(NEW YORK) MintPress — The gloves are out. President Obama has clearly signaled his readiness for a brawling election campaign with the announcement by the head of his new consumer finance watchdog, the Consumer Financial Protection Bureau (CFPB), that the agency is bringing debt collectors and the credit rating industry under federal supervision for the first time. […]
(NEW YORK) MintPress — The gloves are out. President Obama has clearly signaled his readiness for a brawling election campaign with the announcement by the head of his new consumer finance watchdog, the Consumer Financial Protection Bureau (CFPB), that the agency is bringing debt collectors and the credit rating industry under federal supervision for the first time.
It was the first step taken by CFPB Chief Richard Cordray since his appointment in January.
“Our proposed rule would mean that those debt collectors and credit reporting agencies that qualify as larger participants are subject to the same supervision process that we apply to the banks,” said Cordray in a statement. “This oversight would help restore confidence that the federal government is standing beside the American consumer.”
Republicans oppose consumer protection
Republicans in Congress have criticized the agency from the start, calling it unnecessary regulation. The CFPB was established under the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010, which was passed by a Democratic Congress as a response to the housing crisis and subsequent recession. The Act brought the most significant changes to financial regulation in the country since the reforms that followed the Great Depression.
The bureau has a broad mandate to police Wall Street banks and other powerful segments of the financial industry. Its stated mission is to “make markets for consumer financial products and services work for Americans — whether they are applying for a mortgage, choosing among credit cards, or using any number of other consumer financial products.”
Appointing Cordray, a former Ohio Attorney General and leading consumer advocate, to head the CFPB in the first place was a bold move by Obama. The President used his executive power to do so while the Senate, which had blocked Cordray’s confirmation for months, was in recess. Senators had threatened to oppose any nominee until changes were made at the agency. Obama effectively thwarted that effort.
The coming crackdown
Cordray is starting his tenure by taking aim at companies that affect nearly every consumer in the country — and about which there are many grievances. “Unlike most services or products where consumers have power through their ability to shop around among different providers, consumers lack the power to do that with these businesses,” he said.
Debt collection has been second only to identity theft in consumer complaints to the Federal Trade Commission (FTC) in recent years: The bureau estimated that 30 million Americans debts in the collection process. Asset Acceptance, one of the biggest firms, agreed to pay a $2.5 million civil penalty in January to settle a FTC lawsuit for misrepresentations in dealing with consumers.
The three large credit reporting companies, Experian, Equifax, and TransUnion have records on 200 million Americans and essentially determine their ability to get a loan, a credit card, a lease and a mortgage. The way in which they operate has been murky for years , and there has been little recourse for correcting mistakes on credit reports.
Earlier this week, Republicans on the House Financial Services Committee summoned Cordray to a hearing on the bureau’s spending plans for 2013 and criticized some of the salaries it has been paying as well as what they said was a lack of detail on its budget.
Under the Dodd Frank law, the bureau doesn’t get its money through the congressional appropriations process. Instead, the money comes from a separate, dedicated funding stream from the Federal Reserve, where it has its offices.
Cordray came under fire from committee chairman Spencer Bachus (R-Alabama), who said. “The truth is [Cordray] could tell us the CFPB spent $100 million on paper clips last year and there is nothing Congress could do about it. Nothing.”
Bachus is reportedly under investigation by the Office of Congressional Ethics for alleged violations of insider trading.
Shortly after Cordray’s appointment, two Republican presidential contenders weighed in. Mitt Romney called it “the worst of Chicago-style politics,” while Rick Santorum quipped, “Enough Mr. President. You are not the emperor.” In an election year, with the 99% making their voices heard, that could come back to haunt them..