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04.19.17

Embattled Cordray under Fire at House Committee Hearing

CFPB head Richard Cordray was in the hot seat before the House Financial Services Committee on April 5, facing a barrage of criticism from Republican lawmakers over the bureau’s handling of several investigations—as well as calls for him to be fired or resign as director of the consumer protection watchdog.

The official purpose of Cordray’s appearance was to present the CFPB’s latest two semi-annual reports, from Spring and Fall 2016. But the often-contentious, nearly six-hour hearing became a platform for several committee members to renew long-standing calls for a change in the leadership structure of the CFPB, which have increased since President Trump took office in January.

“I believe the president is clearly justified in dismissing you and I call upon the president—yet again—to do just that, and to do it immediately,” said committee chairman Jeb Hensarling (R-Texas). Hensarling has been among the lawmakers most critical of the CFPB, having sponsored and supported several bills to reform the CFPB, in part by replacing Cordray’s position with a five-member board.

The embattled agency’s leadership structure also is being debated in a federal courtroom, with an en banc hearing scheduled to take place in D.C. circuit court on May 24 in the case PHH Corp. v. CFPB. A three-judge panel from that court found the CFPB’s single-director leadership model was unconstitutional, because, under the Dodd-Frank Act, the director can only be removed by the president for cause. In February, the court granted the bureau’s request for an en banc hearing, vacating the previous decision.

Before the House committee, Cordray indicated that he would not resign if asked by President Trump, saying his removal from office would have to “follow the law of the land.”

Along with questions about his leadership status, Cordray faced criticism over the CFPB’s handling of its investigation into the fake account scandal at Wells Fargo last year, with Republicans claiming the agency was slow to discover the issue. Republicans also took issue with the language the agency has used in its consent orders, which some committee members said was overly accusatory in cases where companies didn’t admit to any wrongdoing.

The hearing was short on details about the CFPB’s future rulemaking plans. Cordray declined to comment on specific timelines on rulemakings for overdraft fees, disclosures and data collections. However, he did offer some insight into the bureau’s recently proposed six-month delay of the effective date of its final rule on prepaid accounts. The proposal stemmed from issues relating to the linking of prepaid cards to digital wallets and the error resolution for transactions on prepaid cards that had not yet been registered, Cordray said.

Republicans on the panel called for a longer delay on implementation. Rep. Roger Williams (R-Texas) said the bureau should drop the rules altogether, noting that prepaid products were the subject of less than 1 percent of all consumer complaints filed with the CFPB. Williams was one of the architects of a February proposal to repeal the rule under the Congressional Review Act.

Days after Cordray’s hearing, the CFPB released its latest annual consumer response report, which tallied and categorized all complaints from consumers received by the agency between Jan. 1 and Dec. 31, 2016. During that period, only about 2,500 of the 291,400 consumer complaints dealt with prepaid cards—continuing a trend of prepaid comprising just a tiny fraction of overall complaints since the agency began tracking prepaid complaints in 2014.

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