WASHINGTON (Legal Newsline) - Richard Cordray, the first-ever head of the Consumer Financial Protection Bureau, considered a thorn in the side of many Republicans, said Wednesday he plans to step down by the end of the month.
Cordray, who has headed the Obama-era watchdog agency since its creation, made the announcement in an email message to colleagues, according to The Washington Post.
“I am confident that you will continue to move forward, nurture this institution we have built together, and maintain its essential value to the American public,” he wrote. “And I trust that new leadership will see that value also and work to preserve it -- perhaps in different ways than before, but desiring, as I have done, to serve in ways that benefit and strengthen our economy and our country.”
Cordray did not give an explanation for his decision -- the reason behind it, or the timing. His term does not end until next summer. And unlike most other Democrats in leadership roles at federal agencies, he did not step down when President Donald Trump took over.
The CFPB was created by the Dodd-Frank Wall Street Reform and Consumer Protection Act, which was passed in 2010 in response to the financial crisis of 2007-08 and the subsequent recession. The bureau has jurisdiction over banks, credit unions, securities firms, payday lenders, mortgage-servicing operations, foreclosure relief services, debt collectors and other financial companies operating in the U.S. It was considered a major achievement of the Obama administration.
Cordray’s announcement comes soon after one of the agency’s major efforts -- its anti-arbitration rule -- was axed by federal lawmakers.
Last month, the U.S. Senate narrowly passed a resolution striking down the rule.
Under the CFPB’s much-anticipated new rule, announced July 10, financial institutions could have included arbitration clauses, but the clauses could not be used to stop consumers from filing class actions.
Basically, if companies wanted to include an arbitration clause in a consumer contract, they would have had to use very specific language.
U.S. Sen. Elizabeth Warren, D-Mass., who helped create the bureau, called Cordray a “dedicated public servant” and a “tireless watchdog” for consumers.
“The new director of the CFPB must be someone with a track record of protecting consumers and holding financial firms responsible when they cheat people,” she said. “This is no place for another Trump-appointed industry hack.”
U.S. Sen. Jack Reed, D-R.I., said Cordray was “tough but fair” and “always remained independent.”
“The question now is: will President Trump name a successor who is equally committed to standing up for consumers? Will he appoint a consumer watchdog or a financial industry lap dog?” said Reed, a senior member of the Banking Committee who also helped create the bureau.
“I urge President Trump to choose a director with a consumer protection background who will stand up for consumers instead of standing down before unscrupulous financial institutions.”
Lisa Donner, executive director of Americans for Financial Reform, agreed.
“Director Cordray did exemplary work on behalf of the American public, often under extremely tough circumstances, ably advancing this vitally important mission,” she said in a statement. “There is lots more work for the CFPB to do, and we will remain vigilant in demanding that it stick to the task.
“The next director of the CFPB needs a track record of standing up for consumers.”
Others were just as pleased to hear Cordray, a former Ohio attorney general, will be stepping down.
U.S. Rep. Jeb Hensarling, R-Texas, said new leadership is “long overdue” for the “rogue” agency.
“The CFPB tramples on the fundamental economic rights of American citizens, taking away their choices and opportunities,” said Hensarling, who chairs the House Financial Services Committee. “The extreme overregulation it imposes on our economy leads to higher costs and less access to financial products and services, particularly for Americans with lower and middle incomes.”
U.S. Rep. French Hill, R-Ark., said the bureau has been the least accountable independent government agency.
“We need new leadership that brings accountability to this rogue agency and respects our laws while implementing much-needed reforms,” Hill said.
Raj Shah, principal deputy press secretary at the White House, said in a statement the Trump administration will announce an acting director and a permanent choice to replace Cordray “at the appropriate time.”
Leading candidates for the job appear to be former U.S. Rep. Randy Neugebauer, R-Texas, or Todd Zywicki, an economist and professor at George Mason University.
Both are strong critics of the CFPB and both have called for changing the CFPB to a commission.
In a commission, the director would serve as the chairman and some sort of quorum would be required. More importantly, it would mean no one person would have nearly unlimited authority.
The Financial Services Roundtable, which advocates for the nation’s financial services industry, said Trump and federal lawmakers should consider restructuring the bureau.
“The Trump administration and Congress should use this opportunity to improve the CFPB by adding a bipartisan board so key decisions are made in a bipartisan and transparent manner with more than just one person involved," FSR CEO Tim Pawlenty said in a statement.
From Legal Newsline: Reach Jessica Karmasek by email at jessica@legalnewsline.com.