Consumer Bureau chief vows cooperation with skeptical Republicans
Hours before he was praised as a consumer watchdog in President Obama's State of the Union address, Consumer Financial Protection Bureau Director Richard Cordray on Tuesday fulfilled a promise and testified to a House panel led by Republicans openly skeptical of his recent recess appointment.
Though officials of the government's newest agency had appeared before Congress a dozen times during the past 18 months, Rep. Patrick McHenry, R-N.C., who chairs the House Oversight and Government Reform subcommittee handling financial services, opened the hearing by saying, "despite an appointment that is constitutionally questionable, [Cordray should] deliver definitive responses about how he will implement and enforce the unparalleled powers of his new office."
Cordray said he was proceeding with full confidence in the validity of his appointment, preparing to step up enforcement against dishonest businesses and implementing his agency's hiring push, which comes at a time of constrained federal hiring. "My vision for the consumer bureau is that it will work to make consumer financial markets operate fairly in order to protect consumers, support honest businesses and play a crucial role in helping to safeguard the overall economy," he said.
McHenry citied business community worries about "uncertainty," proposing that Cordray mimic the practice of the Securities and Exchange Commission by publishing an annual advance regulatory framework "to give clarity to public and businesses affected."
Cordray replied that while CFPB is still new, "I think we can satisfy you on that."
McHenry expressed concern that the bureau would force businesses wary of prosecution from offering new products, providing consumers with only "plain-vanilla choices."
Cordray said his team would "see what it can to do encourage innovation" in products such as credit and debit cards. "We're not intending to constrain everyone in a straightjacket," he added. "No regulator knows enough to tell the market the right answer.
Instant Payday Loan Freedom Station Ohio - News
By Tory Newmyer, writer FORTUNE -- In a down-market strip mall 12 miles from the center of Columbus, Ohio, sandwiched between a Jackson Hewitt Tax Service and a "Check 'n Go" payday lender, President Obama's re-election effort has quietly planted a
CFPB also is working closely with the Education Department on student loan abuses, Cordray said. He plans to set up small business review panels and advisory councils, as he did as state attorney general in Ohio, to get input from credit unions and
Vice President Joe Biden and House Speaker John Boehner of Ohio listen at rear. (J. Scott Applewhite | The Associated Press) Mr. Speaker, Mr. Vice President, members of Congress, distinguished guests, and fellow Americans: Last month, I went to Andrews
The 400 Percent Loan, the $36000 Hotel Room, and the Unicorn ...
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Is a $16 surcharge on a $100 product unfair, unjust, and “predatory”? Hardly anyone flinches, for instance, at a $16 “resort fee” on a $100 hotel room. But when it comes to short-term loans offered by non-bank institutions, mostly payday loans, politicians call for banning the practice, using dubious arguments about such loans’ true cost.
Before he was installed in a controversial “recess” appointment in January, the White House issued a report urging the confirmation of former Ohio Attorney General Richard Cordray as director of the new Consumer Financial Protection Bureau (CFPB), “because some studies have found that payday lenders on average charge fees of roughly $16 for a two-week loan … this translates into an annual percentage rate of roughly 400 percent.”
How does that work? Quite simply, it does not. The Obama administration and other politicians who make this argument are using a flawed method of calculating interest that is an apples-and-oranges application of annual percentage rate (APR) to loans of a much shorter duration than one year.
A typical payday loan in the U.S. covers a period of two weeks, tracking the interval of time between paychecks. Interest and fees3 come to $10 to $20 per $100 of the amount of the loan, the total amount of which is usually $500 or less. Such loans are often taken out during emergencies to pay immediate costs that can be covered with the arrival of the next paycheck.
Were a borrower to take out a new loan every two weeks for a year, the total would indeed equal 420 percent. The only problem with that scenario is that it does not match reality. State government data on payday loans show that hundreds of thousands of borrowers take out just one loan per year and pay back the loan within the two-week duration. Even staunch critics of payday loans have yet to name a single individual who has paid close to 400 percent over a year from a law-abiding lender.