Ohio Attorney General To Head Consumer Financial Protection Bureau's Enforcement Arm

Bloomberg is reporting that Elizabeth Warren has tapped Ohio Attorney General Richard Cordray to head up the all-important enforcement arm of the Consumer Financial Protection Bureau. General Cordray's hiring will not tend to put the consumer finance industry at ease. Nationally, Mr. Cordray has been one of the most outspoken Attorneys General involved in the multi-State foreclosure investigation, and he has been a vocal proponent for severely sanctioning mortgage servicers accountable for foreclosure related trangressions. To the extent Ms. Warren has been traveling the country and meeting with CEOs and management representatives in an effort to calm their nerves a bit, this move is likely to reverse any progress that has been made. However, there may be a silver lining. If General Cordray is working for the CFPB and enforcing Dodd-Frank, then he won't be hounding mortgage servicers over their handling of foreclosures and will not be participating in the multi-State investigation.

Regardless, to the extent anyone's vision of the Consumer Finance Protection Bureau was of an agency that would not have an active enforcement arm, or that there would be no cooperation with the State Attorneys General, the Cordray hire should end those beliefs and that discussion.

CONSUMER FINANCIAL PROTECTION BUREAU: An Overview

Okay, so if you happen to read this blog, whether because you are one of our regulars (you don't count, Mom) or because Google tells you that you should, you have likely heard of Dodd-Frank, Elizabeth Warren, the Consumer Finance Protection Bureau and the changes to consumer finance regulation, investigation and enforcement that are underway. Even so, we found this article published by the New America Foundation informative. Its distillation of important information related to the mission and formation of the CFPB is plain-spoken, does not invoke a "stop drop and roll" reflex, and should be required reading for all who may need to communicate on the subject with other human beings.

For those of you who know little about the New America Foundation and wish to know a little more, and with all the necessary cautions regarding Wikipedia, you can find out a little more here.

CONSUMER FINANCE CEOs SEEK ROGAINE

As we predicted here on December 1, significant increase in States Attorneys General power may well be the top consumer finance regulatory enforcement story for the coming year. In a move further evincing that efficacy is her mission as opposed to consolidation of power, Elizabeth Warren is bringing the State AGs into the CFPB fold. Unless appearances are seriously deceiving, Ms. Warren is not merely giving speeches or keeping the AGs updated. According to Bloomberg Businessweek, Ms. Warren is actively reaching out to the AGs, hosting weekly calls and inviting them to D.C. for closed door meetings. Just this week, she traveled to Fort Lauderdale, Florida to attend the NAAG Winter Meeting. Importantly, this was a meeting limited to AGs and their staff, which is at least one indicator of serious strategy discussions. Good timing, especially considering the nationwide foreclosure issues and implementation of Dodd-Frank and its Consumer Financial Protection Bureau that were almost certainly headlining the agenda.

Any real cooperation or alliance between CFPB regulators and AGs would be the harbinger of a new day in consumer finance regulation and promises to increase the rate of many CEOs already receding hairlines. Warren has explicitly said that the AGs "are natural partners for the consumer agency," and she has acknowledged that "regulators in Washington . . . used to prevent the [AGs] form protecting consumers." Ms. Warren's reference is most pointedly directed to the Office of the Comptroller of Currency, which historically has been the keeper of "preemption," a legal doctrine that protected many lending institutions from State-level regulatory enforcement actions. The balance of power has changed with Dodd-Frank. It has curbed the OCCs ability to block consumer protection actions brought by State AGs. And, there is no surprise in the fact that the closer the AGs cuddle up to Warren and the other CFPB leaders such as Peggy Twohig and Steve Antonakes, the better positioned they will be. To this end, North Carolina's AG, and current NAAG President, Roy Cooper recently observed that a key goal in establishing a new and closer relationship with the feds is to influence the preemption doctrine. Anyone that knows General Cooper or is familiar with his office's work in NC knows all too well that he is not hoping to see preemption strengthened or expanded. And, Cooper has already fromed a group of State AGs to work with Warren on policy decisions related to mortages and credit cards.

So, let's review: Dodd-Frank already gives State AGs the authority to enforce its provisions and related regulations in courts. The CFPB is being formed under the hand of a consumer advocate that is serious enough about protecting consumers that she appears willing to abandon age old turf-protection practices and policies. Talk of a preemption rollback is picking up steam just as State AGs and the CFPB appear on the verge of a real partnership. And, sales of Rogaine on Wall Street are up sharply. Are these stories related? You make the call.

LET’S TALK TURKEY: TOP THREE POST-MIDTERM ELECTION STORIES

In the weeks leading up to November 2, 2010, the financial related ranker and hyperbole achieved a fevered pitch. Whether the topic was foreclosure, banking, Dodd-Frank, or the CFPB, no one near a microphone was ever seemingly in need of oxygen. On November 11, here at BB&R, we reported on the election results and provided some perspective on their relevance to consumer finance investigation and regulation. Now that the world, and airwaves, have calmed a bit, we have taken a collective breath and with Thanksgiving in our rear view, the Lame Duck session underway and the “holidays” upon us, we pause to review the top three post-election stories that have legs.

1. Republicans are Gearing Up: Judging, as I believe my professors often did, by the sheer weight of the printed pages that we have read here at BB&R, the top post-election story is, ironically, the one with the least chance of meaningful impact. Article upon article has reported upon the GOP’s dizzyingly quick pronouncement of its intention to repeal significant portions of Dodd-Frank and change the very genetic makeup of the CFPB. Of course, the GOP has next to no chance of repealing any portion of Dodd-Frank that the Senate and White House support, and insofar as the CFPB falls under the ambit of the Federal Reserve, it will enjoy a level of independence that many in the House of Representatives will have a hard time accepting. Because the Fed is self-funded, its purse strings are not as subject to being pulled as many in Congress are accustomed. Of course, Congress will flex its muscles in connection with key appointments and some appropriations, which could affect rule making, but in the end Dodd-Frank survives and the CFPB is reality. Good money will follow bad over the next eight or nine months in a futile effort to avoid that reality, but its coming.

2. Whistling is Cool: Dodd-Frank’s new “whistle-blower” rules expand potential bounty from merely tattling about insider trading to information resulting in judicial or administrative action brought by the [SEC] under the securities laws and resulting in monetary sanctions exceeding $1,000,000. Which brings me to this: Wow! $1,000,000 is not a particularly high bogey to meet. This is one of those Dodd-Frank goodies that could well get rolled back a bit in terms of the prerequisite sanction amount necessary to trigger financial rewards for whistle-blowing but, for now, if Congress wanted an expanded whistle-blower rule with teeth, Dodd-Frank certainly seems to have accomplished that end. Just one word of caution to all you would-be whistle-blowers. In addition to being cautious of lip fatigue, remember, this is the government, which means that there are forms and deadlines. Be aware of them, or bringing down your employer (or former employer) may have to be its own reward.

3. CFPB Posts are Filling…or Are They?: Elizabeth Warren’s dance card remains perpetually crammed with high level industry meetings, speeches, events and interviews Thus, it would appear that the captains of consumer finance are making peace with the fact that she will have a role in their future. However, the buck may not stop with her after July 21, 2011. In fact, mid-November brought a new name, Melissa Bean, as a possible nominee for CFPB Directorship. Due, in part, to well-publicized links between soon-to-be former Congresswoman Bean and the financial community, the idea did not seem to get much traction. That said, no appointment has yet been made. Meanwhile, a few critical CFPB positions have been filled. Peggy Twohig and Steve Antonakes will, respectively, supervise non-depository and depository institutions. Ms. Warren has publicly supported their hiring and acknowledged that they “will play a critical role in helping to level the playing field between banks and non-banks,” which is a core CFPB mission. Additionally, UConn Law School professor, Patricia McCoy has been tapped to direct the CFPB division that will focus on protecting consumers against mortgage fraud, an issue that rings a bell from some recent reports.

Though the GOP, Dodd-Frank whistle-blower measures and CFPB evolution have likely sucked the most post-election ink, no “list” like this could be complete without a nod to the States Attorneys General as the biggest late-2010 winners. Consumer protection is squarely in the expertise wheelhouse of many Attorneys General, and Dodd-Frank’s strike against federal preemption will almost certainly result in a significant expansion of State-level financial regulation and enforcement through consumer protection laws. So, not only are the States Attorneys General front and center in the current foreclosure paperwork debacle (which is just getting started), if Dodd-Frank survives, industry leaders will soon become as familiar with their names as with Elizabeth Warren’s.