With Richard Cordray leaving, chance for new start at CFPB
Richard Cordray has announced that he will resign as director of the Consumer Financial Protection Bureau by the end of the month. This is good news because Cordray’s tenure as the inaugural director of this new agency has been terrible. It has been terrible for Americans who rely on financial products to manage their households, terrible for the financial services industry. It has been terrible for rule of law and constitutional principles. We need a new director at the head of this agency.
The agency’s purpose is to “ensur[e] that all consumers have access to markets for consumer financial products and services and that markets for consumer financial products and services are fair, transparent, and competitive.” The CFPB, however, strays well beyond this purpose and, in many cases, frustrates its own mission by limiting consumer access to needed products.
Most recently, it issued a rule that will all but eviscerate the payday lending sector. These loans, while expensive, often fill a gap and can be lifelines for vulnerable people. This fact seems to have been lost on Director Cordray, who pushed forward with the final rule despite widespread agreement that it would result in a significant decrease in the availability of these loans. The agency has also tried to expand its reach beyond its actual jurisdiction, applied new interpretations of regulations retroactively and without notice, and ignored basic principles of due process.
Here are a few guiding principles for the new director. First, focus on deterring and punishing fraud. A recent poll conducted by the Cato Institute, in collaboration with YouGov, found that Americans overwhelmingly support protecting consumers from fraud as a top priority for financial regulators. Down at the bottom of the list were “ban risky financial products” and “prevent consumers from making bad decisions.” People want protection from fraudsters, not from their own bad decisions.