Transcript:
Penny Crosman (00:03):
Welcome to the American Banker Podcast. I'm Penny Crosman. Most people listening to this podcast will know that Richard Cordray was the first head of the Consumer Financial Protection Bureau. He was recruited by Elizabeth Warren in 2010 to become the head of enforcement for the bureau. Then President Obama shortly after that asked him to become the CFP B'S first director. The CPB was set up after many consumers lost their homes or went into a financial tailspin during the 2008 financial crisis. Now the future of the CFPB looks uncertain with drastic cuts to its funding and its staff proposed by the Trump administration. Richard Cordray is here with us today to talk about the CFBs work and its future prospects. Welcome, Richard.
Richard Cordray (00:46):
Glad to be with you Penny.
Penny Crosman (00:48):
Thank you. So I believe you were Ohio's Attorney General when the mortgage crisis happened. What were some of the things you saw during that time? What were some of the things that worried you and what were some of the kinds of cases you prosecuted?
Richard Cordray (01:05):
Sure. Actually, the background is even more interesting because prior to being Attorney General, I was a local county treasurer responsible for collecting property taxes on real estate properties, and we found that many people who you would not have expected it were going delinquent on their property taxes. And this had to do with people buying up lots of properties on speculation time of a real frenzy in the real estate market. I then became state treasurer and we had to safeguard the state's investments as the crisis started to shutter the markets and then became Attorney General and ended up prosecuting a number of people bringing lawsuits to collect monies back that were lost in the financial meltdown.
Penny Crosman (01:54):
Has some of that speculative buying been diminished as far as you know?
Richard Cordray (02:02):
Well, sure. I mean, once the real estate values crashed in the wake of the financial crisis, there were a lot of people who lost their homes, but also a lot of people who had properties foreclosed on and prices really bottomed out back toward what should have been the norm all along. Since then, prices go up and down, markets go up and down, but much more within a reasonable range, and that's been the experience since 2010 now, 15 years later. And one of the things that's really important to note is that one of the things, first things that Consumer Bureau did was to put in place strong rules affecting the mortgage market that have rendered that market and the participants in it, realtors and mortgage and the like, would very much agree with this, have rendered that market safe and sound and made it possible for people to proceed with confidence once again.
Penny Crosman (03:14):
So what were those early days like and was your focus pretty much on mortgages and protecting people from potential damage of what had happened during the crisis?
Richard Cordray (03:30):
Yeah, so you're asking about the early days of the Consumer Financial Protection Bureau, which was written into law in 2010, and the reality is that the early days were quite unique in the history of government. It is not very often that a new government agency or government department is created, and the reasons for this were they had the extreme problems from the financial crisis. So our job was to actually set up an agency from scratch to make sure that it complied with all the different statutes. There's about a hundred pages of law in the US code that speak to the consumer bureau and what it's supposed to do and what it's supposed to consist of. And at the same time that we were setting up and building the Bureau, we were having to carry out its responsibilities at first with a smaller staff because we were just starting out and then eventually with a Fuller staff after about three or four years.
(04:36):
So at the same time that we were building and creating an agency, we were writing rules to safeguard the mortgage market. We were setting up a complaint handling system so that consumers from all over the country could file complaints with us about financial problems that they were seeing in the marketplace that we would attempt to work with them to resolve and doing a lot of other things as well and bringing enforcement actions that eventually recovered about $12 billion for tens of millions of consumers. So it was a busy time, an interesting time, and quite a handful.
Penny Crosman (05:14):
So I read that the CFEB has processed more than 9 million consumer complaints. When you were there, how did you decide which cases to pursue and which cases to leave alone?
Richard Cordray (05:28):
Yeah, it's a question that's a fair question for anybody who does any kind of law enforcement. When I was Attorney General of Ohio State, attorneys general all over the country every day, also prosecutors and people at other levels of the government, the Justice department at the federal level, they all have to make judgements and weigh comparative problems in deciding where to focus their limited resources most effectively. And we had to make the same kind of decisions at the Bureau. One of the things that we tried to do was to look for cases that involved a larger number of consumers and greater harms to consumers because you don't really want to waste your ammunition on small time cases that aren't really going to amount to much. You want the cases with precedential value where you're going to clean up a problem that's going to affect potentially tens of thousands, hundreds of thousands or even millions of people.
Penny Crosman (06:32):
That makes sense. So I wanted to ask you about the Dodd-Frank section 1033 data sharing rule, which I know the work on that was started during your tenure. What were some of the guiding principles when you were working on this?
Richard Cordray (06:48):
Yeah, the 1033 rule that you're asking about is actually quite an important measure. It's one that Congress specified and identified as important enough to require the bureau to write a rule about it, so it's mandatory. That's in the statute. We started working on that, which meant first of all, gathering information about the marketplace so that we could write a rule that would make sense. It's a very fairly complex area, and the issue there is consumer data. So for example, you and I, penny we're consumers, everybody listening to this podcast is a consumer, and over time there are various financial data that you leave in your wake, how you use your bank account, whether you have a mortgage, whether you pay it down and perhaps paying it off, how you use your credit cards, what kind of bills you amass, what kind of payments do you make.
(07:43):
All of those things are important data and they're valuable data because they speak to the history of your consumer behavior and help predict the future of your consumer behavior and help people target and tailor products that might be of use to you. One of the important principles, I think the most important principle behind the 1033 rule is that that can consumer data, although it's compiled by financial institutions that provide these products, does very much belong to the consumer as well. And the consumer should have say over what is done with that data and certainly should have right of access to that data because it's about them. It's not about anybody else. It's very personal financial data. And if they want to use it for various purposes, if they want to direct it to certain companies for potentially producing products that will serve them, they should have every right to do that. And that was something that we wanted to establish with a 1033 rule and is somewhat contested today.
Penny Crosman (08:48):
Yes, many aspects of it are contested. So if you were put in charge of rewriting it today, what are some things that you might include or not include?
Richard Cordray (08:59):
So the 1033 rule was actually finally adopted after quite a bit of work was done over a number of years, quite a lot of data gathering and assessment. It was finally adopted by the Consumer Financial Protection Bureau late in the year 2024. So just last year. And the rule that was adopted I think was a pretty good rule. It didn't try to be prescriptive about every nuance in every detail of how consumer data would be handled. It didn't go into all of the nits and gnats of that, but it did establish the core principle that the data belongs to the consumer. The consumer should be able to direct who has access to that data, and it's a pretty good rule. There are more things that could be done with it certainly, but what happened to that rule as you know and your listeners may not, is that it was challenged in court by the banks, some of the banks who didn't like the notion that they wouldn't have control of that data, and was also revisited by the new leadership of the Consumer Financial Protection Bureau in 2025 under the Trump administration who walked back the rule and were on the way to rescinding the rule.
(10:27):
That then caused a huge ruckus because there are a lot of entities that have an interest in this rule. It's one of the interesting rules because it actually helps support consumers to give them control over their data. It helps support some financial technology providers who have interesting new products that consumers may well want and want to have their data submitted so that they can have access to those products. And it affects banks. A lot of smaller banks are benefited by this rule because they can work with third parties to deliver services to their customers that perhaps they couldn't deliver on their own. Some of the larger banks feel that this rule gets in their way because they would like to have full control over people's data and control the products that those people can use. That doesn't feel appropriate to me. It's not in the spirit of the rule, but when the consumer bureau walk the rule back there were in particular the crypto industry was quite upset because it was going to interfere with their ability to work with consumers to get products to them. And that seemed to get the attention of the White House, and now they are rethinking whether they were going down the right path in trying to undo the 10 33 rule.
Penny Crosman (11:46):
Yes, and I think another thing the banks didn't like was that I believe the rule did not allow them to charge the data aggregators anything for the customer data that they were sharing. And of course, we've started to see banks start to charge fees of the data aggregators. What do you think about that development?
Richard Cordray (12:08):
Yeah, here's what I would say about that. The banks want to charge for the data that is about the consumer, about me and you. That is very possibly in many cases, an excuse for blocking consumers from using the data for purposes they want to use it for. Because if you charge a high enough price, it's going to not be really accessible to people or not be economical. If you're going to charge just a very minimal cost of keeping the data, which is something banks actually do anyway, usually free of charge. For example, when I have a bank account with them, they're not charging me each month for compiling my data. They're finding it useful to compile it, and so they're doing it for their own purposes and at times offering me products based on their assessment of what the data shows about my financial needs and wants. But the notion that you should be charged anything more than a minimal cost for access to your data strikes me as really out of the spirit of the entire 1033 statute, which is in the code and seems to me to specify that consumers have rights of access to their data, the right to control their data, and that if they're charged anything for that, it should be minimal enough that it doesn't interfere with their independent thinking about how they want to use their own data for their own financial needs.
Penny Crosman (13:45):
So I want to ask you about the CFPB today. So the budget bill that President Trump signed in July decreased the CFPB'S funding cap by 46% and referred to a $2 billion expense savings. Tells me that the CFPB budget would be cut by $2 billion. The administration also sought to cut the CFPB staff from about 1,700 people to about 200 people, and these staff cuts are being challenged in court. But if the administration succeeds in severely diminishing the bureau, what would be lost?
Richard Cordray (14:28):
Well, let me answer that in a couple of ways. First of all, the picture of what the Trump administration is doing with the Consumer Financial Protection Bureau has been pretty muddy since the beginning, but it's been clearly an attitude of great hostility toward the Bureau and what it does for consumers. They seemed entirely intent on shutting the bureau down, entirely, firing all of the employees and cutting the budget to zero simply because they don't like the Bureau for a variety of reasons that don't really stand up to scrutiny. The fact of the matter is that the Consumer Bureau was created by Congress. It is provided by law, it is in the statute, it is required to do certain things. It is directed to do other things. And this administration is doing something quite extraordinary, which is saying, we understand that that's the law of the land.
(15:26):
We understand that this agency is legally mandated to exist, but we're going to do our best to keep it from functioning at all simply because we don't like it. And that's a very lawless way of proceeding, but it's how the administration has chosen to proceed. Their actions were challenged in court, and once they started being challenged in court, they started to shift their approach and scurry around trying to find a more defensible approach. So instead of cutting all the employees down to zero, they've talked about cutting it back to a bare minimum. They have talked about cutting the budget and in fact persuaded the Congress to cut the budget but not down to zero, as you say, by approximately half, maybe 55% of the budget, which is enough for the Bureau to function in the early days. Remember when I was there and we were building the Bureau, we started off with a very small expenditure and a very small number of employees.
(16:30):
It wasn't sufficient to do the job that Congress had directed us to do. And over time we built it up to a much, much larger agency that could handle all of the responsibilities, but somewhere in between we passed a line that they're going to be at now, and it was sufficient to have several hundred employees and certainly to do a lot of the work that the Bureau was expected to do. And that's where the Congress has now left it. And the question is whether the administration will accept that or whether they're going to continue to insist on the one hand telling the court that they're doing the bare minimum, but on the other hand, actually trying to gut the Bureau and make it so that it cannot function at all for the next four years or perhaps longer, they remain in power.
Penny Crosman (17:20):
I've heard people say that, well, the Federal Trade Commission and bank regulators can carry on the work of protecting consumers from financial harm. What would you say to that argument?
Richard Cordray (17:33):
Yeah, I've heard that argument made over the years again and again by banks that at times had not liked what the Bureau is doing because it's crimping their style and enforcing the law against them. The reality is that's a decision for Congress to make, and Congress made that decision. Congress in 2010 passed a law that said, we know we have the Federal Trade Commission. We've had it for years. We know we have these other banking agencies. We've had them for years. None of that is sufficient. We need to have an agency that will look out and be focused on protecting the consumer. So the consumer is no longer being abused in the marketplace as they are from time to time, and we need a CFPB for that purpose. So anybody can look at it and say, gee, why is that necessary? Because you have these other things. But Congress is the decider on that Congress has made its decision. It changed the law specifically to create a consumer bureau and with good reason because the consumer Bureau has been fulfilling various responsibilities to protect consumers that were not being handled sufficiently or appropriately by those other agencies prior to the CFPB being created.
Penny Crosman (18:47):
I want to ask you a little bit about some of the current state of finance today where one thing that's happening is digital assets and stablecoins are becoming more popular. The market caps of stable coins are just escalating. What do you think that means for consumers and could there be consumers that have buyer's remorse down the road? Do you worry about the effect on consumers of that?
Richard Cordray (19:15):
Sure. There's always reason to worry. Look, the financial marketplace is a fast moving situation, and you have financial products that unlike physical products like couches and tables and cars, financial products really are just a matter of terms and money and fees. And they can take various forms and they can shapeshift rather quickly. And we've had new products come onto the market very much over the last 15 years since the Bureau was founded. And before that you had credit cards come onto the market. Those didn't exist a hundred years ago. Mortgages have become much more prevalent and much more complicated in many ways that didn't exist a generation or two ago and the like. The same is true now of these stablecoin products. And one of the things you need to worry about is to begin with do consumers actually understand these products? Because if they don't understand them, it's easy to get hurt, it's easy to lose money, it's easy to not be able to assess the risks properly or to be aware of what the risks are or when you're walking into a problem or when you're being deceived or tricked or scammed. All of those things can happen because these products are sometimes fairly complicated. They have cumbersome terms. They might have a contract with you that runs to tens or even hundreds of pages of online material that you can not easily read or understand. So all of those are reasons to be very concerned for consumers with new products.
Penny Crosman (20:59):
What about the overall rise of household debt? I feel like people don't talk about this very much, but I was just looking it up and in the second quarter, total household debt in the US reached a new record high of more than 18 trillion, and it's mostly mortgage debt, but also credit card auto and student loans. Do you think that could become a problem going forward?
Richard Cordray (21:21):
Well, the amount of debt that people hold can always be a problem. And for individuals it can sink their financial ship in ways that they'll never recover from. I think if you take a step back, what you'll find is that as the nation grows wealthier and the total total GDP and the total household wealth increases, you may well have more debt to go along with that because people can afford more debt. Sometimes debt for people is a convenience. For me to take my credit card and go to the store and buy something on the credit card without having to have cash available or go to the bank or have it in my pocket is a convenience for me, but it creates a debt for a period of time until I pay that off. And the same is true of being able to buy a home where I don't necessarily, most people don't have the ready money to pay cash for a very pricey item like a home and a mortgage facilitates that.
(22:26):
So they take on debt, but it's debt that they can repay, debt that they can handle, debt relative to their overall wealth that is a convenience for them and helps their financial situation, but is not going to put them underwater for good and render them unable to function financially. So I'm not overly worried about the rise in household debt because I think a debt to income or debt to wealth ratio is probably a better measure of that. But it certainly has been true, as you say, for quite some time that overall debt has been expanding in the country and there are plenty of households that get out of balance on their debt and get to the point where they can't really make the payments and are going to end up potentially in bankruptcy or in dire financial straits.
Penny Crosman (23:17):
So what would you like to see the CFPB focus on today or going forward, if you could give it some direction?
Richard Cordray (23:27):
Well, I think the CFPB was actually developed to focus on the major problems that consumers face, and you just kind of ticked them off Penny a moment ago, which is if you look at the largest amounts of debt owed by consumers in this country, by far the largest consumer debt is for mortgages. And so you want to make sure that that market is running on a safe and sound basis on a sustainable basis, that the products are understandable to consumers and they have terms that consumers can live with and cope with over time. And I think that that's very much the case right now. And there was a lot of work done by the CFPB to improve the mortgage market in the wake of the financial crisis of 2008, 2010, which was caused by problems in the mortgage market. So those have largely been solved or resolved, and as long as we can maintain a steadiness in that market, that's a very good thing for consumers.
(24:26):
The next largest consumer debts have to do with credit cards, auto loans and student loans. And that's been shifting around a bit. Student loans now are somewhat larger among those three. And auto loans have also increased over time and credit cards, which used to be the highest of those three, is now in many cases, some often lower than auto loans and student loans. And so you want to be worried a little bit about whether families are taking on too much debt for any of those obligations to pay for college or to buy a car. And most parts of the country, people can't really function very well without a car or sometimes several cars. And in terms of credit cards, that again is people have gotten used to that convenience of being able to go out and buy something, finance it on their card, and then pay it down over time.
(25:24):
You want to make sure that all those markets are being looked after by the CCPB. And by the way, this is why it's very difficult to see the CFPB really functioning in any effective way with fewer than 200 people. I mean, when you think about the magnitude of those markets, which are worth billions or even trillions of dollars and the amount of things that need to be sort of supervised by the bureau, the notion that you're going to do it with just a bare bones staff isn't realistic and it's not intended to be realistic. The powers that be in the Trump administration right now are simply hostile to the idea of the bureau. They don't like it, they don't want it, and they feel that they have more say than the Congress does about the laws of the land and whether they have to be enforced, which I think is very much out of balance with the whole history of how our country works.
Penny Crosman (26:19):
Last question, what are you doing now?
Richard Cordray (26:22):
I am, much as I did during the first Trump administration, doing a lot of consulting work. I do a lot of consulting work with consumer groups around the country. One of the things we're trying to do, Penny, is if the CFPB is going to be stepping back as it certainly has been this year from taking on the responsibilities that Congress gave it, then there are places where state officials, especially state attorneys general, and in some cases state banking regulators can step in and provide some of the protection for consumers that is missing right now. And I've worked with a lot of those groups around the country, particularly in California and to some extent in a number of other states. And we're trying to make sure that there's an aggressive active coalition looking out for consumers. Another thing that I do is I do consulting in the FinTech world.
(27:14):
That is a world that is developing new products to serve consumers. Some of those products are really good products that are going to better consumers' lives. Some of them start out that way, but often turn into products that can be exploitative or the finances don't work as well as people hoped or expected they would. So you have to be careful. But there are some consumer friendly financial products out there. And I'm working, for example, I'm on the board of directors for Vela, which is one of the FinTech innovative companies that is developing new consumer friendly products and services that we think are going to make a good difference to consumers across the country and in many cases around the world.
Penny Crosman (28:03):
Alright, well, Richard Cordray, thank you so much for joining us today and to all of you, thank you for listening to the American Banker Podcast. I produced this episode with audio production by Adnan Khan. Special thanks this week to our guest, Richard Cordray. Read us, review us and subscribe to our content at www.americanbanker.com/subscribe. For American Banker I am Penny Crosman and thanks for listening.