Five months after its formation, the new federal agency tasked with safeguarding the financial interests of ordinary people is still without a director, meaning it cannot regulate the kinds of lenders that consumer groups say prey on the poor.
A Senate vote to move the nomination forward failed Thursday. Sixty votes were needed to end debate on the nomination of former Ohio attorney general Richard Cordray. Fifty-three senators voted in favor while 45 senators -- all Republicans -- were opposed. The only Republican to vote in favor was Sen. Scott Brown of Massachussetts.
Senate Republicans, led by Sen. Richard Shelby, R-Ala., said they will continue to block Cordray, who is currently serving as the agencys enforcement chief, unless the law is amended to make the bureau more accountable.
"No bureaucrat will have more power over the daily economic lives of Americans than this director," Shelby said from the floor of the Senate, shortly before the vote. Without more oversight, CFPB actions will lead to bank failures, he said.
The Republicans want a board of commissioners rather than a single director to oversee the agency and more control over the agency's purse strings - moves that would weaken the bureau, consumer advocates say.
The consumer agency, created by the Dodd-Frank financial regulation law, needs a director to have the authority to make or enforce rules governing certain non-bank financial companies, including payday lenders, mortgage brokers, and private student loan companies, which are currently not subject to federal regulatory oversight.
The Republicans position matches that of Washingtons most prolific lobbying force, the U.S. Chamber of Commerce, which is pushing a House bill that would replace the director with a five-member commission. A total of 34 industry groups list the bill as a lobbying priority, according to a Center for Public Integrity analysis of federal records, representing 183 industry lobbyists. At least 86 once worked for the government.
The House bill and a similar bill in the Senate would replace the director with a five-person commission, nominated by the president, and subject to Senate confirmation. The Senate bill, which is also supported by industry, would fund the commission through the congressional appropriations process, something Senate Republicans also favor.
The Chamber spent nearly $30 million in lobbying in the first three quarters of 2011 on financial regulation and a host of other issues. It tasked 21 lobbyists to work bills that would restructure the agency. In addition to the chamber, the most active opponents of the bureau's current structure include the American Bankers Association, the Financial Services Roundtable, the Independent Community Bankers of America and the Consumer Bankers Association.
Among the most notable lobbyists are former Sen. Don Nickles, R-Okla., representing the Financial Services Center of America Inc., an association that represents payday lenders; former Rep. Deborah Price, R-Ohio, representing the Consumer Credit Industry Association; and former Rep. Steve Bartlett, R-Texas, president and CEO of the Financial Services Roundtable, whose members include the nation's largest banks.
Jonathan Graffeo, a spokesman for Shelby, said that Republicans are seeking "common sense" reforms. "Not any of the proposed amendments would strip any of the bureau's new or existing authority to protect consumers," he said. "It is a myth to say that Republicans want to destroy the agency."
But Republicans, including Shelby and industry groups, have called for an outright repeal of Dodd-Frank, which would eliminate the consumer bureau.
Shelby's spokesman said that bank lobbying had nothing to do with his efforts to reform the agency. "He said from the very beginning that [the structure] vests unprecedented power in one person without any checks and balances."
In a press conference on Wednesday, White House spokesman Jay Carney said the bureau has an "unprecedented set of accountability provisions."
The bureau must consult with other bank regulators before issuing rules, it must assess what those rules might mean to small businesses and any rule that threatens the safety and soundness of the banking system can be spiked by the Financial Stability Oversight Council, Carney said. The CFPB is also the only agency with a funding cap, Carney said.
Consumer groups say the holdup is more about protecting industry than accountability.
"The fight over the confirmation over a director is a symbolic contest about who in the Senate wants to protect Main Street and who continues to serve Wall Street paymasters," said Bart Naylor, a consumer advocate at Public Citizen.
Shelby, the ranking Republican member on the powerful Senate banking committee, has raised about $2 million since 2008 from finance industry employees and political action committees. Top contributors include JP Morgan Chase & Co. and Travelers Group.
This isn't unusual. Both Democrats and Republican leaders typically reap big hauls in campaign cash from the financial sector.
The abuses of big banks have gotten plenty of attention in recent years, but the actions of non-bank lenders often escape serious scrutiny.
Over the past year, iWatch News has reported on how some nontraditional lenders are accused of exploiting gaps in existing laws to make predatory and confusing loans.
Some online payday lenders have partnered with Indian tribes to provide their business the cloak of tribal sovereign immunity; companies that accept military pensions as collateral for quick cash; and about a debt settlement company accused of landing its clients in deeper financial hot water than they were before.
Other federal regulators have had supervisory and examination authority over other parts of the agency's portfolio, which includes rule-making and examination authority over financial institutions with assets over $10 billion.
The acting head of the CFPB, Raj Date, has said that inspectors from the agency are already on the job, examining how the biggest banks treat their customers, and that the agency has also made strides in its campaign seeking to simplify mortgage disclosure forms and make student borrowing more clear.
But without a director, industries outside the financial mainstream remain subject only to an inconsistent patchwork of state laws.
"Without a director, the CFPB is constrained in our efforts to address predatory practices by payday lenders, private student loan providers, debt collectors, and other nonbank lenders," agency spokeswoman Jennifer Howard wrote in an email to iWatch News. "It also limits our ability to level the playing field by ensuring that banks and nonbanks play by the same rules."
The National Association of Consumer Advocates and other allied groups have taken to Twitter to voice their frustration with the stalled nomination. "A strong #CFPB needs a director; confirm Richard #Cordray as director now!" reads one such tweet.
"We would love to have a director in place so the agency can assume its full powers," said Pam Banks, a senior policy council at the Consumer's Union, which lobbied in favor of the CFPB. "There are a lot of abuses at the entities that are not being regulated, such as payday lenders and debt collectors," she said.
Brown, the lone Republican that supported the nomination, is facing a tough challenge from Elizabeth Warren, who helped set up the bureau before declaring to run for the Senate.
Obama could still appoint Cordray once the Senate recesses, but Senate Republicans could foil that move by scheduling sessions during the holidays.
This story has been updated.
Alexandra Duszak contributed to this report.