Trying to Stay Above Politics

After a slow start in the months without a permanent director, the Consumer Financial Protection Bureau is moving quickly to build a regulatory regime from scratch. Under Richard Cordray's watch, it has designated nonbanks for formal supervision, improved its processing of consumer complaints and committed to succeeding where other regulators have failed in streamlining mortgage forms.

Cordray has been crisscrossing the country speaking to audiences of bankers as he tries to move past the controversy over his hiring as bureau  director. During his stop at a recent Consumer Bankers Association convention in Austin, Texas, CBA President Richard Hunt called the new agency the most accessible in Washington.

While in Austin, Cordray spoke with American Banker reporter Kate Davidson to discuss his views on rulemaking, enforcement and whether the CFPB can be responsive to consumers without getting political.

American Banker: You come from an enforcement background, and you've talked about the advantages of using supervision as a tool. Policymaking is another important element of the job. Where do you think the CFPB can be more effective: in writing the rules, or in enforcing them?

Richard Cordray: To us there are two different aspects of the rulemaking. There are certain rules that Congress has specified we have to adopt. Many of them have very specific deadlines; many of them have provisions that would kick into play if we were not to meet those deadlines. So it's very important that we do because otherwise institutions would have to go in a different direction and veer back when the rules were written.

Then there are areas where we have rulemaking authority, but there's not a particular mandate for us to do something. It's going to be discretionary for us as we see it.

On the mandatory rulemaking agenda, there's a lot for us to do in a short time that puts some strains on our ability to deliver, and it puts a premium on us being able to think more quickly, gather data more quickly. Then there are other issues where we intend to be more broadly consultative and take our time to think through what's the right approach.

Rulemaking is a very powerful tool. It's essentially us standing in the shoes of the legislative branch and specifying rules of the road that people have to comply with. It also is an effective tool in some respects if you're trying to affect an entire market.

Enforcement has a deterrent effect, word gets out. But there's also a certain skepticism about enforcement, and I think it's well-placed, which is how easy is it going to be to enforce against lots of individuals in a given space?

In some industries I've seen people feel like there's a lot they can get away with, and that's not a good thing.

AB: Is your rulemaking team staffed adequately at the moment, and what are its priorities?

RC: We have a reasonably sized rulemaking staff, although it feels small compared to the real burdens over the next 10 months in particular. They're quite anxious about meeting all of our obligations.

We pretty much absorbed the entire consumer rulemaking group from the Fed, so there's a lot of experience there. But there are a lot of difficult, complicated issues that they're intended to address in a short time frame.

Integrating [the Truth in Lending Act and the Real Estate Settlement Procedures Act] is a very high priority for us, and we put a lot of time and effort into it and gotten a lot of feedback that needs to be sifted through. We're going beyond the mortgage application to the final closing documents and really trying to reduce the overall burden. That's a major undertaking, and QM [the Qualified Mortgage rule] is a major undertaking.