Critics of the Consumer Financial Protection Bureau who opposed the agency's single-director structure lost a big battle yesterday as the U.S. Senate confirmed Richard Cordray as the CFPB's first permanent director.
For the auto finance sector, the confirmation makes the possibility even more remote that the CFPB will be restructured and maybe reverse its efforts to limit dealer reserve, the additional amount of interest that dealerships add to the customer's rate on an auto loan as compensation for arranging the loan.
The CFPB said earlier this year that by allowing dealers to set the final interest rate for customers, lenders were potentially allowing discrimination against legally protected classes such as minorities.
The CFPB has also indicated through its actions in a couple of cases that it wants to see more transparency in the sale of F&I products such as extended-service contracts. It also recently expanded its scrutiny of debt-collection agents.
The CFPB's opponents in the Senate, and in the auto finance sector, wanted to replace Cordray with a board of directors that would have included some Republicans.
Senate Republicans were so adamant against Cordray's appointment that rather than seek Senate confirmation in late 2011, President Barack Obama appointed Cordray as interim director during a congressional recess in early 2012.
And Cordray got the appointment because Senate Republicans indicated they were even more strongly opposed to Elizabeth Warren, Obama's first choice to run the CFPB. She helped set up the new bureau and is now a U.S. senator from Massachusetts.
The Consumer Bankers Association, which has been among the CFPB's critics, said in a written statement yesterday it will "continue to work with" Cordray.
In the past, bankers association President Richard Hunt has given the CFPB credit for working with industry representatives, even as the lender organization complained about the CFPB's single-director structure and what the CFPB's critics called a lack of accountability.
"CBA congratulates Richard Cordray and his family on being confirmed Director of the CFPB. For the past two years, CBA has worked closely with the director and the Bureau to create a level playing field in the financial services sector. We will continue to work with Director Cordray to ensure consumers have access to financial products they determine meet their family's needs," Hunt said.
Bureau advocates and consumer law experts said Senate confirmation clears up a number of questions, including Cordray's legal status as the temporary bureau director and the agency's authority to oversee certain financial sectors such as debt collection.
"There is no doubt that the consumer agency will survive beyond the crib," Warren told reporters earlier on Tuesday.
The consumer bureau, which opened in 2011 and oversees mortgages, credit cards and other consumer-oriented financial products, including auto loans, had been a source of controversy since its creation.
Opponents said it has too much authority over a wide array of financial products. Others said it should be run by a bipartisan board rather than by a single director and funded through the congressional appropriations process instead of the Federal Reserve.
So far, financial industry representatives have said the bureau has not been as overbearing as they feared, noting the CFPB has communicated with them about new regulations and has been open to suggestions about how to improve its rules.
Reuters contributed to this report.
