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GOP Senators' Position on Consumer Finance Bureau Matches Industry Lobby

Vote unlikely to end stalemate over agency director

Ben Hallman and John Dunbar

President Barack Obama announces the nomination of former Ohio Attorney General Richard Cordray as the first director of the Consumer Financial Protection Bureau. (Manuel Balce Ceneta/The Associated Press)

WASHINGTON - Five months after its formation, the new federal agency tasked with safeguarding the financial interests of ordinary people is still without a director, meaning it cannot regulate the kinds of lenders that consumer groups say prey on the poor.

A Senate vote scheduled for Thursday to end debate over President Barack Obama’s nominee to run the new Consumer Financial Protection Bureau is likely to fail.

Senate Republicans, led by Sen. Richard Shelby, R-Ala., say they will block the nomination of former Ohio attorney general Richard Cordray unless the law is amended to make the bureau more accountable.

The Republicans want a board of commissioners rather than a single director to oversee the agency – a move that would weaken the agency, consumer advocates say.

The consumer agency, created by the Dodd-Frank financial regulation law, needs a director to have the authority to make or enforce rules governing certain “non-bank” financial companies, including payday lenders, mortgage brokers, and private student loan companies, which are currently not subject to federal regulatory oversight.

The Republicans’ position matches that of Washington’s most prolific lobbying force, the U.S. Chamber of Commerce, which is pushing a House bill that would replace the director with a five-member commission.

A total of 34 industry groups list the bill as a lobbying priority, according to a Center for Public Integrity analysis of federal records, representing 185 industry lobbyists.

To move Cordray’s nomination forward, 60 votes are needed to end debate. That’s unlikely given that 45 Republicans have indicated their opposition.

“Mr. Cordray’s nomination is dead on arrival in the Senate and will remain so until these reasonable changes are made,” Shelby wrote in a Wall Street Journal op-ed published in July.

The Chamber spent nearly $30 million in lobbying in the first three quarters of 2011 on financial regulation and a host of other issues.

Some of the most active opponents of the bureau’s current structure are the American Bankers Association, the Financial Services Roundtable, the Independent Community Bankers of America and the Consumer Bankers Association, according to lobbying records.

Among the most notable industry lobbyists are former Sen. Don Nickles, R-Okla., lobbying for the Financial Services Center of America Inc., which represents payday lenders; and former Rep. Deborah Price, R-Ohio, representing the Consumer Credit Industry Association.

Jonathan Graffeo, a spokesman for Shelby, said that Republicans are seeking “common sense” reforms. “Not any of the proposed amendments would strip any of the bureau’s new or existing authority to protect consumers,” he said. “It is a myth to say that Republicans want to destroy the agency.”

But Republicans, including Shelby and industry groups, have called for an outright repeal of Dodd-Frank, which would eliminate the consumer bureau.

Shelby’s spokesman said that bank lobbying had nothing to do with his efforts to reform the agency. “He said from the very beginning that [the structure] vests unprecedented power in one person without any checks and balances.”

In a press conference on Wednesday, White House spokesman Jay Carney said the bureau has an “unprecedented set of accountability provisions.”


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The bureau must consult with other bank regulators before issuing rules, it must assess what those rules might mean to small businesses and any rule that threatens the safety and soundness of the banking system can be spiked by the Financial Stability Oversight Council, Carney said. The CFPB is also the only agency with a funding cap, Carney said.

Consumer groups say the holdup is more about protecting industry than accountability.

“The fight over the confirmation over a director is a symbolic contest about who in the Senate wants to protect Main Street and who continues to serve Wall Street paymasters," said Bart Naylor, a consumer advocate at Public Citizen.

The House bill and a similar bill in the Senate would replace the director with a five-person commission, nominated by the president, and subject to Senate confirmation. The Senate bill, which is also supported by industry, would fund the commission through the congressional appropriations process, something Senate Republicans also favor.

Shelby, the ranking Republican member on the powerful Senate banking committee, has raised about $2 million since 2008 from finance industry employees and political action committees. Top contributors include JP Morgan Chase & Co. and Travelers Group.

The abuses of big banks have gotten plenty of attention in recent years, but the actions of non-bank lenders often escape serious scrutiny.

Over the past year, iWatch News has reported on how some nontraditional lenders are accused of exploiting gaps in existing laws to make predatory and confusing loans. 

Some online payday lenders have partnered with Indian tribes to provide their business the cloak of tribal sovereign immunity; companies that accept military pensions as collateral for quick cash; and about a debt settlement company accused of landing its clients in deeper financial hot water than they were before.

Other federal regulators have had supervisory and examination authority over other parts of the agency’s portfolio, which includes rule-making and examination authority over financial institutions with assets over $10 billion.

The acting head of the CFPB, Raj Date, has said that inspectors from the agency are already on the job, examining how the biggest banks treat their customers, and that the agency has also made strides in its campaign seeking to simplify mortgage disclosure forms and make student borrowing more clear.

But without a director, industries outside the financial mainstream remain subject only to an inconsistent patchwork of state laws.

“Without a director, the CFPB is constrained in our efforts to address predatory practices by payday lenders, private student loan providers, debt collectors, and other nonbank lenders,” a spokeswoman for the agency wrote in an email to iWatch News. “It also limits our ability to level the playing field by ensuring that banks and nonbanks play by the same rules.”

The National Association of Consumer Advocates and other allied groups have taken to Twitter to voice their frustration with the stalled nomination. “A strong #CFPB needs a director; confirm Richard #Cordray as director now!” reads one such tweet.

“We would love to have a director in place so the agency can assume its full powers,” said Pam Banks, a senior policy council at the Consumer’s Union, which lobbied in favor of the CFPB. “There are a lot of abuses at the entities that are not being regulated, such as payday lenders and debt collectors,” she said.

Just one Republican senator has said he supports Cordray’s nomination – Scott Brown of Massachusetts. Brown is facing a tough challenge from Elizabeth Warren, who helped set up the bureau before declaring to run for the Senate.

Alexandra Duszak contributed to this report.

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