GOP Raises Heat on CFPB’s Cordray
Vitter questions legality of appointment, refuses to hear from head of Consumer Financial Protection Bureau
Republicans on the Senate Banking Committee questioned Richard Cordray, the director of the Consumer Financial Protection Bureau, on Tuesday about the agency’s data collection and offered other criticisms about the agency’s structure. But the bigger story may be in who wasn’t there for the hearing.
Sen. David Vitter, R-La., picking up on a statement by House Financial Services Chairman Jeb Hensarling, R-Texas, announced Tuesday that he had boycotted the session because, he said, Cordray’s appointment is in legal jeopardy.
“Mr. Cordray should not have testified today as if he is the legitimate director of the CFPB,” Vitter said in a statement. “Acting as such is only increasing the cloud of uncertainty around the CFPB and the economy, which is why I did not attend the hearing today.”
The Republican statements that they were taking the highly unusual step of not recognizing Cordray as director of the CFPB raises the heat on the partisan dispute over an agency created by the 2010 Dodd-Frank regulatory overhaul (PL 111-203).
Democrats at the Senate hearing said Cordray’s confirmation has been held hostage by Republicans, who opposed the creation of the CFPB and at a minimum want the director-led agency transformed into a multi-member commission.
To get around a GOP filibuster of Cordray’s nomination, launched because Republicans object to the structure of the regulatory body, President Barack Obama appointed Cordray early last year, saying that the Senate was in recess. However, other recess appointees to the National Labor Relations Board at the same time have been ruled to be unconstitutional by a D.C. circuit court. That case, which does not include Cordray’s appointment, is headed to the Supreme Court.
But Vitter’s move illustrates a deepening battle between congressional Republicans and the CFPB.
“As I have consistently stated in past hearings, we still have concerns with the structural nature of the agency,” said Sen. Michael D. Crapo of Idaho, the ranking Republican on the Banking Committee. “We continue to seek a change from the sole directorship to a board-like structure.”
“And with regard to the president’s recess appointment to the CFPB last year, my opinion has not changed,” Crapo said. “I continue to believe the recess appointment was unconstitutional.”
Other GOP senators attending and asking questions included Richard C. Shelby of Alabama, Mike Johanns of Nebraska and Jerry Moran of Kansas. Sen. Bob Corker, R-Tenn., appeared briefly just before the hearing began but did not remain.
Cordray was on the Hill to give his agency’s semiannual report to Congress, something mandated by the Dodd-Frank financial law. But the flaring of the dispute over Cordray overshadowed the work at an agency that is supposed to represent consumer interests in financial services.
On Monday, Hensarling sent a letter to Cordray saying he would not permit the regulator to testify before the House Financial Services Committee because he has not been confirmed by the Senate.
Hensarling’s action was a striking move, and the offices of the House and Senate historians could not immediately find a precedent for such an action.
Senate Minority Leader Mitch McConnell, R-Ky., during a legislative conference of the American Bankers Association last week, told the bankers he believed the NLRB decision in Noel Canning v. NLRB could throw into question not only Cordray’s appointment but also any actions taken at the entire agency under his leadership.
But House Financial Services ranking member Maxine Waters, D-Calif., on Tuesday challenged Hensarling’s decision not to permit Cordray to testify.
“As you conceded in your correspondence with the CFPB, no court has addressed the legitimacy of the president’s appointment of Director Cordray,” Waters wrote. “If you chose to continue to ignore the law, then I am prepared to use the rules of the committee to provide the director the opportunity to give testimony before the Committee.”
During the Senate hearing, which proceeded in a relatively undramatic fashion, Cordray told the panel that his semiannual report included some of the bureau’s first enforcement actions taken against credit card companies that “deceived and misled consumers.” He told the lawmakers the bureau had secured $425 million for some 6 million consumers and had imposed penalties on the industry.
“These actions will serve as a warning signal for anyone who seeks to profit by deceiving or misleading consumers,” he said.
Many of the Republicans’ questions focused on reports of data collection. Cordray said his agency is trying to keep up with the financial industry’s own data collection and that the CFPB could not adequately do its job of reporting its work to Congress or monitoring consumer trends without collecting information. He also noted that the CFPB does not reveal private information about consumers and instead uses “anonymized” data.
“The big banks know more about you than you know about yourself,” he said.
Crapo questioned whether the federal government should “now be getting in a big way into the kind of data collection that you’re talking about.” Ultimately, Cordray and Crapo agreed to have their staffs further examine how the data is retrieved and stored.
Other members, too, told the CFPB director that they found the data collection a cause for concern.
“To many people, this is going to sound downright creepy,” Johanns told Cordray.
Cordray also defended his agency’s work to make public consumer complaints against financial institutions. “This is information that is illuminating to us as we go about doing our work,” he said.
Democratic Sens. Sherrod Brown of Ohio and Elizabeth Warren of Massachusetts, who advocated for formation of the agency before she was elected to the Senate last year, said the GOP filibuster threat against Cordray was aimed at holding the agency “hostage.”
Cordray said the CFPB has sought input on proposed regulations from the financial industry. And on Monday, the CFPB announced that it had named Dan Smith, a former Freddie Mac official, as assistant director for the new Office of Financial Institutions and Business Liaison. That office is tasked with connecting the CFPB with banking industry and other outside groups.