From high mortgage rates to shortages that have spread coast to coast, New York Times reporter Emily Badger explains the roots -- and consequences of our country's broken housing system.
Five years ago this week, President Barack Obama signed the Dodd-Frank act into law. A reaction to the country’s financial meltdown, the legislation created a brand new federal agency called the Consumer Financial Protection Bureau. Part regulator, part educator, the CFPB’s mission was to stand up for consumers and make sure they’re being treated fairly in the marketplace. From its controversial birth, the agency has been criticized for a lack of oversight and possessing too much authority. But supporters say it plays a critical role in helping people navigate an increasingly complex financial landscape. We talk with Director Richard Cordray about the agency’s early years – and its future.
- Richard Cordray Director of the Consumer Financial Protection Bureau
MS. SUSAN PAGEThanks for joining us. I'm Susan Page of USA Today sitting in for Diane Rehm. She's on vacation. It's been five years since Dodd-Frank became law. A centerpiece of the act was the creation of the Consumer Financial Protection Bureau. Since opening its doors, the agency has brought $5.5 billion of relief to consumers through enforcement actions. It's also extended federal regulation to non-bank financial companies, like payday lenders and collection agencies.
MS. SUSAN PAGEMeanwhile, critics continue to warn of overreach and a lack of accountability. Joining us for a discussion of the Consumer Financial Protection Bureau on the anniversary of its birth is its director, Richard Cordray. Thanks so much for joining us.
MR. RICHARD CORDRAYMy pleasure.
PAGEWe invite our listeners to join our conversation with your calls or questions. Our toll-free number, 1-800-433-8850. You can always send us an email at firstname.lastname@example.org or find us on Facebook or Twitter. So five years ago, Congress passed Dodd-Frank. Four years ago, the CFPB opened its doors, but I'm sure there are some of our listeners who don't really know what it is. Tell us what it does.
CORDRAYSure. So the Consumer Financial Protection Bureau, and the name kind of lays out what we do, is all about looking out for consumers, that is, every one of us, every one of us as a consumer in the financial marketplace, making sure that we're being treated fairly by the financial companies, some of the most powerful institutions in the world that we deal with on all the things that we do financially in our lives, whether it's mortgages or credit cards, student loans, auto loans, bank accounts and the like.
CORDRAYThis agency is looking out for consumers, enforcing the law, getting money back to consumers when that's appropriate, getting problems fixed. And I think that's quite important because where else do we turn normally when we have a problem of that kind, unless you're going to sue them in court, which is not something most Americans typically think of doing. An agency like this can be the balance and level the playing field so that you have a fighting chance to be treated fairly.
PAGESo some of the industries that you're regulating have not been subject to federal regulation before. Tell us what those are.
CORDRAYSure. So, for example, you mentioned payday lenders. They've not been subject to federal regulation or oversight before. Debt collectors have been, but we're going to have a chance to -- and we're working on new regulations that will overhaul that industry. Credit reporting companies, not something most American consumers know much about, but every one of us has a file. 200 million American have credit files that affect what people will be charged on interest rates on loans or whether they will be denied loans and making sure that those companies are handling things appropriately, that their files are accurate, that they're able to resolve the kind of disputes you might have when you think something is wrong in your files.
CORDRAYThese are quite important things and no one was really dealing with that before.
PAGESo how much of the agency deals with enforcing regulations against industries? How much is it about educating consumers to try to navigate what's become a really complicated world?
CORDRAYYeah. Both of those things are important. We're looking to provide new and improved tools and resources for consumers to be able to make their own choices in accordance with what serves their own lives. And, for example, on our website, which I'll probably mention several times over the course of the show, consumerfinance.gov, we have tools, for example, on how you can go about figuring out the kind of questions and choices you make in terms of whether to buy a home and how to shop for a mortgage and get the best deal.
CORDRAYThat's called "Owning a Home." It's on our website at consumerfinance.gov. We have a similar tool for if you're thinking about -- and many families never face this but once or twice in their lives -- how do you go about, try to finance affordable higher education for your children? There's a "Paying For College" tool where you can walk through. You can actually compare schools. You can compare financial offers, really think about what the student debt load will look like when you graduate, how much it will cost you and what your repayment rights are.
CORDRAYSo these are all things that we want to make it easier for consumers to make their own decisions appropriate to their own lives, but give them some help and support. At the same time, enforcing the law and making sure the institutions treat people fairly is critically important and if no one was in a position to do that job, consumers would be really fending for themselves and that's not really sufficient.
PAGEYou mentioned buying a home. And, of course, the mortgage industry was one of the big culprits back in 2008 when we had that financial meltdown. So what's different now when people are buying a home, compared to the situation they faced before the 2008 crisis?
CORDRAYThere's a lot that's different and a lot of our early work has been around making the mortgage market better performing for American consumers. As you said, that was the market that everybody has recognized, Federal Reserve and everyone, Congress. That was the market that blew up the economy, cost millions of people their jobs, cost millions of people their homes, cost trillions in household wealth and it needed to be cleaned up.
CORDRAYThere were so irresponsible practices by 2006, '07 and '08 that needed to be halted. So we have written a series of regulations to provide guardrails around that market so that those things cannot happen again. We also are enforcing those rules and others. Mortgage servicing, which is people who do have trouble paying their mortgages and during the crisis, many people did. The volume of that is such that some of the companies do a very poor job of customer service and they make the problems even worse for consumers who are already struggling.
CORDRAYSo in those areas, I think we have made a significant difference. The mortgage market will never be what it was in the middle of the last decade when it was increasingly irresponsible and the underwriting was poor and many of those mortgages blew up and harmed people, harmed families, harmed communities and ultimately undermined our entire economy.
PAGEIs -- of course, we all remember the financial crisis. It had such devastating consequences for homeowners, for job seekers, for our whole economy. Are consumers better -- now, we've got a recovery, kind of a slow recovery. A lot of workers haven't seen an increase in wages, but we are in an economic recovery. Are consumers better off today when it comes to these risk factors that proved so devastating five years ago?
CORDRAYYeah. So it's been a slow, but increasingly steady recovery. It's uneven across the country and so different people have very different reactions to it. But what I would say is the mortgage market is a better market. People who are mortgage lenders and realtors will tell you that it is a better market for the responsible competitors. They don't have to feel undermined by people who were breaking the law with impunity or were being highly irresponsible and managing to get away with it, at least for a short time, maybe not over the long haul.
CORDRAYFor consumers, the ability to understand more clearly what the costs and risks are that they face as they make choices, I have great confidence in consumers' ability to make decisions for themselves. Nobody can stand in their shoes and understand their circumstances as well as they do themselves. But at the same time, there are things they need to know about what the choices really are and whether the choice that's being presented to them is the deal that they will actually be able to live with next year or the years after or whether it will have changed in ways that are not clear to them in the fine print.
CORDRAYThese are all ways in which consumers, if they have their eyes open and if they can clearly see the futures, will make pretty good choices for themselves. But if the future is obscured, if they're being tricked and if there's deceptive marketing, as was often the case, then they will make bad decisions and they'll regret them and none of us wants to see that and consumers most of all.
PAGEWe saw a big retrenchment, of course, right after the 2008 crisis when it came to home mortgage. But I saw an ad on TV last night that really struck me. It was for a company that offers loans and it said buying a home is the American dream and you should be willing to take a risk. It's like climbing to the top of a mountain. You should be willing to take a risk if it means you'll be able to own a home. And I thought that that reminded me of some of the encouragement that people had that lead them to disastrous consequences when they couldn't, in fact, afford the mortgage that they had taken out.
PAGEAre you concerned that some of these things are creeping back?
CORDRAYI think we've created some guardrails around the mortgage market so that what happened before will never be able to happen again. I'm quite confident we made a lot of progress on that. Consumers ought to be able to take risks and decide on risks for themselves. Those are judgments we make about the opportunities of our lives, but they ought to have clear eyes, open eyes and full disclosure of what the risks are so that they can weigh them carefully.
CORDRAYSome people have a different risk appetite than others. Some people are more conservative about their approach to spending their money. Some are more aggressive. Different consumers can make those decisions for themselves. What I object to is when the risks are masked or obscured so you don't really know what you're getting into. Somebody is leading you in one direction, but in fact, you're going in another direction.
CORDRAYNobody can make good choices in those circumstances. And a lot of our work, early on, has been to enforce the law against deceptive marketing and the kinds of things that we've heard from people about -- all over the country, you know. A woman at a field hearing in Louisiana who talked about being foreclosed out of her home, even though she had been trying to work with the company and she thought she had been given several solutions by them. But at the same time, they were pursuing foreclosure and ousting her from her home at 3:00 AM.
CORDRAYThese are the kinds of things that we hear about all over the country. But again, I don't have a problem with consumers taking risks as long as they know what they're getting into. What I have a problem with is many companies were deceiving them about what the real risks were and then they couldn't make good decisions.
PAGEWe're talking to Richard Cordray. He's director of the Consumer Financial Protection Bureau. He's the first director of that new agency founded -- created five years ago and he's the former attorney general of Ohio. We're going to take a quick break and when we come back, we'll go to the phones and take some of your calls and questions. Our toll-free line is open, 1-800-433-8850, or send us an email to email@example.com. Stay with us.
PAGEWelcome back. I'm Susan Page of USA Today, sitting in for Diane Rehm. And with us in the studio for this hour, Richard Cordray, director of the Consumer Financial Protection Bureau. We were talking about the financial crisis of 2008 that led to the creation of your bureau. We've got a couple emails from people with questions that relate to that crisis. Let me see if you can answer them. Kay, writing us from Dayton, Ohio, writes, can you tell us how much of the trillions, is that right, loan to failing banks during the crash of 2008 have been paid back and interest made off those so-called loans? Were these loans a give-away?
CORDRAYSo thank you for the question, Kay. My mom grew up in Dayton, Ohio, actually. The amounts of money paid back to the government, that's something the Treasury Department deals with, and I believe that there has been pretty aggressive collection and repayment of the loans made. I don't really have the experience of the federal government's actions during the crisis because I was the state treasurer and then state attorney general in Ohio at the time.
CORDRAYWhat I can say is that the economy was so badly broken during that period that we really needed to fix some of the problems, and as Susan and I were talking about earlier, fixing some of the problems in the mortgage market were the most obvious and necessary things to do, and we have been working hard to do that and enforcing the law aggressively to make sure that those changes stick.
PAGEAnd here's a question from Tony he posted on our Facebook page. He says, how many people served any time for their parts on this? He says, I bet I could count them off on one hand and still have fingers leftover.
CORDRAYYeah, and again, the Consumer Bureau doesn't have criminal jurisdiction, but the Justice Department does. What I can say is when I was attorney general in Ohio, there are many people who went to jail during the crisis for all kinds of fraudulent behavior and mortgage fraud, and we put well over 100 people in jail when I was the attorney general of Ohio.
CORDRAYAt the same time, I think the complaint people have is that at the largest banks, no one was jailed. I'm not going to get into that controversy today, but I can tell you one of the things we have focused on and we have the authority to do is changing practices at the largest banks so that ways in which they may have taken advantage of consumers or consumers were misled or defrauded, such as our actions against credit card add-on products, where we've taken 10 enforcement actions against the largest credit card issuers, including Citibank yesterday, Bank of America, JP Morgan Chase, Capitol One, Discover, we've gotten billions of dollars back for consumers.
CORDRAYThat was appropriate. It was returning money that we thought was taken from them wrongfully, for products that they signed up for but didn't get or were misled into getting that they didn't want. That's the kind of action we've been trying to take to make sure that consumers are able to function in the financial marketplace and know that someone's standing on their side, trying to see that they're treated fairly. That's our job.
PAGETell us about the enforcement action you filed yesterday.
CORDRAYSo the enforcement action yesterday was against Citi, and it was for credit card add-on products. So what we're talking about is often when you signed up to get a credit card, you would call, and they would market you other products, so-called insurance type products or payment protection products for different scenarios. What we found was those products were marketed aggressively, often by third-party vendors. They pushed the envelope on those products, and often the marketing became, we thought, deceptive.
CORDRAYOr people were supposedly signed up for the product, and they would be -- start to be charged for the product, but they would find that if they went to use the product, they weren't actually signed up for it. So there were failings in that regard. It was $700 million going back to consumers as a result of that action, changes in practices to stop this in the future, which we've done now against 10 different credit card issuers. And there were penalties paid to try to deter that behavior in the future, $35 million to the Consumer Bureau and $35 million to our partners in the Office of the Comptroller of the Currency.
PAGEYou also have a complaint pending against Verizon and Sprint. What do you accuse them of doing?
CORDRAYActually we've resolved that matter, and the issue there was that consumers were finding that charges were being crammed onto their bills that they did not know about and did not intend. These were actual fraudulent schemes where Verizon and Sprint were acting as the payment processors, and other people, not necessarily with Verizon and Sprint's knowledge but very much facilitated by the way the bills were handled, were getting on the bills.
CORDRAYAnd they looked fairly innocent. They might look like data services. Well, how would I know to contest that or complain about it? But $4.95 a month, and it was actually a total fraud. So I think we got over $100 million back for consumers there and significant changes in practices going forward so that that kind of mobile cramming will not repeat in the future. And by the way, the FCC was a tremendous partner to us and several state attorneys general. And the FCC is working on clarifying these kinds of bills so that that will be much more obvious to consumers in the future, and that's a great effort that's being undertaken there.
PAGEYou know, you get a credit card bill, or you get a bill from the company that provides you with mobile phone services, and it's confusing. It's elaborate. Sometimes you think it's designed to be confusing. So what should consumers do when they get these bills?
CORDRAYWell, you should always look at the bill carefully, but I agree with you. if the bill is confusing, you can look it carefully and still not understand it. Chairman Wheeler of the FCC and I have talked about this. We've agreed that it would be a good thing to try to simplify and streamline those bills so the know-before-you-owe concept that we brought to mortgages and to credit cards and now prepaid cards, and that will be an improvement.
CORDRAYBut in all of these areas, if the information provided to consumers is complex, if it's dense, if it's long, it's going to make it harder for consumers to make their own choices with clear eyes and with clear intent. And we want to make those things simpler for people so that it's more accessible, and consumers can make good choices that they can live with over the long term.
PAGELet's talk to John, he's calling us from Baltimore. John, you're on "The Diane Rehm Show."
JOHNGood morning. A major player in the financial crisis was the real estate industry, and the real estate agent knew or should have known the buyer would not be able to make the mortgage payment when the teaser rate expired or the first adjustable rate was implemented. Yet they allowed the transaction to be completed, got their commission and disappeared behind the screen of the National Association of Realtors. How could this happen? Well, it happened because the National Association of Realtors' lobbying arm had language inserted in the Dodd-Frank bill exempting real estate brokers and agents from any enforcement action from the CFPB.
JOHNIs there any effort being made by the CFPB to remove this restriction and give the CFPB the authority they need to protect, excuse me, protect the consumer from repetition of the negligence displayed by the real estate industry?
PAGEAll right, John, thanks so much for your call.
CORDRAYSo as you may know, John, it's not so easy to legislate things in Congress these days. And I'll leave that to the Congress. What I will say is that in our law that we're enforcing, there are a set of exemptions for different industries, but those exemptions do not apply if they're offering consumer financial products and services. And that's been true across the board.
CORDRAYWhat I will say is everybody who was involved in the red hot mortgage market of the mid-decade, and I would exempt out of that community banks and credit unions, who I think were the most responsible players and did not contribute to the crisis, bear some responsibility for how irresponsible the underwriting was, and people looked the other way and simply, you know, played musical chairs while the chairs were still available.
CORDRAYBut we had a race to the bottom. We did not have good regulation of the market, didn't even have good visibility into what was happening in the market. I've been told by people who were on the scene at the time, those things are changing with the new Consumer Bureau. We have new rules in place to prevent these things from happening. We have the ability to enforce and oversee and supervise entities around compliance with those rules, and we have new tools available, including our know-before-you-owe streamlined forms that will make it much easier for consumers to really understand what's happening in their home-buying transaction or their home-financing transaction and make sure that they will not be surprised at the closing table and people cramming things down on them that they did not expect and that the deal that they have and is presented to them will be the deal that will stick with them for years to come.
CORDRAYAnd that often didn't happen during that last decade, and it was very unfortunate, and many people were hurt as a result.
PAGEJohn, thanks so much for your call. Let's go to Fairfield, Pennsylvania, and talk to Michael. Michael, hi.
MICHAELHi, how are you?
MICHAELI'm glad to be able to get on your program this morning. I'm calling about airline ticket prices and, you know, the drop in price of fuel, and it seems like the price of tickets have gone up since the merger of all these airlines. Instead of getting lower prices, it seems like we're getting price-fixing almost because they all go up at the same time, even though the price of fuel goes down. And I just wanted to know if they've done anything.
MICHAELI heard President Obama was supposed to do something, have some conversation about that, but I haven't seen any action.
PAGEAll right, Michael, thanks very much.
CORDRAYThanks for the question. And understand, Michael, that I'm a consumer, too, and I fly, and I also drive, and I get aggravated by how the prices seem to change or not change. And the price at the pump also, which sometimes doesn't seem to follow the price of a barrel of oil in ways that are hard to understand. The Consumer Bureau doesn't have the ability to affect airline pricing or gasoline pricing. What we do have the ability to affect is all the ways in which consumer products are financed.
CORDRAYAnd as I said, it involves, just to repeat what our agency does, mortgage, credit cards, student loans, auto loans, bank account products, debt collection, credit reporting, payday loans. So it's a broad area, but it's not all-encompassing. Some people have described me as some sort of all-powerful czar over consumer issues. That's not true in any respect. But our jurisdiction is limited to consumer finance issues.
PAGEIf you could do something about the legroom on airline seats, I would be very appreciative.
CORDRAYI have bigger legs, longer legs than yours, I think, too, so...
PAGELet's talk to Mohammed. He's calling us from Indianapolis. Mohammed, thank you for joining us.
MOHAMMEDThank you for taking my call. First of all, every year, thousands of young people apply for student loans and get them. Of that, a large percentage of these youngsters, either through sickness or poor grades, drop out of college, still stuck with that loan, can't get additional loans after they drop out, they can't afford to pay for that loan, and they're locked into a position where they'll never finish college, and liens are put on whatever little resources they do have. What can be done of this forgotten group of people who get locked into that kind of checkmate situation?
PAGEAll right, Mohammed, thanks for your call.
CORDRAYIt's an excellent question, Mohammed, and frankly the cost of higher education has increased dramatically, I think faster than just about anything else in our economy, even faster than health care costs over the last decade or two. We're starting to price a lot of middle- and working-class families out of higher education. It's a concern, and people are having to borrow significant amounts to get through school. And it's hard enough for the college graduates, who have been graduating into what, you know, seven years ago was a terrible economy and having trouble finding jobs and therefore having trouble repaying loans.
CORDRAYBut as you point out, for people who take on loans and then don't even have the degree to show for it, it is an even more difficult problem. In that situation, also, people don't have the ability to have these loans discharged in bankruptcy. So these loans will, they will carry them for much of their lives, struggling to repay them. And one of the things that we've been focused on is that the companies that actually service those loans, the ones you actually deal with on repayment of those loans, there need to be more options made available, that's starting to happen, in terms of being able to refinance those loans.
CORDRAYThere are different options about recognizing the difficulty of individuals' economic situations for people and doing more workout efforts. But it -- but it remains difficult, and the student loan servicers themselves cause additional problems for people, really adding insult to injury when people are already in tough straits, as you so eloquently, I thought, described.
PAGEI'm Susan Page, and you're listening to "The Diane Rehm Show." We're taking your calls, 1-800-433-8850, and I think we have a caller with a personal story about student loans. Chris is calling us from Jacksonville, Florida. Good morning, Chris.
CHRISYes, and thank you for taking my call.
PAGEYes, thanks for giving us a call.
CHRISJust wondering if -- Mr. Cordray actually answered a few of the questions that I had just a second ago, so -- but I just did want to say, I mean, the interest rate is crippling. I mean, I've been paying student loans for, gosh, 20, 15, 20 years now, and it just seems like I cannot make a lot of headway on them. And also, you know, I have two daughters that are in college, as well, and taking out two loans to get them through. And just one thing is the Consumer Financial Protection Bureau, what -- if it did have any control, or if it was able to influence, you know, the federal government to maybe move toward forgiveness or at least to, you know, make the interest rates lower, to force the companies who service them to lower the interest rates or any kind of help, you know, kind of in a general way across the broad spectrum of student loans, and thank you.
PAGEThank you, Chris.
CORDRAYYeah, so Chris, we're trying to do a number of things in this area. One is for people in the future, who are going to face this decision, we want them to go in with eyes open and really understand what the ramifications are and are paying for college tool on consumerfinance.gov is something that they can use and benefit from, and I urge people to take a look at that.
CORDRAYFor people who are already in this situation, as you describe, there's a number of things that we're trying to do, and we work with the Department of Education on some of these things. Number one, if you have federal student loans, there is income-based repayment, which can adjust your repayment schedule to your actual income, and as the gentleman before described, if you didn't -- if you weren't able to graduate, and often it's for financial reasons, which is the saddest of all for people, you can get your repayment on federal student loans calibrated to whatever your level of income is, which is some help.
CORDRAYThere are -- increasingly we're trying to push for refinancing options, which also can help. And the other thing that, as I said before, the companies that actually service these loans, the one you would deal with month in and month out, have been subpar in various respects, making the problems worse for people. Some people who want to pay off the loans can't get a payoff amount, or the payments are being allocated to the wrong loans so that they're not paying down their highest-interest loans. They're trying to, but the company isn't necessarily doing it the way they said to do it.
CORDRAYSo we're looking at -- we're overseeing, we now can supervise those companies for compliance with the law, and we will bring enforcement actions as needed. We're really trying to police that space as best we can. We cannot solve the problem of somebody owes money, and they need to be repaying it, but there are efforts underway in some of these programs.
CORDRAYAnother one I want to mention the federal government has on federal student loans, if you're in a public service profession, either working for any level of government or for certain nonprofits, you can have your payments deferred and ultimately forgiven. So that's something people might want to think about, as well. That's law on the books already.
PAGEChris, thanks for your call. Good luck with your student loans and with your kids' student loans coming up. We're talking to Richard Cordray, director of the Consumer Financial Protection Bureau. It's an agency that was created under the Dodd-Frank law, signed into law by President Obama five years ago this week. We're going to take a short break. When we come back, we'll continue taking your calls and questions as 800-433-8850. And we'll talk about some of the criticisms of this new agency and its power. Stay with us.
PAGEWelcome back. I'm Susan Page of USA Today, sitting in for Diane Rehm. And we're talking with Richard Cordray, Director of the Consumer Financial Protection Bureau. You know, before the break, I described you as the first director of this new agency. Here's an email from Leslie that says, I don't think Richard Cordray is the first person to take charge of the Consumer Financial Protection Bureau. Wasn't Elizabeth Warren the person who set it up?
CORDRAYYes. That's accurate. What happened was, this is more complicated than most people want to know, but the law was passed July of 2010. For the first year, the job was to set up the agency. Of course, that wasn't all done in a year. And then, after a year, the agency actually came into being. So, for the first year, we weren't actually the agency. Elizabeth Warren was Special Assistant to the Treasury Secretary to set up the bureau. And special advisor to the President to help lead the search for a Director of the Bureau.
CORDRAYIn July of 2011, the President nominated me to be the first Director of the bureau. I was later appointed by the President and then confirmed by the Senate. So, Senator Warren was the one who oversaw the creation of the agency and the setting up of the agency. I am, in fact, the first Director of the agency.
PAGESo Leslie, in a way, we're both right here.
CORDRAYYeah, that's right. Fair enough.
PAGESo, you know, and in fact, Elizabeth Warren very much wanted to head this agency. She wrote about it in her book, which came out last year. But the conclusion by the administration was that she just couldn't get confirmed by the Senate.
CORDRAYIs that a question or...
PAGEYeah. And, yeah.
CORDRAYSo, that's -- I've read the book. That's the account given in the book. I don't really know all the background ins and outs. What I do know is that I came to the bureau because of the mission that was so inspiring to so many of us. Which is how do we stand on the side of the consumer and see that they're treated fairly in the financial marketplace? I'd seen a lot of those problems when I was Treasurer and then Attorney General in Ohio. I had the chance, the good fortune to work with Elizabeth for the first year and then the President nominated me to be the director and she's now Senator who helps oversee us in Congress.
CORDRAYAnd I think we're trying hard to make the promise of this agency and it was her conception originally before Congress really took it up. We're trying to make it real for people. We want people to know that the Consumer Financial Protection Bureau is working for them, is standing on their side, is seeing that they're treated fairly and is standing up to some of the most powerful financial institutions in the world to see that that happens. And that's a hard job, but we're working hard to do it.
PAGEAnd Elizabeth Warren, in her book, writes very favorably of you. She says she was glad that if she couldn't be director, she was glad you could be. But, you know, there are some people who think the only reason she ran for the Senate was cause she couldn't be Director of the Consumer Financial Protection Bureau. Is she still a friend of the agency from her position now as Senator of Massachusetts?
CORDRAYShe's a friend of mine, I can tell you that. I know her very well and as I say, she brought me to the agency and I wouldn't have had this opportunity if not for her. Her singling me out from around the country. What I can say is, look, I don't speak for Elizabeth Warren. She speaks very well for herself. She has a whole middle class agenda that goes beyond what the Consumer Financial Protection Bureau does. And is advocating for that. I'm focused on the work we're doing for consumers and the people we see around the country. We go around the country all the time and hear from people about their real problems in their lives with their mortgages.
CORDRAYWith their student loans. Many of the kind we've heard from the calls on the show today. And we're working hard to solve those problems and it's a great opportunity to improve life for Americans and I'm glad to have the chance to serve my country in this way.
PAGEYou know, there are critics of the agency. The National Review wrote an article last year that called it the worst federal agency, raising questions about this. Let me just read a sentence or two from that article. It said, created as an independent agency, ostensibly to insulate it from lobbying, it was made virtually unaccountable instead. Congress holds no power of the purse over it. The judiciary's restrained from reviewing its decisions. Even the President cannot dismiss its director without evidence of gross impropriety.
PAGELet's deal with the first of those. The power of the purse. Appropriations for your agency do not go through the usual Congressional process. Is that right? How is it funded?
CORDRAYIt's true of all the banking agencies. They are funded by either bank fees or other mechanisms. We are part of the Federal Reserve system, which also does not, doesn't go through the same appropriation process. And that's been true for 100 years, and everybody has always thought that that is highly appropriate. It doesn't seem that we should be any different. But I will say we're subject to very careful Congressional oversight. I'm required to testify four times a year.
CORDRAYI was just in front of the Senate Banking Committee last week. They are aggressive in questioning me and raising issues. I feel very keenly, my responsibility to respond to them and to take to heart their comments and concerns. And make sure that we are doing things appropriately. Which is what the agency should do and wants to do in order to build credibility and trust with the American public. So these are things that we take very much to heart. I've seen the criticism in places like the National Review, which has its own take on things.
CORDRAYAnd I read those things carefully to see what we can learn from them. But some of this is really at the level of sloganeering, I think, at this point.
PAGEThe second thing they said, the judiciary is restrained from reviewing its decisions. Is that true?
CORDRAYNo different for us than any government agency or government department. We -- there's no special rule on that whatsoever. When agencies do things, courts will oversee them and our things can be appealed to courts and they can overturn them. They will give some deference to agency expertise, but it's not at all conclusive. Deference, but there's nothing special about the CFBB. That's just part of the sloganeering.
PAGEAnd of course, the -- there is a Director. That would be you. It's not a bipartisan board, as some regulatory agencies have. Why is that?
CORDRAYSome are that way and some are not. You know, every cabinet department is run by a single person. Every elected office in every part of the country is run by a single person. And so, that's actually the more common model. Some of the independent agencies have a board or a commission. Some do not. The Controller of the Currency, who is one of my counterparts, is a single director agency. The Federal Housing Finance Administration, which oversees Fanny Mae and Freddy Mac, pretty important agency there, is run by a single director.
CORDRAYSo, you know, there can different ways of organizing things. More important is what kind of job are you doing and are you fulfilling the right role? And for us, especially getting started, to have a single director to focus very specifically on all the things we needed to do and to speedily get underway to fix things like the mortgage market which was so badly broken. And to look after people, in terms of helping them understand student loan situations, payday loan situations and the like.
CORDRAYI think we've had a good chance to get underway here, and I'm proud of the work that our team has done.
PAGELet's go to Pittsburgh and talk to Colene. She's been holding. Colene, thanks for holding on.
COLENEOh, you're welcome. The question that I have is when a crime is committed by a corporation, Freddie Mac, Verizon, Enron, an individual committed those crimes. Why aren't we hearing the individual's name instead of just a -- a corporation didn't commit the crime. Or are the CFO's protected? If I commit a crime, my first and last name is utilized. I cannot hide behind a corporation.
PAGEAll right, Colene. Thanks for your call.
CORDRAYYeah, look, it's a very fair question. It's one a lot of people are asking around the country. What I will say, again, the Consumer Bureau does not itself have criminal jurisdiction. I used to have some when I was Attorney General in Ohio. And we didn't favor someone who was committing crimes because they worked in a corporation or didn't work in a corporation. We do refer individuals for criminal prosecution where we think that's appropriate. We also take individual action against individuals to get money back for consumers to penalize them, even to bar them from a particular market.
CORDRAYFor a period of time where we think that's appropriate. I do agree with you that individual responsibility is where decisions are actually made. And that needs to be taken into account by policy makers and public officials. It's quite an important principal.
PAGEHere's an email from Judy, who has a very specific question about her situation. She writes, I have a large balloon payment coming due on my mortgage next month. Although I have excellent credit and excellent equity in my home, I am unable to refinance or modify this mortgage, because I have no income. I've been living off my 401K, taking a 10 percent penalty for each withdrawal. Is there some other way to refinance this loan? I am feeling desperate.
CORDRAYSo, Congress had a concern about balloon loans and when they passed the law that created this agency, with a number of reforms in the mortgage market, they really sharply restricted balloon payments on mortgages to rural and underserved areas. And we have been trying to work out the definition of that for some time and get that right. But, you know, balloon payments do pose risks. They mean that the consumer has to come up with the money all at once. Often, that gets refinanced by the institution and that's a way of handling it.
CORDRAYAnd if so, then it works out fine. But it's a real risk for consumers. And your caller's describing that risk in her situation. If she can refinance into a different kind of mortgage, she may wish to do so. She may want to look around at other lenders, not just the one she has the mortgage with. But balloons of any kind, and many payday loans are balloon loans as well. And they pose similar outsized risks as a result.
PAGEJudy, good luck. We hope that works out for you. Here's a question from Tom. He writes us from Parkville, Maryland. Is there reason for concern about the credit score industry? Now, that was one of the things that you mentioned earlier in the show. Is there reason for consumers to be concerned about that?
CORDRAYSure. And often, people aren't necessarily clear what they think they're referring to. There's a credit reporting industry, which keeps files on each of us, that we may not know much about. But may well control decisions that then lenders make about denying us credit or granting us credit, but charging us more than they would someone else who had a different kind of history. So the credit reporting industry's quite important. The credit scoring industry's somewhat different.
CORDRAYThey create scores from the credit report information on each of us, so we're talking FICO, in particular, is a notable member there. So, credit scoring matters hugely, as well. On the credit reporting side, we're very concerned about the accuracy of all these files. You know, even if they do a pretty good job, if they're 95 percent accurate, if you're talking about 200 million Americans who have files, that's 10 million Americans whose files are wrong. And may be fundamentally being treated improperly in terms of their access to credit.
CORDRAYWe're worried about the kind of information that's furnished to them. And making sure that it's reliable. We've done a lot of work on medical debt, which we found to be quite unreliable, in terms of credit reporting and credit scoring. Because often, people don't really know that they have medical debt. They think the insurance company is supposed to pay it or they thought it was paid. Or they didn't realize they had a co-pay. That can be very confusing for people.
CORDRAYAnd we've been working, the credit scoring companies have started treating medical debt differently in the wake of the research we have done on that. So, we're looking to influence that market toward accuracy. And importantly, toward consumers being able to dispute what's in their file and get their dispute heard and resolved and get things cleaned up. That's very important, and the industry's going to have to continue to be more and more responsive on that front. And that's something we're pushing them on.
PAGEI'm Susan Page, and you're listening to The Diane Rehm Show. We're taking your calls, 1-800-433-8850. Well, first, let's talk about data collection. By 2016, next year, you plan to monitor 95 percent of all credit card purchases. Tell us what that means. What kind of data are you going to be able to collect on that?
CORDRAYSo, it's not data. The companies themselves collect data on all of us. And they want to know all about, you know, Susan, your spending patterns and mine. So that they can influence our spending decisions in the future or try to pedal products to us. That's not anything like what we're doing and it's important to understand how different this is. We're collecting anonomyzed information about the patterns of how consumers are treated in the marketplace. It's not really much different from GDP data or unemployment rate data. If we don't really know what's going on in the marketplace, then what would we do?
CORDRAYWe'd have to take companies' word for it, that they're treating people fairly. We need to be able to monitor that. We need to be able to know the facts. But we don't need to know, and I don't care to know about you or me. What we're doing, but what's happening to consumers generally.
PAGENow, some conservatives have raised questions about how this data might be used. Newt Gingrich wrote an op-ed in the Wall Street Journal saying it was more dangerous than the data mining program of the NSA, which is saying something. Is there reason for concern? Are there privacy concerns that could be raised by your collection of data?
CORDRAYSo, that's just an assertion. It doesn't really hold water. It doesn't make any sense. Understand, he's become a paid consultant to interests in the consumer sphere that are opposed to having a bureau that would protect consumers. But what I would say is that we are collecting data on, for example, the mortgage market. The Federal Reserve, Ben Bernanke and now Janet Yellen have both told me that they wished that they had known more about the mortgage market before the crisis. Could have potentially seen these dislocations coming.
CORDRAYAnd recognized that it could have affected the economy as much as it did. It would be a crime, and just inexcusable for us not to do a better job of monitoring the mortgage market going forward and being able to understand what's working and what's not working in that marketplace. And the same with the other areas where we're looking at. Again, we're not looking at, we're not gathering social security numbers or names or addresses or account numbers. Those are the kinds of things hackers are looking for at some of the places like Target and Home Depot who've been hacked into in the private sector.
CORDRAYWe don't have that kind of information. What we have is not very interesting to hackers and folks like that. But it's important data to understand what's happening in the marketplace, how our enforcement actions and rules are affecting consumers positively or negatively. And if we don't have that line of sight, again, we just have to take companies' word for it, that they're all doing the right thing. And we saw how that worked out.
PAGEHere's an email from Jill. She writes us from Jupiter, Florida. She says, yesterday, thanks to CSPAN, I watched a live meeting held at the American Enterprise Institute. She said the panel hate the new consumer protections, as they believe they interfere with the manner in which they would prefer to operate and conduct their business. Is the agency threatened? Is it imperiled if there's a new President elected? There will be a new President elected. But if the new President that is elected is opposed to the consumer agency, or do you feel that the bureau is pretty firmly established at this point?
CORDRAYSo, I think that what we're doing to create fairness in the financial marketplace takes on a lot of entrenched interests. And if there weren't people who were complaining about that, or perhaps disliked us for that, then we wouldn't really be doing anything. And that would be a bad sign for us. I do think that the value that we create, in terms of getting money back to consumers who had it wrongly taken from them, in terms of enforcing the law. Don't we want our financial institutions to have to comply and obey the law?
CORDRAYThey shouldn't be any different on that score from you or me. And finally, making sure that consumers have better understanding of the costs and risks they face and can more clearly make their own decisions about how to best advantage themselves and their families. These are all things that to me are common sense. It's a shame that we weren't doing those things up until 2010 when this agency was created. It would be a shame if we went back to not doing those things again in the future.
CORDRAYBut I don't think it's gonna happen. I think the public appreciates what's being done here as they learn about it more and more. And I think that all the boogie man stories about how we're ruining markets and drying up credit just aren't panning out. The Federal Reserve New York study just showed that access to credit is increasing in the current year and the coming year. And the agency is making these markets safer and creating some guardrails around them. That's good for consumers, and by the way, it's good for the responsible players in the marketplace who won't have to compete against the cheaters and the liars and the people who break the law to get an advantage.
PAGEAnd let's close with an email from Judy. She writes, I'm a real life example of someone who benefitted from the Consumer Financial Protection Bureau. I had a dispute with American Express over a 3,000 dollar charge that was paid. I even sent them the cancelled check, but the company was adamant that I owed them not only 3,000 dollars, but a penalty. Thanks to the CFPB, a problem I'd spent three months going back and forth between my bank and AMEX, was resolved within two days. Had it not been for the CFPB, there's no doubt I would have had no other option but to pay them the money or have them cancel my cards.
CORDRAYCan I just say, Susan, if you have a complaint about any product, you can go to our website, consumerfinance.gov and let us try to help you.
PAGEThanks for joining us. I'm...
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