While bankers remain concerned about the activities of the Consumer Financial Protection Bureau, they should take some comfort from a suggestion this week by the agency's director, Richard Cordray, that the regulation of nonbank institutions is a top priority.
"[I]t is notable that we are the first federal agency authorized to supervise non-bank players such as mortgage originators, mortgage servicers, payday lenders, and private student lenders," Cordray told the audience Thursday at an event hosted by the University of Rochester's business school. "With so many areas going unsupervised, at least at the federal level, it is no wonder that consumer financial markets are rife with concerns about how well they serve the public."
The CFPB's plans to regulate non-bank financial service providers are not new, and it has vigorously asserted its capability of acting on numerous fronts at once. But Cordray described state regulation as patchy or absent in key areas, and suggested that the size of non-bank financial services justified immediate attention.
"There are 30 million consumers that owe debt are being chased by debt collectors," he said in an interview following the talk. "It's one of the areas that's very much on our priority list."
Bank collection practices wouldn't be exempt from review — "from the consumer's point of view it doesn't make a difference if it's the original creditor or a third party debt collector," he said.
Regardless of who's seeking payment, "To the extent that they're trying to collect on debt they can't vouch is accurate, that's a concern," he said. "To the extent that they're deceiving the courts, that's a concern."
In the interview, Cordray said that CFPB enforcement efforts are progressing well, though he declined to estimate whether the bureau would have anything to announce before the end of its first year in existence, which occurs on July 21. The CFPB's lack of formal enforcement authority before his January arrival "hampered" its early progress, he said.
"There's a lot of work going on, and it will ripen in somewhat unpredictable stages," he said.
Cordray also downplayed the bureau's frustration about an ongoing spat over whether the targets of CFPB's investigations can give the agency documents while maintaining their confidentiality. Some industry attorneys have warned that giving the CFPB such information could waive attorney-client privilege. But Cordray said that the targets of CFPB's enforcement actions have not refused to turn over information based on such concerns in any significant number.
"People have hypothetical anxieties and fears," he said. "We think that under settled law, if a bank makes an involuntary disclosure of information, it doesn't waive privilege."
Even still, the CFPB has issued a proposal to "say again what has already been said," and supported legislation that would confirm that position. Those two actions should remove any lingering doubts about confidentiality, he said.
During Cordray's public talk, he emphasized the rigor of bureau methodology and promised that the agency would not make rules hastily.
"The rigorous, sophisticated, analytical techniques that you bring to your businesses are the same techniques we are using to understand trends and developments in the consumer markets," he said.
But Cordray said the bureau was dissatisfied by the limited availability of public data regarding consumer financial matters. In the CFPB's review of banks' overdraft practices, "we are coordinating a study on overdraft with more comprehensive data that a number of the largest banks are providing to us," he said. More such initiatives will likely be announced as time goes by, he said, though it would be a long term effort conducted over "five or ten years" he said.