Jo Ann Barefoot Quoted in Thomson Reuters: “Cordray Heading CFPB Could Have Quick Impact, Legal Challenges”
As Seen in Thomson Reuters
January 5, 2012
Thomson Reuters
Ted Knutson
President Barack Obama’s appointment Wednesday of Richard Cordray to head the Consumer Financial Protection Bureau could have an immediate impact on the compliance operations of banks and financial industry advisors, consumer advocates told Thomson Reuters.
“Cordray has a strong enforcement focus. He’ll ratchet up the enforcement activity considerably,” financial compliance expert Jo Ann Barefoot said of the new director, a former Ohio Attorney General.
Barefoot, who set up the first consumer compliance unit at the Office of the Comptroller of the Currency and currently co-chairs Treliant Risk Advisors, predicted that Cordray will announce the CFPB’s first high-penalty cases in the coming months.
With a director in place, the CFPB can make and enforce rules barring abusive practices in connection with a consumer financial product or service, said Schan Duff, a consumer financial services specialist with the law firm of Allen and Overy.
“The industry worries quite a bit because what constitutes an abusive practice is not well defined in the law,” Duff said.
Until it had a director, the CFPB could not make rules in non-bank financial lending and other areas, but Travis Plunkett, Consumer Federation of America legislative director, said he doesn’t see why Cordray can’t hit the ground running and start quickly to stem financial abuse.
“You can do a lot more politically and organizationally with a head in place at the agency,” Plunkett said.
Potential firestorm
The impact of the controversial recess appointment of Cordray as the CFPB’s first director could be diminished if opponents of the new agency can get their way.
Since last spring, Senate Republicans have demanded that the Dodd-Frank Act, which set up the CFPB, be changed to replace the director with a five-member board, to require congressional approval of the CFPB budget and to give the Financial Stability Oversight Council more authority to overturn CFPB rules. Without these changes, the GOP senators said they would not approve anyone to head the agency.
Obama lost a test vote on a Cordray nomination last month with only one Republican Senator in favor. The recess appointment, which the White House said does not need Senate approval, will last until the end of the next Senate session in late December.
Senate Banking Committee Chairman Tim Johnson, a South Dakota Democrat, applauded the appointment as finally giving Americans the consumer protection they deserve. The committee’s ranking Republican, Richard Shelby of Alabama, called the appointment an end run around the Americans’ elected representatives.
The appointment may put the CFPB on shaky legal ground, two key lobbies warned.
The American Bankers Association said the move puts the CFPB’s future actions in Constitutional jeopardy.
The U.S. Chamber of Commerce said the appointment means the CFPB’s authority will be challenged in the courts, with Chamber spokesperson Bryan Goettels saying the group has not ruled out making that challenge itself.
