Richard Cordray, who resigned on Friday from his post as director of the Consumer Financial Protection Bureau, ignited an unexpected succession fight with President Donald Trump over the agency during the weekend.
The battle, which is headed for the courts, marks the latest chapter in the long-running feud between Republicans and Democrats over the CFPB, an agency that emerged as part of the sweeping reforms enacted after the financial crisis.
Here is what you need to know about the consumer watchdog agency and why it has become the epicenter of debate over financial regulations.
How did the CFPB come about?
Congress and President Barack Obama created the bureau in 2010 in the wake of the crippling recession and housing market collapse. The idea for a new watchdog dedicated to protecting consumers from financial wrongdoing was envisioned by Elizabeth Warren before she ran for the Senate in 2012. Obama declined to pick Warren to run the new agency, in large part because the CFPB’s director must face Senate confirmation. Warren, a polarizing figure for many lawmakers, would have needed bipartisan approval — far from a sure thing.
What does the agency do?
The Dodd-Frank Act, the landmark law that rewrote the rules for the financial industry, gave the CFPB director unilateral authority to set fines and enforce a broad range of laws governing mortgages, credit cards, student loans and other consumer financial products. The agency says it has returned $12 billion to consumers. Cordray, a former attorney general of Ohio, has been the CFPB’s first and only chief since its inception.
Why is it controversial?
Republicans fought for about two years to keep Cordray from being confirmed by the Senate as director. GOP lawmakers have railed against the tough regulations for financial companies that the CFPB has imposed. They also object that the CFPB is not subject to the congressional appropriations process, but is funded by the Fed. That was done by design by the Democrats so future Congresses wouldn’t have leverage to rein in the agency. Republicans say that makes the consumer agency unaccountable.
Among the major fines the CFPB has imposed was a $100 million penalty on Wells Fargo in 2016 for encouraging employees to secretly open deposit and credit card accounts for customers without their consent.
CFPB critics have challenged the bureau’s constitutionality in court, in a lawsuit that could be decided within weeks or months.
What is the leadership crisis about?
Though many of the financial regulators appointed by Obama stepped down shortly after Trump was elected, Cordray remained for months. Earlier this month, Cordray announced he would step down, but then he abruptly resigned just after 2 p.m. on Friday. Cordray elevated Leandra English to deputy director. Just after 7:30 p.m. Friday, the White House designated OMB Director Mick Mulvaney as acting director of the CFPB until a permanent leader can be nominated and confirmed.
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