CFPB Director Cordray's Testimony Gets Off to a Heated Start

Today Consumer Financial Protection Bureau (CFPB) Director Richard Cordray testified before the U.S. House Financial Services Committee. Following brief prepared remarks, Committee Chairman Jeb Hensarling (R-TX) went on the attack, first quoting from a December 21, 2016 National Review article written by attorney Ron Rubin, a former employee of both the CFPB and the House Financial Services Committee.

Hensarling cited that the “unwritten policy was ‘never give them what they ask for,’” and other allegations from the article, and asked whether any of it is true. Cordray responded that he was familiar with the article, that it contained only hearsay, and that he couldn’t respond. Hensarling then got more specific, asking whether he was aware of any Inspector General inquiry into the CFPB’s handling of Congressional inquiry. Cordray said he didn’t know.  Hensarling asked whether Cordray had seen a report from the Inspector General. Cordray: “I’ve gotten dozens of reports. I don’t know what you are referring to. I’d be happy to look into it.” Hensarling: “If necessary, we will subpoena the report.” Cordray: “If you showed me the report and I could refresh myself…” Hensarling: “I’m hoping you can show me a report.” Cordray: “I don’t know. Is it a published report?” This is about as far as that went.

He then moved on to attempt to establish that there is cause for the President to remove Cordray from his office for cause by raising the issue that he has engaged in discretionary rulemakings (such as arbitration and pre-paid card arbitration) while there is still required rulemaking that remains outstanding (such as small business lending).

Rep. Waters (D-NY) then suggested that Director Cordray ignore the entire National Review article, and that she believes he has moved as quickly as possible on the 1071 issue. She then tee’d up the opportunity for Cordray to recount how the bureau uncovered the Wells Fargo problem (laying groundwork for what would be an extremely contentious exchange between Rep. Wagner (R-MO) and Cordray regarding who should really get the credit for exposing the Wells Fargo scandal. She concluded by saying the LA Times accused the CFPB of being “asleep at the wheel.”

Rep. Luetkemeyer (R-MO) then raised the issue of the CFPB’s proposed rule to impose a gag order on companies under investigation, suggesting that it amounts to elimination of due process and is unconstitutional. Cordray responded that they had received Luetkemeyer’s memo on the topic, that he believes they’ve raised legitimate concerns, that they plan to ‘go back to the drawing board on this,’ and that he is confident they will be pleased with a revised proposal.

He then moved to the small dollar lending rule, saying it is so punitive that it will close many businesses, and will deny access to small dollar loans to many consumers who have no other options. He cited the example of “Nick,” who needed a loan to fix his truck, and asked Cordray directly what his solution would be for this. Cordray responded that 14 states have no payday lenders, so tens of millions of American’s seem to be getting by just fine without it. Luetkemeyer said, “No, they are still there. They are just going offshore to borrow the money and those loans are unregulated.”

Other Democrats proceeded to show support for Cordray and the work of the CFPB, while Republicans vigorously attacked him on the issues above, as well as others such as treating rural communities the same as urban ones, even though consumers’ financial options differ greatly; the fact that companies are bullied into accepting consent orders, and that press releases mischaracterize companies’ admission of wrong-doing, and the fact that – even though Cordray’s term ends in July 2018 - he has already served more than 5 years, Congress’s intended term, and isn’t it the right thing to do to step down now (Rep Duffy, R-WI, suggested that would likely be more palatable to Cordray than a messy public hearing about harassment, discrimination, etc. to prove cause for removal).

As of the time this post was finished, nobody had brought up debt collection (except Cordray, briefly, in his prepared remarks).

Democrats offered the chance to showcase his efforts. Republicans didn’t give Cordray much chance to get a word in edgewise. Whatever side you are on, one must admit, it was no doubt a stressful day for the Director.