CFPB Set to Launch, Director Nominated

July 19, 2011

Nearly one year after the passage of the Wall Street Reform and Consumer Protection Act of 2009 (H.R. 4173), President Barack Obama this week nominated former Ohio Attorney General Richard Cordray to serve as the first permanent director of the Consumer Financial Protection Bureau (CFPB).

Professor Elizabeth Warren, assistant to the president and special advisor to the secretary of the U.S. Department of the Treasury, had been viewed as the likely nominee, as she has been responsible, since the fall, for setting up the CFPB and hiring its staff. In fact, Warren hired Cordray earlier this year to lead the CFPB’s enforcement division.

Warren’s nomination would have set off contentious partisan battle, as Republicans had vowed to oppose it. It hardly is clear that the nomination of Cordray will placate the Republicans, however. In May, Sen. Richard Shelby, the ranking member on the U.S. Senate Committee on Banking, Housing, and Urban Affairs, sent a letter to the White House, vowing that every Republican senator would oppose any CFPB nominee, “absent structural changes that will make the bureau accountable to the American people.”

Regardless of the status of its director, the CFPB, on July 21, officially will assume responsibility for more than a dozen consumer protection laws previously enforced by other regulators and agencies, such as the U.S. Federal Reserve and the Federal Trade Commission.

The CFPB is an independent agency that will regulate the mortgage industry; consumer credit cards, including pre-paid cards; debt collection and debt relief companies; credit reporting agencies, money transmission and check cashing firms, and larger nonbank financial entities.

Thanks to provisions originating in an NSBA-supported amendment—introduced by Sens. Olympia Snowe (R-Maine), the ranking member of the U.S. Senate Committee on Small Business and Entrepreneurship, Mark Pryor (D-Ark), Lindsey Graham (R-S.C.), and Robert Menendez (D-N.J.)— to the Wall Street Reform and Consumer Protection Act of 2009, the CFPB will be obliged to consider how its rulemakings would affect America’s small businesses by requiring it to conduct Regulatory Flexibility Analyses in conjunction with any rulemaking.

The CFPB also is required to consult with a Small Business Advocacy Review Panel prior to the publication of any proposed rule, with the Review Panel’s recommendations published in any eventual proposal.