concluded:

In our judgment, the text of the Constitution and precedent and practice thereunder support the conclusion that the convening of periodic pro forma sessions in which no business is to be conducted does not have the legal effect of interrupting an intrasession recess otherwise long enough to qualify as a 'Recess of the Senate' under the Recess Appointments Clause. In this context, the President therefor has discretion to conclude that the Senate is unavailable to perform its advise-and-consent function and to exercise his power to make recess appointments.

Please let us know if you would like a copy of this Department of Justice memorandum.

Director Cordray's Testimony/Speeches

Even though Cordray has been installed as the Director for only one month, he has testified before Congress twice and has given a number of other speeches.

Brookings Institution. Just one day following his installation as Director, Cordray addressed the Brookings Institution. His comments addressed three questions: (i) first, why does the Bureau matter; (ii) second, what has the Bureau been doing for six months; and (iii) what does it mean for the Bureau to have a Director. FDIC Board. Once Cordray was installed as Director of the CFPB he also became a member of the FDIC Board. Accordingly, on January 17, at his first FDIC Board meeting, Director Cordray thanked FDIC Director Curry and Acting Comptroller Walsh for their warm welcome to the Board and noted that the work of the CFPB complements that of the FDIC. More specifically, the Bureau's supervision function will supplement the supervisory role of the FDIC and the other banking agencies and help provide a more complete picture of bank operations. Remarks Before U.S. Conference of Mayors. On January 18, Director Cordray addressed the U.S. Conference of Mayors in Columbus, Ohio. Cordray informed the audience that the Bureau wants to partner with mayors to promote responsible behavior by financial institutions and consumers alike; and commended the mayors for the success of their DollarWise campaign to fund and operate financial education and other programs. TARP Subcommittee Testimony. On January 24, Director Cordray testified before the Subcommittee on TARP, Financial Services and Bailouts of Public and Private Programs. Cordray summarized the Bureau's actions to date including the establishment of their bank and nonbank supervision efforts, their "Know Before You Owe" initiatives, and the establishment of several offices designed to protect certain classes of consumers (the military, the elderly, etc.) Senate Banking Testimony. On January 31, Director Cordray appeared before the United States Senate Committee on Banking, Housing and Urban Affairs. The topic of the hearing was "Holding the CFPB Accountable: Review of the First Semi-Annual Report." At the hearing, Cordray reiterated that the primary objective of the Bureau is to ensure that consumers understand the costs and risks of financial products. Its secondary...