“We will begin dealing face to face with payday lenders, mortgage servicers, mortgage originators, private student lenders and other firms that often compete with banks but have largely escaped any meaningful federal oversight,” Cordray said during an appearance at the Brookings Institution on Jan. 5.
As a treasurer in Ohio, and later as the state's attorney general, Cordray said he observed several instances where nonbanks led lending practices in a “race to the bottom” that pushed aside responsible lenders.
“I have seen senior citizens defrauded of there savings and I have seen families bankrupted by complex mortgages with spiraling interest costs they did not understand and could not afford,” Cordray said, adding that such practices eventually triggered the financial meltdown. Cordray also said his recent experience at the bureau proves that the credit markets still pose a danger to consumers.
“In just a short time we have heard thousands of stories: Some are outrageous,” he said. “The problems are welling up everywhere.”
The bureau has taken a number of steps to address issues in the consumer credit markets. Cordray highlighted the CFPB's efforts to craft clearer disclosures for mortgages, student loans and credit cards. He also discussed the agency's ongoing bank supervision program, which will serve as the basis for its nonbank oversight efforts.
“We have examiners on the ground with broad authority to review loan documents, ask tough questions and make a bank fix problems that come to light,” Cordray said. He also revealed that the agency has launched a number of investigations ”” some in conjunction with other regulators and some on its own.
“Some [investigations] may be resolved through cooperative efforts to correct problems. Others may require enforcement actions to stop illegal behavior. The consumer bureau will make clear that there are real consequences to breaking the law,” he warned.
Cordray said nonbanks within its ambit can expect similar treatment.
“Since most of these businesses are not used to any federal oversight, our new supervision program may be a challenge for them, but we must establish clear standards of conduct so that all financial providers play by the rules,” he said.
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