Richard Cordray, whom President Obama made a recess appointment to head the Consumer Financial Protection Bureau (CFPB), said the agency will immediately begin regulating non-bank lenders.
“The consumer bureau will make clear that there are real consequences to breaking the law,” Cordray said in remarks Thursday at the Brookings Institution, a Washington think tank. He added that bureau, an independent agency housed in the Fed, is taking over investigations started by other agencies and plans to launch new ones.
He said some practices “may be resolved through cooperative efforts to correct problems,” while others may require enforcement actions. Credit union executives have long complained that they are subject to extensive regulations while competing against payday lenders and others who aren't as closely regulated.
The Dodd-Frank financial overhaul bill which established the CFPB forbade it to regulate non-bank lenders until a permanent director was in place. Senate Republicans had blocked the confirmation of any director unless Democrats agreed to structural changes. Obama circumvented the gridlock Thursday by making a recess appointment of Cordray, a former Ohio attorney general who has headed the bureau's enforcement efforts since last January.
However, there is some question about the legality of Obama's move since there it is not clear that Congress was technically in recess when he did it. This could trigger a lawsuit challenging the legitimacy of future actions of the CFPB.
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