CFPB Director Appointed: What Comes Next?
On Wednesday, President Obama announced that he was using a recess appointment to make Richard Cordray the first Director of the Consumer Financial Protection Bureau (CFPB). Cordray had gone through intense questioning during a confirmation battle, only to see his appointment held up for months by some Senators’ qualms with the CFPB’s authority (and not with Cordray himself, who even many detractors found to be qualified).
So what does this mean for the low-income families we serve? While the CFPB was created in 2010, it was not given its full authority until a Director was confirmed. This authority includes the ability to regulate smaller banks (those with assets less than $10 billion) and non-bank institutions, which include payday lenders, check-cashers, credit reporting agencies, some mortgage lenders and non-governmental student loan providers.
Not surprisingly, low-income individuals are more likely than their high-income counterparts to utilize the services these institutions offer. Consider the impact of these institutions on the everyday lives of our clients:
- Nearly 20 million customers use payday lenders each year, totaling more than $29 billion in 2010*
- Payday lending fees were approximately $4.2 billion in 2010*
- 200 million adults have credit files, which they rely on to apply for home loans, car loans, credit cards, etc.**
- Debt collectors rake-in more than $40 billion yearly for third-party collections***
- 27% of complaints to the Federal Trade Commission are regarding debt collectors. Of these complaints, 50% cited harassment****
Whether or not low-income individuals are targeted in a predatory way – though most would agree they are – the CFPB now has the authority to ensure these institutions are complying with federal law and monitor their often-misleading and -unfair practices.
It is clear that CFPB, even without the ability to regulate non-bank institutions, has already had a positive impact on the marketplace. Its Know Before You Owe initiative works to make the mortgage and student loan industries more transparent so that consumers understand the costs and benefits of each.
The future looks promising – yesterday, Cordray himself penned a blog post outlining the CFPB’s future plans. This morning, the CFPB announced it had already begun taking over investigations from other agencies on non-bank institutions and asserting its new authority. And among other things, the Bureau has identified student debt as a critically important issue to explore – a priority with which NCTC strongly agrees, given families’ mounting challenges in college affordability.
At NCTC, we’re looking forward to seeing what the CFPB can do to protect low-income families now that it has its full authority and a Director at the helm.
* Center for Responsible Lending Issue Brief. “A 36% APR cap on high-cost loans promotes financial security.”
** Stuart Pratt. Comments of Consumer Data Industry Association to National Telecommunications and Information Administration.
*** ACA International and PriceWaterhouse Coopers. “Value of Third-party Debt Collection to the U.S. Economy in 2007: Survey and Analysis.”
**** Federal Trade Commission. “Federal Trade Commission Annual Report 2011: Fair Debt Collection Practices Act.”
By Dan Fair, Manager of Communications & Member Relations