Consumer Financial Protection Bureau Finally In Place

But congressional wolves are waiting in the wings — Saturday, February 26, 2011

By Phyllis Salowe-Kaye

Consumers finally have cause to celebrate. On July 21, the landmark Consumer Financial Protection Bureau became the nation's chief consumer financial oversight agency. The implementation of this part of the Dodd-Frank Wall Street Reform and Consumer Protection Act represents an historic step toward protecting average Americans from the deceptive and dangerous banking practices recognized as a one of the primary causes of the 2008 financial crisis.

The celebration will be short-lived if the efforts by Republicans in Congress to dilute the agency's effectiveness are successful. The GOP threatens to oppose any nomination for a director unless the bureau's authority is weakened. HR1315, which passed on July 21, would handcuff the CFPB and give discredited banking regulators the power to block needed protections.

New Jersey Citizen Action joins a diverse group of consumer, business, civil rights, labor and community organizations in urging the Senate to reject HR1315 and to confirm Richard Cordray as director of the bureau immediately.

The CFPB's sole purpose is to protect consumers. It will not tolerate risky and harmful banking products and services that offer only short term benefits and extensive risk to consumers and that are designed strictly to maximize lender profits. The agency will have the authority to create rules whenever there are abusive practices which clearly interfere with the ability of consumers to understand risks, costs, or conditions associated with products and services including mortgages, credit cards, overdraft fees, student and payday loans and more. The CFPB must have very strong independent leadership in order to enforce these rules and to police the current culture of quick profit and reckless financial product development which has poisoned the retail banking industry. HR1315 would grant regulators, the very same regulators who failed to protect consumers and stop the financial crisis of 2008, the powers to block CFPB rules

Elizabeth Warren, the respected Harvard Law professor, assistant to the president and special adviser to the Secretary of the Treasury hired by President Obama to create the CFPB, was widely endorsed as the best candidate for the job as director of the CFPB. Unfortunately, Professor Warren, who would cut an imposing and effective figure as the agency's top watchdog, was viciously attacked and vigorously opposed by an anti-reform faction in Congress. Her opponents view the CFPB as an impediment to the record breaking profits that financial institutions are still making even in the aftermath of the 2008 financial crisis and while average Americans still face scamming, foreclosures, financial ruin and unsecured futures.

New Jersey Citizen Action was extremely disappointed that opposition to Elizabeth Warren's appointment prevailed, but is delighted that President Obama has managed to nominate another highly qualified candidate for the position. Richard Cordray, a former Ohio Attorney General, has been tapped for the job and he comes with a strong endorsement from Warren who hired him to head the enforcement arm of the CFPB and believes he will make a stellar director. Cordray is well respected in Ohio for his integrity, intelligence and fairness and he has a proven track record of fighting for families during his time as head of the CFPB enforcement division.

Despite Cordray's qualifications, his confirmation by the Senate is not guaranteed. Shockingly, 44 Republican Senators pledged earlier this year that they would not confirm any nominee, not Elizabeth Warren or anyone else, unless the Bureau's powers were first gutted. After the economic collapse in 2008, Congress did not hesitate to ask taxpayers to bail out the banks. Yet, it wasn't until 2010, that they finally enacted legislation to protect consumers from a repeat of that economic disaster. Now these 44 Senators refuse to confirm a director. The GOP is clearly intent on crippling the CFPB and on denying the public a protector and advocate in the woefully under regulated world of consumer finance.

We must block this assault on the desperately needed financial oversight and protections provided by the CFPB. We must contact our senators to insist that they defeat HR1315 and that they confirm Richard Cordray as director of the Consumer Financial Protection Bureau ASAP.

Phyllis Salowe-Kaye is executive director of New Jersey Citizen Action, headquartered in Newark.

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