“Boy, they really hate you, don’t they?”
Such were the words from Massachusetts Democrat Michael Capuano during a hearing this week between CFPB Director Richard Cordray and the House Financial Services committee which “welcomed” the consumer watchdog’s director for a 5 hour round of questioning on the HIll. The session was characterized by one who watched it as “a new level of hostility in the increasingly partisan battle over the controversial agency.”
And, it should be noted, attaining new levels of hostility in this matter is actually something of an achievement all its own — the situation was already very hostile, bitter and partisan.
Still, given that the hearing started off with chairman and Texas Rep Jeb Hensarling expressing surprise that Cordray showed up at all, accusing him of using his office for political gain and then making it clear his strong hope is to never see him in his capacity as CFPB chairman again — it’s hard to say that the witnesses misjudged the hostility in the room.
“I’m otherwise surprised to see you here in that, as you well know, there have been many press reports saying that you would have otherwise returned to Ohio to pursue a gubernatorial bid. Perhaps the rumors of your political aspirations are greatly exaggerated,” Hensarling said as the hearing commenced.
“For conducting unlawful activities, abusing his authority and denying market participants due process, Richard Cordray should be dismissed by our president,” Hensarling said. “Not only must Mr. Cordray go, but this current CFPB must go as well. I believe the president is clearly justified in dismissing you and I call upon the president … to do just that, and to do it immediately.”
Most of the hearing from that point on was about the (largly GOP led) case to dismiss Cordray and rebuild the organization he runs.
The main thrust of their argument: The CFPB under Cordray routinely overstepped legal and jurisdictional boundaries and prized flashy, expensive fines over consumer freedom. That argument was hit particularly hard by Reps. Bill Huizenga and Dave Trott — both republicans from Michigan — who pressed Cordray on why the legal language of the CFPB punitive settlements is less harsh than the press statements announcing the punishments.
Huizenga accused the CFPB of being unaccountable — and holding banks hostage to “trial by press release.” Cordray said the legal language didn’t change the underlying facts of each case.
“We know the facts, they know the facts, they don’t have a leg to stand on,” Cordray said.
Huizenga shot back that the team at PHH — the plaintiffs behind the lawsuit that could see the CFPB’s structure ruled unconstitutional — clearly thought they had a leg to stand on, as did at least one appellate court.
Republicans also focused on several recent rules as examples that the agency does more to harm consumers by limited their access to credit than it does to actually protect them.
“If the rule effectively eliminated this industry, where do we go? We’re not eliminating the demand,” said Rep. Dennis Ross (R-Fla.) of the payday lending rule.
The harshest critique of the CFPB, however, came on the issue of Wells Fargo and $185 million in fines it was assessed to settle investigations by the bureau, Feuer and the Office of the Comptroller of the Currency. In short, Cordray and the CFPB were accused of taking all the credit for the Wells Fargo case — despite that fact that it had been other agencies’ work that had brought the corruption to light.
Various Republicans argued that the CFPB ignored signs of fraud at Wells Fargo before fining the bank more than $180 million last September for opening more than 2 million unauthorized accounts.
“The only conclusion there is to draw regarding the Wells Fargo scandal is the CFPB was asleep at the wheel,” Rep. Ann Wagner noted. “The L.A. Times, the [comptroller’s office] and the L.A. city attorney all got there before you did, Mr. Cordray.”
Cordray, for his part, had responses both specific and general. On the issue of Wells Fargo, he noted the CFPB investigation began with a whistle-blower tip in 2013 — well before the L.A. Times piece (though he did note that it was an example of splendid reporting).
On the whole, reports indicate that Cordray gave little ground, found ways to dodge many yes or no questions and at various points accused his interlocutors of “character assassination.”
He also offered no indication that he would resign before his five-year term ends in July 2018.
And, it should be noted, Cordray had his defenders during the five-hour hearing.
“First they complain that you enforce too much,” Rep Capuano said to Cordray. “Then we just heard a 10-minute rant about how you enforce too little,” referring to Wagner’s questions.
“You are the first and only agency with the single mission of protecting consumers,” said Rep. Al Green (D-Texas). “There is nothing like you.”
Ranking Democrat on the committee Maxine Waters also sent this official statement to PYMNTS on Cordray and the CFPB’s relationship with Congressional republicans:
“The Consumer Financial Protection Bureau has not only been faithfully compliant in responding to the Chairman’s endless requests for documents, but to date they’ve produced nearly 90,000 pages. Committee Republicans are misleading the American people by claiming that the Consumer Bureau is unresponsive and unaccountable, when in reality, Chairman Hensarling has suffocated the Consumer Bureau’s staff with excessive information requests and subpoenas, directing resources away from their primary mission: protecting hardworking Americans from predatory financial actors. It’s instances like this that exemplify why Committee Democrats have called to eliminate the Chairman’s unilateral subpoena authority so we can publicly debate the merit of Committee subpoenas and prevent the harassment of hardworking public servants.”
The fate of the CFPB structure — and whether or not a single director with the level of power Richard Cordray has is constitutional — will be decided by the Washington full appellate court next month. The White House has indicated that any action to attempt to remove Cordray will be tabled until it is known whether the courts will essentially bench the CFPB for the president.
It is probably fair to expect a contentious relationship between legislators and the CFPB.