Obama's Consumer Watchdog Gets to Work

Richard Cordray puts lenders on notice for discrimination and deception as he starts his new agency.

Richard Cordray (Alex Wong/Getty Images)

From the time that President Obama first mentioned the idea of the Consumer Financial Protection Bureau in 2009 -- pitched in the wake of the economic collapse as part of his broader vision for financial regulatory reform -- it has been followed by controversy. With its mandate to police financial products and services marketed to consumers; enforce new rules for the financial industry to provide clear, easy-to-understand information; and crack down on practices that are fraudulent or deceptive, Republican detractors saw the consumer-watchdog agency as unnecessary government intrusion into business.

Republican opposition was even strong enough to obstruct Elizabeth Warren, the former chair of the Congressional Oversight Committee who came up with the idea for the bureau, from heading it. Criticized as too aggressive in pursuing financial regulation, she was passed over for the nomination. But it was Warren who recruited Richard Cordray, a former Ohio attorney general with a reputation as one of the nation's leading consumer advocates.

When the president finally appointed Cordray as director of the CFPB in January, despite the GOP's best attempts to block it, Mitt Romney called the agency "the most powerful and unaccountable bureaucracy in the history of our nation, headed by a powerful and unaccountable bureaucrat with unprecedented authority over the economy."

Yet from Obama's perspective, after the rise of subprime loans and other predatory-lending practices that triggered the economic crisis, the bureau is an absolute necessity. "Middle-class families and seniors don't have teams of lawyers from blue-chip law firms. They can't afford to hire a lobbyist to look out for their interests," he said last summer when he announced Cordray as the nominee to head the CFPB. "But they deserve to be treated honestly."

Now four months into the job, Cordray has been busying himself with building upon the new agency's groundwork and letting businesses -- including banks, mortgage brokers, private student-loan providers, credit card companies and payday lenders -- know what's coming. The Root spoke with Cordray about that rocky start with congressional Republicans, his recent actions around racial discrimination in the lending industries and the best thing about building a federal agency from scratch.

The Root: What did you hope to accomplish with the bulletin you sent to lenders this month (pdf), giving notice that you will be enforcing laws against racially discriminatory lending practices, including those that have a disparate impact on protected groups?

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Richard Cordray: There were multiple pieces to that. The first was to reiterate what has been an accepted view of the law for 20 years, but [a view] that is challenged and not necessarily accepted by everybody in this market.

The second piece was that the consumer bureau wasn't around 20 years ago when this issue first came up, so we had never ourselves taken any position on [the law] yet. We wanted to, as we phrased it, "give fair notice on fair lending" so that institutions have a sense of what we're looking for and can think about getting their houses in order, rather than be surprised. Thirdly, in this area we work with the Department of Justice, the other federal banking agencies, the Federal Trade Commission and others, so it's important for them to be clear on where we stand on these issues so that we can foster our working relationship as well.

TR: What responses are you getting from companies to the various bulletins and guidance documents that you've released?