Last week, President Barack Obama took advantage of the current Congressional recess to appoint Richard Cordray as the Director of the Consumer Financial Protection Bureau
(CFPB). Interestingly, the Senate remains in “pro-forma” session, which basically means they haven’t officially recessed for more than three days, and are doing so specifically to prevent “recess appointments”. Additionally, the language in Dodd Frank specifically refers to a “Senate confirmed” agency director prior to the CFPB having the authority to regulate nonbank financial services providers such as payday lenders, small loan companies and others. The only reason for a recess appointment is to avoid the confirmation process. This appointment will no doubt lead to prompt litigation and challenges, puts future rules and the enforcement authority of the CFPB in doubt, and raises questions regarding the legitimacy of future FDIC Board actions (CFPB Director has a seat on that Board) .
Senate Republicans had blocked the confirmation of any Director, believing that the CFPB should have oversight by a board, rather than an individual, and be subject to the appropriations process (to provide some level of Congressional oversight and leverage). IBAT has been supportive of legislative initiatives to provide these reasonable checks and balances on the new agency.
The President’s bold move will likely create additional political friction, and could result in further delay on the pending confirmations of several key bank regulatory appointments including the new Comptroller of the Currency (Tom Curry) and FDIC Chairman (Martin Gruenberg).
The CFPB is moving forward with plans to regulate the nonbank financial services providers, which will hopefully provide some consistent application of “the rules” under which we as community banks must operate. This is a very fluid situation, and we shall keep you apprised going forward.