WASHINGTON — Chicago will become the first city to directly report financial activity and fraud to the Consumer Financial Protection Bureau.
CFPB Director Richard Cordray and Chicago Mayor Rahm Emanuel jointly announced the partnership Wednesday in an effort to ramp up enforcement of financial companies and detect early signs of fraud.
But the agency also said it hopes this is just the beginning of such arrangements, issuing a call for other cities to follow suit.
"We want to know what you are seeing and how that can inform what we should be doing — where our supervision and enforcement teams should focus their attention, and what problems our policymakers should undertake to fix," Cordray said at the event in Chicago. "For us, this is a leading example … to say to other cities you should be doing what Chicago is doing."
The city will provide information including "spikes" in financial activity within local markets from payday lenders, debt collectors, student loans and banks, Emanuel said.
"The big guys — the banks and insurance companies and payday lenders — all have what they need," Emanuel said. "We've got to make sure the consumers have the law on their side and the protections and resources equal to measure what the big banks and others bring."
The information collected and shared with the CFPB is also "going to be an indication to literally stop something before it scales out nationwide," the mayor said.
Chicago will propose three ordinances that relate to regulating and licensing debt collectors as well as new zoning to reduce the concentration of payday lenders in certain markets, Emanuel said.
Both the city and the CFPB are using the partnership to specifically target financial companies that prey on low- to middle-income families, military personnel and seniors.
"The upshot is that predatory lending hurts more than its immediate targets; it assaults the very foundations of stable communities," Cordray said. "The damage can take years and years to repair, as we are finding."
Cordray said Chicago was the first city to actively share such information directly with the bureau.
Tom Feltner, director of financial services at the Consumer Federation of America, praised the effort and its potential expansion to other cities.
"The two-way flow of information and enforcement efforts between the CFPB and local authorities is critical to elevating concerns about high-cost products, such as payday and auto title loans, quickly," Feltner said in a press release. It "will help drive a better understanding of potential abuses."
But there are political and geographical ties between Cordray and Emanuel that likely helped Chicago become the first city to partner with the CFPB.
Emanuel, a former investment banker, is deeply rooted in Washington, having served as the White House Chief of Staff to President Obama, a member of the House Financial Services Committee and senior advisor to President Bill Clinton.
Cordray also lived in Chicago while attending the University of Chicago Law School, where Obama taught years later.
Cordray immediately kicked off his speech Wednesday by noting that he once lived across the park from where former Chicago Mayor Harold Washington resided — where a family of "wrong way" parrots built an "enormous nest" above the parking space of the Mayor's police security detail.
"I also understand that the Mayor was a fierce and valiant defender of those parrots," he said.