What will Richard Cordray's credit union legacy be?
November 15, 2017 5:17 PM
Bon voyage, Director Cordray
With the announcement that Consumer Financial Protection Bureau Director Richard Cordray plans to leave the bureau soon , Credit Union Journal asked a variety of CU stakeholders for their thoughts on his departure, his legacy and what changes they'd like to see as the bureau moves forward.
Responses have been edited for length and clarity.
Responses have been edited for length and clarity.
Wally Murray, president and CEO of Greater Nevada Credit Union
While I wish Mr. Cordray well in his future endeavors, the announcement of his impending departure is good news for credit unions. His consistent unwillingness during his time as director to utilize the exemption authority for smaller institutions that Congress specifically included in that legislation ultimately only served to help the “too big to fail” institutions grow even larger. It is difficult to see how American consumers benefited from his decisions in that regard.
I don’t think he will be viewed favorably. He oversaw the building of a huge taxpayer funded bureaucracy of more than 30 departments with 2,000 attorneys on staff. Many of those teams and roles are clearly redundant with other efforts in other parts of the federal government, including NCUA. As a leader, he also built an agency that appears to have significant internal dysfunction from a personnel management standpoint. Having met with both him and his team on several occasions and multiple issues, including areas where credit unions have had significant experience assisting the very consumers the agency was designed to protect, the consistent takeaway from those sessions is that those meetings were less about fact finding and more about the staff defending their preconceived positions on the matters at hand. They were inevitably futile attempts at proverbially banging our heads against an unmovable wall.
The two main lessons learned from this experience are that such an agency cannot be effectively led by a single individual and needs to be under federal appropriations. With respect to its leadership, regardless of political affiliations or leanings, now that the vast majority of the legally prescribed issues that were part of Dodd-Frank have been addressed, the future agenda of the CFPB will be almost entirely determined by its director. That is clearly far too much power to vest in one person, which is why moving to a board approach is appropriate. On the budget side, unlike NCUA which derives its funding from the credit unions it insures and regulates, the CFPB is funded by general tax revenues. Therefore, congressional oversight of its funding is important.
I don’t think he will be viewed favorably. He oversaw the building of a huge taxpayer funded bureaucracy of more than 30 departments with 2,000 attorneys on staff. Many of those teams and roles are clearly redundant with other efforts in other parts of the federal government, including NCUA. As a leader, he also built an agency that appears to have significant internal dysfunction from a personnel management standpoint. Having met with both him and his team on several occasions and multiple issues, including areas where credit unions have had significant experience assisting the very consumers the agency was designed to protect, the consistent takeaway from those sessions is that those meetings were less about fact finding and more about the staff defending their preconceived positions on the matters at hand. They were inevitably futile attempts at proverbially banging our heads against an unmovable wall.
The two main lessons learned from this experience are that such an agency cannot be effectively led by a single individual and needs to be under federal appropriations. With respect to its leadership, regardless of political affiliations or leanings, now that the vast majority of the legally prescribed issues that were part of Dodd-Frank have been addressed, the future agenda of the CFPB will be almost entirely determined by its director. That is clearly far too much power to vest in one person, which is why moving to a board approach is appropriate. On the budget side, unlike NCUA which derives its funding from the credit unions it insures and regulates, the CFPB is funded by general tax revenues. Therefore, congressional oversight of its funding is important.
Chuck Purvis, president and CEO of Coastal FCU
I don’t think he’ll be remembered very fondly. The CFPB, as we’ve said for a long time, had the authority to exempt credit unions from all the regulatory stuff they put out. Rather than acknowledging that and exempting credit unions, they applied it all to us.
I think it’s time for a pause to take a step back and evaluate what has been the effect of the rules passed, and the bureau's general approach to rulemaking.
I hope that new leadership will take a look at the requirement that credit unions provide TRLS integrated disclosures three days in advance of closing. You cannot waive the requirement for a new three day notification. You’ve got to wait three days on all of that.
I think it’s time for a pause to take a step back and evaluate what has been the effect of the rules passed, and the bureau's general approach to rulemaking.
I hope that new leadership will take a look at the requirement that credit unions provide TRLS integrated disclosures three days in advance of closing. You cannot waive the requirement for a new three day notification. You’ve got to wait three days on all of that.
Cliff Rosenthal, former CEO and founder of the National Federation of Community Development Credit Unions
For the last several years, I have been appalled by the demonization of Richard Cordray and the characterization of the CFPB as a "rogue" agency. In my two years at the CFPB, I got to see, if not always influence, the process of rulemaking, after thirty-two years on the other side of the fence as the CEO of the National Federation of CDCUs. Mr. Cordray is a bright, honest, and dedicated public servant, who was always open to listening, although firm in his principles. His mandate was to protect consumers--not financial institutions--and that is precisely what he did, to the tune of billions of dollars of fines and penalties imposed on the true "rogues" of the financial system, who perpetuated unfair and sometimes deceitful practices on a massive scale. The bureau did make exceptions for small institutions on mortgage lending and other financial products. Yes, I occasionally wished that it could have done more. But the good done by the CFPB far outweighs the damage of additional compliance, and the country needs someone who will follow the path Richard Cordray has blazed.
Dennis Dollar, principal partner, Dollar Associates
Cordray has been an activist regulator who seldom found a proposed rule he didn’t like. Any replacement in a Trump administration will be more balanced from a business perspective and will, hopefully, actually try to find a workable approach that both protects consumers and does not adversely impact their marketplace choices by unnecessary restrictions on the financial institutions that offer them the products and alternatives they often seek. There is a chance that, without Cordray’s activism, there could be a reasonable discussion about replacing a single administrator with a three or five member board to provide some diversity of thought into the rulemaking process at CFPB. That would be an excellent outcome. Cordray’s personality, activist nature and unwillingness to consider exemptions for smaller institutions have been a barrier to serious discussion of a restructured CFPB because, just as he had his many detractors, he also had many supporters in the consumer protection arena. Extreme positions, both pro-consumer and pro-business, do not result in good policy. There must be a balance, and Cordray did not – in my view – seek the balance as much as he sought to placate the hard extreme on the consumer protection side.
J. Scott Sullivan, president/CEO of the Nebraska Credit Union League
The recent announcement by CFPB Director Richard Cordray that he'd be stepping down as the bureau's director did not come as a surprise. Since the election of President Donald Trump, there has been a great deal of speculation whether he would step down as the head of the agency or if President Trump would fire him considering candidate Trump and President Trump's views on the bureau and its work.
Director Cordray will most likely be remembered by most credit unions as the head of a regulatory body that has impeded the ability of credit unions to best serve their members by promulgating rules and regulations that are "one-size-fits-all". Many of the rules and regulations that Director Cordray and the bureau put into place were aimed to protect consumers from bad actors or from Wall Street banks but even the smallest of credit unions were subject to those same rules written for the "too big to fail" banks! The four largest banks individually have more assets than all credit unions in the U.S. combined yet credit unions in Nebraska, many of whom have 10 or less employees, must comply with those same rules written for the BIG four. That's not common-sense regulation.
We would like to see common-sense regulation. We would like to see credit unions exempted from future rules and regulations of the CFPB. Short of an exemption, Congress should change the structure of the CFPB from a bureau with a one-person director to a bi-partisan commission of five members appointed by the president as Nebraska Sen. Deb Fischer has introduced.
Director Cordray will most likely be remembered by most credit unions as the head of a regulatory body that has impeded the ability of credit unions to best serve their members by promulgating rules and regulations that are "one-size-fits-all". Many of the rules and regulations that Director Cordray and the bureau put into place were aimed to protect consumers from bad actors or from Wall Street banks but even the smallest of credit unions were subject to those same rules written for the "too big to fail" banks! The four largest banks individually have more assets than all credit unions in the U.S. combined yet credit unions in Nebraska, many of whom have 10 or less employees, must comply with those same rules written for the BIG four. That's not common-sense regulation.
We would like to see common-sense regulation. We would like to see credit unions exempted from future rules and regulations of the CFPB. Short of an exemption, Congress should change the structure of the CFPB from a bureau with a one-person director to a bi-partisan commission of five members appointed by the president as Nebraska Sen. Deb Fischer has introduced.
Dave Adams, CEO of Michigan Credit Union League & Affiliates
This resignation was widely anticipated and wasn’t that surprising. Mr. Cordray will hopefully be remembered as a well-intentioned advocate for consumer protection. He often went to great lengths to understand the ‘credit union difference’ in tailoring regulations. He did the job that he was hired to do. The problem was not with the director, but the bureau itself and the unchecked breadth of its authority. Hopefully, a new director and/or statutory changes can exempt credit unions and smaller banks from the regulations promulgated by the bureau. Narrow the focus of rulemaking -- stop painting with such a broad brush because while you think you’re helping consumers, in fact, you’re killing community-based financial institutions. Until this is fixed by statute, when power shifts back to a Democratic White House, credit unions will once again be subject to onerous and far-reaching regulations that have the unintended consequences of harming consumers more than they help them.
Patrick La Pine, president/CEO of League of Southeastern Credit Unions & Affiliates
There had been talk that Mr. Cordray would leave the CFPB in order to run for governor of Ohio next year, and so it will be interesting to see who his replacement will be, either on an interim or permanent basis. Going forward, we are very concerned with what the CFPB might do with the recently issued rule pertaining to small-dollar (or payday) lending and any potential overdraft protection rule. These are of crucial importance to credit unions. Overall, I think that during Cordray’s tenure, the CFPB sometimes overstepped congressional intent and did not do a good enough job in exempting credit unions from some of its onerous rulemaking and regulations.
Don Milici
Diana Dykstra, CEO and president of the California and Nevada Credit Union Leagues
Reaction: We were aware he would be leaving so it was not a surprise given his appointment was for five years and he would not have been reappointed by the current administration
Remembered: When the bureau was established we celebrated the mission of protecting consumers against bad players in the market. Unfortunately, the director chose to make all rules “one-size-fits-all” which punished credit unions, and ultimately their members, because of increased regulatory costs.
Future: We would like to see measured regulations that recognize that credit unions and other small institutions should be exempt from the bureau’s oversight.
Remembered: When the bureau was established we celebrated the mission of protecting consumers against bad players in the market. Unfortunately, the director chose to make all rules “one-size-fits-all” which punished credit unions, and ultimately their members, because of increased regulatory costs.
Future: We would like to see measured regulations that recognize that credit unions and other small institutions should be exempt from the bureau’s oversight.
Paul Gentile, president and CEO of Cooperative Credit Union Association
We firmly believe that credit unions should be treated different in terms of the CFPB. We would like to see some segmentation of credit unions and other financial institutions, and we would like to see the CFPB get back to what we were told the CFPB was there to do: Regulate the bad actors and too big to fail insitutions.
We would like to see revisions to the Home Mortgage Disclosure Act and to HELOC loans. They should be higher. On first mortgages the new HMDA reporting loans need to be at least 500 if not more.
We would like to see revisions to the Home Mortgage Disclosure Act and to HELOC loans. They should be higher. On first mortgages the new HMDA reporting loans need to be at least 500 if not more.
John Bratsakis, president and CEO of the Maryland|DC Credit Union Association
Obviously the CFPB has a responsibility to Dodd-Frank to protect consumers from what caused the [fiancial] crisis. Unfortunately, they picked a one-size-fits-all approach. As the CFPB moves forward, I hope that they will truly tailor their regulations to recognize the roles credit unions play in the financial marketplace.
I would also like to see the threshold for the CU exemption raised. I think $10 billion is too low. There needs to be more research into what is appropriate. Is it $100 billion? Is it $500 billion? At what category do you see the pattern or problem starting?
I would also like to see the threshold for the CU exemption raised. I think $10 billion is too low. There needs to be more research into what is appropriate. Is it $100 billion? Is it $500 billion? At what category do you see the pattern or problem starting?
Scott Earl, president and CEO of the Mountain West Credit Union Association
The Mountain West Credit Union Association has 125 credit unions representing 3.2 million members across the states of Arizona, Colorado and Wyoming. We appreciate the dedication that Director Cordray exhibited as head of the CFPB and we wish him well in the future. As we move forward, we hope to see more progress to showcase that credit unions are the best financial partner for consumers, that credit unions exist to protect the financial interests of their members and that the CFPB will work to issue rules that help pro-consumer financial institutions. We look forward to working with whomever is chosen to lead the CFPB after Director Cordray.
MarkBolles.com
William J. Mellin, president/CEO of New York Credit Union Association
Richard Cordray is a strong consumer advocate who has operated with admirable intentions, and we certainly wish him all the best in his future endeavors. There’s no question credit unions have long felt that Director Cordray’s approach to regulation and rulemaking often failed to distinguish between the worst actors in financial services and those that already operate with consumers’ best interests in mind. Hopefully the new leadership at the bureau -- in whatever form it takes -- will use their authority to exempt credit unions from regulations that should be aimed only at the institutions that harm consumers or pose a true systemic risk.
Mark Cummins, president and CEO of the Minnesota Credit Union Network
We appreciate the efforts of Director Corday. We see his departure as an opportunity for the agency to refocus and refine the agency’s rule making and tailor rules to be more effective in protecting consumers. Ultimately, we hope the executive director position will transition to a multi-person board or council to allow a balanced and fair rulemaking process.
Caroline Willard, president and CEO, Cornerstone Credit Union League
We wish Director Cordray well as he moves on to his next chapter, and we’re hopeful that his successor will be reasonable, fair, and even-handed in leading the agency’s oversight of credit unions. We are hopeful that the next CFPB director will either exempt credit unions from future rules, or at minimum, tailor rules that take into account the unique structure of credit unions, which are considered by many to be the original protectors of consumers.
Paul Stull, president and CEO of the Credit Union Association of New Mexico
This is good news for credit unions and all small community financial institutions. The oppressive one-size-fits-all regulation that became the cornerstone of Cordray’s rule hurt many consumers and communities struggling to get access to financial services. We can only hope that more common sense policies will find a way to both protect and expand services to consumers
I remember him as someone who was so convinced of his mission that he failed to listen to -- or even acknowledge -- other ideas. During a hearing on arbitration he stared into the corner as I attempted to portray the fact that credit unions were member-owned. He frustrated credit unions who had hoped he would be an ally in expanding services to underserved communities, instead a complicated rule making process designed to fit too-big-to-fail behemoths was applied to consumer-owned cooperatives working to help consumers.
The agency needs to look for ways to leverage connections with organizations that share the mission of protecting consumers. It needs to be open to more than one man’s perspective on regulation. Consumer protection is a good idea and supported by credit unions across the country. They know all too well the troubles faced by consumers. A more collaborative atmosphere that recognizes that no one solution fits all situations needs to be addressed. It would seem that a board of governors with broad understanding of both the needs of consumers and the institutions that serve them would be ideal.
I remember him as someone who was so convinced of his mission that he failed to listen to -- or even acknowledge -- other ideas. During a hearing on arbitration he stared into the corner as I attempted to portray the fact that credit unions were member-owned. He frustrated credit unions who had hoped he would be an ally in expanding services to underserved communities, instead a complicated rule making process designed to fit too-big-to-fail behemoths was applied to consumer-owned cooperatives working to help consumers.
The agency needs to look for ways to leverage connections with organizations that share the mission of protecting consumers. It needs to be open to more than one man’s perspective on regulation. Consumer protection is a good idea and supported by credit unions across the country. They know all too well the troubles faced by consumers. A more collaborative atmosphere that recognizes that no one solution fits all situations needs to be addressed. It would seem that a board of governors with broad understanding of both the needs of consumers and the institutions that serve them would be ideal.
John McKechnie, credit union consultant and partner at Total Spectrum
Credit unions have had a complicated relationship with Director Cordray and CFPB in general. On one hand, it's in our DNA to be pro-consumer -- we didn't need a federal agency to tell us that. And some of what CFPB did to root out abuses in the marketplace made sense.
What hasn't made sense is the "one-size-fits-all" nature of some of the rules, or the overly complicated approach by CFPB that actually discourage good actors like credit unions from doing their jobs. The remittance rule comes to mind as an example.
My hope would be that the president appoints a successor who takes a balanced and restrained approach, who views the private sector positively, and who looks for real world solutions to any abuse is that he or she finds.
What hasn't made sense is the "one-size-fits-all" nature of some of the rules, or the overly complicated approach by CFPB that actually discourage good actors like credit unions from doing their jobs. The remittance rule comes to mind as an example.
My hope would be that the president appoints a successor who takes a balanced and restrained approach, who views the private sector positively, and who looks for real world solutions to any abuse is that he or she finds.
JOSHUA ROBERTS/REUTERS
Carrie Hunt, EVP of government affairs and general counsel NAFCU
Cordray was always willing to listen, accepted our meetings and took the Credit Union Advisory Council seriously. However, feedback we provided to him and the bureau was largely absent in the policies the bureau ultimately finalized.
We encourage new leadership to focus on unregulated bad actors who negatively impact consumers, recognize that credit unions are unique in the financial services market, and use the Bureau's exception authority to greater effect. NAFCU also believes that additional reforms, such as changing the bureau's leadership structure from a sole director to a bipartisan commission, might better serve the industry in the long run.
We encourage new leadership to focus on unregulated bad actors who negatively impact consumers, recognize that credit unions are unique in the financial services market, and use the Bureau's exception authority to greater effect. NAFCU also believes that additional reforms, such as changing the bureau's leadership structure from a sole director to a bipartisan commission, might better serve the industry in the long run.
Kris Kully, partner with Washington, D.C.-based law firm Mayer Brown
For what it's worth, of course, an announcement of Cordray’s departure has been expected for a long while. The only surprise is that so many prior rumors about his departure date proved false. The timing at least reflects the latest rumor -- that he would stay until the CFPB's payday lending rule was finalized.
Credit unions may feel like saying "thanks for nothing." While they surely appreciated his recognition that they have always prioritized members' financial well-being, that recognition did not result in significant regulatory relief.
Credit unions may feel like saying "thanks for nothing." While they surely appreciated his recognition that they have always prioritized members' financial well-being, that recognition did not result in significant regulatory relief.
Ryan Donovan, chief advocacy officer at the Credit Union National Association
Throughout his time at the Consumer Financial Protection Bureau, Director Cordray went out of his way to acknowledge that credit unions are in the business of protecting consumers. Obviously we were disappointed a number of times with how the rules the bureau finalized under his leadership added burden to credit unions that made it more difficult for them to be consumer protectors, but he seemed to have an understanding of where credit unions were in the marketplace and the good role they provided. At the end of his term, with the payday rule, we were really pleased to see that he tailored a regulation to make sure that credit union lending wasn’t disrupted.
It’s hard to say what would have happened if there had been more time [with Cordray helming the bureau]. What we would’ve liked to see happen – and what we hope happens with the next director – is that the CFPB focuses on the abusers of consumers as opposed to focusing on credit unions. We’ve got a situation right now where Wall Street banks like Wells Fargo and others aren’t even bothering to follow the rules. They can afford not to follow the rules and consumers get hurt by that, whereas credit unions are put in a position where they’ve got to follow the rules, and the rules get harder and harder, and [CUs] are not doing a thing to hurt consumers. Hopefully the next director will correct that balance and focus on Wall Street banks and other abusers of consumers.
We think the bureau ought to put a stop to all pending rulemaking and reexamine its regulatory agenda. There are some rules that have been proposed but not yet finalized, and we’ve got to put a stop to those.
We would be hopeful the next director would transfer supervisory authority of the very large credit unions back to the National Credit Union Administration so that supervision of those institutions is with the prudential regulator, and that should free up resources for the CFPB to go after abusers of consumers.
We’re going to continue to work with the bureau under new leadership to reconsider analysis of its statutory-exemption authority. We think Congress through Dodd-Frank gave the bureau very broad authority to exempt any class of entity from its rules, and we’re going to encourage the next director to use that to protect credit unions from rules designed for consumer abusers.
It’s hard to say what would have happened if there had been more time [with Cordray helming the bureau]. What we would’ve liked to see happen – and what we hope happens with the next director – is that the CFPB focuses on the abusers of consumers as opposed to focusing on credit unions. We’ve got a situation right now where Wall Street banks like Wells Fargo and others aren’t even bothering to follow the rules. They can afford not to follow the rules and consumers get hurt by that, whereas credit unions are put in a position where they’ve got to follow the rules, and the rules get harder and harder, and [CUs] are not doing a thing to hurt consumers. Hopefully the next director will correct that balance and focus on Wall Street banks and other abusers of consumers.
We think the bureau ought to put a stop to all pending rulemaking and reexamine its regulatory agenda. There are some rules that have been proposed but not yet finalized, and we’ve got to put a stop to those.
We would be hopeful the next director would transfer supervisory authority of the very large credit unions back to the National Credit Union Administration so that supervision of those institutions is with the prudential regulator, and that should free up resources for the CFPB to go after abusers of consumers.
We’re going to continue to work with the bureau under new leadership to reconsider analysis of its statutory-exemption authority. We think Congress through Dodd-Frank gave the bureau very broad authority to exempt any class of entity from its rules, and we’re going to encourage the next director to use that to protect credit unions from rules designed for consumer abusers.
Nick Bourke, director of The Pew Charitable Trusts’ consumer finance project
The CFPB under Richard Cordray’s leadership implemented several important consumer protections, including new regulations that target the worst harms of short-term payday loans. Director Cordray and the bureau spent several years gathering input, and they clearly listened to the stakeholders who commented. If state lawmakers do their part to curtail 400% APR payday installment loans, and if federal regulators enable banks and credit unions to offer better credit alternatives, the CFPB payday loan rule will be a major step toward a safer, more affordable small-dollar loan market for consumers nationwide.
A. Victor Goodpasture
Jack Antonini, president and CEO of the National Association of Credit Union Service Organizations
I am hopeful that a new director will recognize that credit unions did not abuse consumers or help cause the Great Recession, and will work to protect consumers from abusive predatory organizations, while exempting credit unions as appropriate from rules that are not needed for consumer owned credit unions.
[Cordray will be remembered] as someone who did not take advantage of the provision in Dodd-Frank to exempt organizations such as credit unions who were not abusers of consumers.
I would like to see recognition that consumer owned credit unions are providing solutions to predatory lending and predatory fees from large profit oriented financial organizations and therefore apply consumer protections appropriately.
[Cordray will be remembered] as someone who did not take advantage of the provision in Dodd-Frank to exempt organizations such as credit unions who were not abusers of consumers.
I would like to see recognition that consumer owned credit unions are providing solutions to predatory lending and predatory fees from large profit oriented financial organizations and therefore apply consumer protections appropriately.
Geoff Bacino, partner, Bacino & Associates
Cordray's departure was not unexpected. The Trump victory, the continued Republican majority in Congress and the upcoming Ohio Senate race probably all played a part in his decision. Years from now, credit unions will probably remember that they continued to be affected by CFPB decisions even though the bureau's public stance was that credit unions did not cause the crisis.
Changes for the CFPB should the implementation of a 3 or 5- person board. Regulatory agencies work best when there is a breadth of opinions and experience.
Changes for the CFPB should the implementation of a 3 or 5- person board. Regulatory agencies work best when there is a breadth of opinions and experience.
