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Next week will be an important one for every Chicago area consumer who uses financial services, from the payday loan store on the corner to Wall Street’s biggest banks. The Senate Banking Committee will hold a hearing September 6th to consider the confirmation of Richard Cordray, President Obama’s nominee as Director of the Consumer Financial Protection Bureau (CFPB). It is crucial that the Senate quickly confirm Cordray, a former Attorney General of Ohio who is well-qualified in consumer issues. However, forty-four Senators, including Illinois Senator Mark Kirk, have vowed to block any nominee until the CFPB is significantly weakened. The longer the process drags on, the longer the CFPB will lack the authority to regulate some financial service providers which have high potential for abuse—such as payday lenders, independent mortgage lenders that made the majority of predatory subprime loans during the housing bubble, and debt settlement companies.
Policy Brief: Consumer Financial Protection Bureau Authorities Without a Director
Illinoisans, particularly those in communities of color, have suffered significant losses as a result of reckless financial practices and a regulatory environment that did not prioritize consumers’ best interests. Woodstock Institute’s research has shown that:
• Nearly 80,000 homeowners went into foreclosure in the Chicago six-county region in 2010 alone, up from more than 70,000 foreclosures in 2009.
• Abandoned foreclosed homes are taking a multimillion-dollar toll on the City of Chicago’s limited resources.
• Personal bankruptcy activity increased by 59.2 percent between 2008 and 2010 in Cook County, and women-headed households in communities of color make up a disproportionate share of Cook County’s bankruptcy filings.
“Financial products offered by non-bank financial institutions contributed to Illinoisans’ economic distress,” said Dory Rand, President of Woodstock Institute. “Clearly, Illinois can’t afford to wait any longer for strong consumer protections for high-cost payday loans, mortgages offered by independent brokers, and prepaid cards.”
The CFPB already is working to protect consumers, even without an agency director. The Dodd-Frank Wall Street Reform and Consumer Protection Act transferred the consumer protection authorities from seven federal regulators to the CFPB. It also empowered the CFPB with new consumer protection authorities not originally in these federal regulators’ scope. On July 21, when the CFPB officially opened, the agency became able to write and enforce the rules that were within the scope of the previous regulators’ powers, however, the CFPB will not be able to exercise of the new powers granted to it until an agency director is confirmed. That means that sectors where predatory practices—such as triple-digit interest rates, hidden fees, and ballooning monthly payments—have flourished due to a lack of consumer protection standards will continue to lack federal oversight.
“Especially in these difficult economic times, consumers can’t afford to go another day without the assurance that the financial products they use won’t trap them in a cycle of debt or add to their financial uncertainty,” said Karen Harris, Director of Asset Opportunity Unit, Sargent Shriver National Center on Poverty Law. “We urge the Senate to confirm Richard Cordray as soon as possible so that consumers of all kinds of financial services will be protected, not just bank customers.”
“Many Senators, including Senator Mark Kirk, are vowing to block any nominee—no matter how qualified—until the CFPB is effectively gutted,” said Brian Imus, State Director of Illinois PIRG. “Illinois consumers need an effective cop on the beat to enforce our consumer protections laws and prevent abuse by big Wall Street banks. That can’t happen until a director is confirmed.”
For more information about the CFPB’s authorities and the importance of confirming Richard Cordray, please download this fact sheet.
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