Richard Cordray marks consumer protection agency’s first year

WASHINGTON — Richard Cordray has a message for opponents of the Consumer Financial Protection Bureau: Neither he nor the new watchdog agency is going away.

The bureau celebrates its first anniversary Saturday with opponents still trying to shut it down — or at least weaken its power.

Instead, the bureau flexed its muscle for the first time this week. It joined with another banking regulator to order Capital One Bank to pay $210 million in refunds and fines to settle allegations of deceptive marketing tactics to credit card customers.

Cordray, the bureau’s director, told the Los Angeles Times that the bureau’s first major enforcement action should send a strong message that it is “vigilant about how consumers are treated in the marketplace.�

Cordray, 53, was installed by President Obama in January with a controversial recess appointment after nearly all Senate Republicans vowed to block any nominee unless the bureau’s authority was reduced.

A pending lawsuit challenges the constitutionality of both the appointment and the bureau’s creation, which was the centerpiece of the 2010 financial reform law. In addition, many lawmakers and financial executives continue to worry that the new oversight and regulations will hurt business and stifle lending to consumers.

Cordray, a soft-spoken former Ohio attorney general, acknowledged the continued controversy. He said he is trying to ease those fears by taking “a measured and careful approach.�

Still, activity at the bureau’s offices near the White House has ramped up since Cordray’s appointment.

In recent months, the bureau has unveiled a simplified mortgage disclosure form as part of its Know Before You Owe project; begun overseeing credit reporting companies; proposed new rules limiting mortgage fees; and launched a database that tracks credit card complaints.

It also is wrapping up new regulations for so-called qualified mortgages, which would have underwriting standards making them safer for consumers and lenders.

Cordray said he expected more enforcement actions related to deceptive marketing of add-on services to credit card customers.

“We want to make sure [consumers] are treated fairly and we will hold companies accountable when we think that is not the case,� he said.

Cordray spoke with The Times further about the bureau’s initial year and his priorities going forward. Here are excerpts:

What has been the biggest success and the biggest failure for the bureau?

Our overall goal has been to restore trust in the consumer finance markets … so we’ve been working on establishing clarity, reliability and accountability.

I think we have been doing a good job … in fixing a direct pipeline between us and the consumers so that we’re hearing regularly and constantly from them, and we are establishing communication from them to give them the kind of information they need.

I think we have accomplished a lot in a short time. If you’re asking about the sort of challenges we’ve encountered along the way … I think we underestimated the sheer magnitude of the task involved in building an agency from scratch.

Are you happy with the ability of consumers to reach the agency?

“We’re now … receiving what would amount to about 200,000 consumer complaints a year. That’s up significantly in the last few months. But whether that will end up being millions a year, we just don’t know.

There’s never been an agency like this that is directly focused on the problems of individual American consumers, several hundred million of them, in their daily lives. I think the complaint function is working surprisingly well.

What’s the biggest threat to consumers right now and what is the agency doing to address it?

Congress spoke pretty loudly on that issue and said that the mortgage market … needs to be addressed, and bad practices that existed previously rooted out.

So we’re involved with the mortgage market really from beginning to end. When you first think about a mortgage and apply for a mortgage, we’ve been working on the Know Before You Owe project, which is rendering that whole process more accessible to consumers and making the prices and risk clearer.

The qualified mortgage rule is extremely important. That addresses that many consumers were being set up to fail in the mortgage marketplace, and some of the terrible underwriting, the no-document loans.

And the servicing rules that we are putting forward are extremely important because for the first time we’re going to have rules of the road that address the entire market.

Frankly, if we had that five, six years ago, the problems wouldn’t have been nearly as severe for people that they’ve experienced across the country.

Your appointment would last until the end of 2013. If a Republican is elected president this fall, would you serve the whole term?

I do plan to do that, yes.

There still seems to be a lot of animosity about this agency and a lot of questions about what it does. Are you surprised that hasn’t dissipated by now?

No, I’m not surprised. I think these things will dissipate over time.... And what happens over the course of time is people begin to reconcile themselves to a new order and the law of the land.

When we respond to someone who has a foreclosure problem, they’re very likely contacting their congressional office as well. And as people can see that we’re adding value here … I think that wins the day over time.

But it doesn’t happen in a day or a week. It takes piling up repeated efforts and people being able to see that accumulate over time. I think it’s already happened to some degree.

Do you think the recess appointment is a complicating factor in that animosity?

If I hadn’t been appointed, we still wouldn’t have a director, and it would be very hard for us to do the kind of work we’re doing. I’m not really focused on that. We’re focused on doing our work and trying to avoid any kind of distraction or taking our eye off the ball.

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