Cordray resigns from CFPB

Taking an early exit as Director of the Consumer Financial Protection Bureau, Richard Cordray stated in an email to employees on Nov. 15, 2017, his intention to resign by the end of the month. His term was set to expire in July 2018. Since he took the helm as a President Obama appointee, Cordray's sweeping authority and the CFPB's constitutionality itself have been called in question in some sectors and supported in others.

Authorized by the 2010 Dodd-Frank Act, the CFPB was established as an independent agency in July 2011. It was created to protect consumers in the financial sector in the aftermath of the financial collapse of 2008 and ensuing Great Recession. The bureau’s jurisdiction spans banks, credit unions, payday lenders, debt collectors and other financial companies operating within the United States.

In the email, Cordray wrote, "Together we have made a real and lasting difference that has improved people's lives, notably: $12 billion in relief recovered for nearly 30 million consumers" and "giving people a voice by handling over 1.3 million complaints that led to problems getting fixed for vast numbers of individuals, and creating new ways to bring financial education to the public so that people can take more control over their economic lives."

Following Cordray’s resignation, Jason Oxman, Chief Executive Officer of the Electronic Transactions Association issued this statement: "We thank Director Cordray for his service at the CFPB and wish him well in his future endeavors. We have appreciated his willingness to listen to input on our shared goal of helping consumers achieve their financial goals. We look forward to working with the White House, Congress, and the CFPB to ensure a regulatory environment that encourages innovation."

Contentious term

During it brief history as an agency, the CFPB has faced scrutiny. Below are excerpts from The Green Sheet and elsewhere describing recent agency developments and actions taken:

• On April 1, 2018, a new CFPB prepaid rule will go into effect requiring financial institutions to limit individual losses for stolen funds or lost cards, investigate and resolve errors, and give individuals free access to account information. According to the CFPB, consumers currently have only limited federal protections when using prepaid accounts.

• On Nov. 1, 2017, President Trump signed a joint resolution passed by Congress disapproving the Arbitration Agreements Rule under the Congressional Review Act. Pursuant to the joint resolution, the CFPB Arbitration Agreements Rule has no force or effect. The materials relating to the rule on the CFPB website are for reference only.

• On Aug. 25, 2017, a federal district court judge in Georgia dismissed a two-year-old enforcement action brought by the CFPB against several payment processing companies, ruling that the consumer watchdog agency effectively stonewalled the pretrial discovery process. The CFPB filed the civil enforcement action in 2015 against a group that included four payment processors over an alleged debt collection scheme that got unwitting consumers to pay off bogus debts.

• On June 8, 2017, the Financial CHOICE Act proposed by House Financial Services Committee Chairman Jeb Hensarling to repeal the 2010 Dodd-Frank Act and scale back the authority of the CFPB was passed by the House. The Senate has yet to craft a bill.

• On May 24, 2017, the U.S. Court of Appeals for the D.C. Circuit reopened PHH v. CFPB, a legal action challenging the CFPB's constitutionality and powers. PHH Corp. and concerned parties sued the CFPB in April 2016. Plaintiffs alleged the bureau belonged to a group of government agencies that "constitute a headless fourth branch of government." PHH Corp. was also contesting a $109 million penalty imposed by the CFPB for deceptive practices, which was dismissed.

Successor uncertain

Under the current structure, the CFPB director is appointed by the president to serve a five-year term. According to Raj Shah, Principal Deputy Press Secretary at the White House, the Trump administration will name an acting director, as well as a permanent choice to fill Cordray's position "at the appropriate time."

A decision on an interim director could come swiftly; otherwise, David Silberman, the agency's second in command, will take over under current provisions. The nomination of a permanent director is expected to take longer.

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