The head of the Consumer Financial Protection Bureau (CFPB), Richard Cordray, announced Wednesday that he will be stepping down at the end of the month, putting the agency’s future in jeopardy.
“I wanted to share with each of you directly what I have told the senior leadership in the past few days, which is that I expect to step down from my position here before the end of the month,” Cordray wrote in an internal memo circulated Wednesday. “It has been the joy of my life to have the opportunity to serve our country as the first director of the Consumer Bureau by working alongside all of you here.”
It is widely speculated that the former Ohio Attorney General, whose term was set to run out in July 2018, will be running in a much-anticipated gubernatorial election in his home state.
With the CFPB since its beginning in 2011, Cordray has gone toe to toe with the financial industry—taking action against banks for deceptive overdraft fee programs and against student loan companies for illegal service practices. Most notably, the CFPB levied a $185 million fine against Wells Fargo for the bank’s infamous practice of opening phony accounts last fall.
Overall, the CFPB’s enforcement actions have resulted in about $12 billion in relief for victims of these unscrupulous practices.
In addition to going after crooked financial companies, the CFPB has also released a number of consumer-focused regulations that aim to curb systemic injustices—including restrictions rolled out in October and aimed at curbing abusive payday lenders. The CFPB also pushed forward a controversial arbitration rule that aimed to allow consumers to file class action lawsuits against banks and credit card companies. Congress killed that regulation, which was hotly contested by the financial industry, at the end of October using the existing Congressional Rule Act.
Now, however, even other CFPB rules and other initiatives face an uncertain future, as a new director could roll back current agency activity.
The future direction of the agency and its rules depends on who is nominated to replace Cordray, says attorney Alan Kaplinsky, a partner with Consumer Financial Services Group at Ballard Spahr. President Donald Trump will likely move to immediately appoint an acting director of the CFPB, which Kaplinsky predicts will be Treasury Secretary Steven Mnuchin.
An acting director must be someone who the Senate has already confirmed, which rules out the CFPB’s current deputy, David Silberman.
No matter who Trump names, Kaplinsky says, “expect to see quite a few changes on regulations”—particularly around the any pending rules. A Trump-appointed acting director will likely move to delay the implementation and propose changes, he says.
“The question becomes: Is the the director going to let the agency’s enforcement division do its job?” says Paul Bland, executive director of advocacy group Public Justice. In these situations, Bland says, many times the cases will continue, but they will target small companies or internationally held firms, instead of companies with household names.
“If you end up with a dishonest hack who is just pushing an industry agenda, it could be catastrophic for consumers,” Bland added
Cordray was the inaugural director of the CFPB and accomplished quite a lot in the six years he served—but it was never an easy path. President Barack Obama selected Cordray as the director in July 2011, but congressional Republicans opposed the nomination on the grounds that the agency’s independent structure did not provide enough oversight. To push through Cordray’s nomination, Obama moved to make Cordray a recess appointment, bypassing the Senate. While that was overturned, Cordray was later officially confirmed by the Senate in July 2013.
The pushback from Republicans has not stopped. This year, the CFPB has taken fire from all three branches of the government. There have been several legislative initiatives attempting to bring the agency under Congressional control, while the Trump administration has lobbied to defund the agency and the Supreme Court is currently weighing a case to determine the constitutionality of the CFPB’s single director status.
Through it all, the CFPB has continued to bring cases and release rules that aim to make the financial landscape easier to navigate for consumers.“Richard Cordray has done more for American consumers than any other public servant in recent history,” Bland says.