The nation’s top consumer financial watchdog will step down this month, sparking concern from advocacy groups — and relief from financial firms — that the federal agency he has led since 2012 will soon be much friendlier to the industry it polices.
Richard Cordray announced his impending resignation Wednesday to the staff of the Consumer Financial Protection Bureau, which was established by the 2010 Dodd-Frank Wall Street reform act after the financial crisis.
He was appointed by President Obama as the first director of the bureau and his term was not set to expire until July. Now, President Trump will get to nominate a replacement to head the bureau, fiercely criticized by many Republicans and trade groups as overzealous and unaccountable under Cordray’s leadership.
“I would anticipate the new director nominee will be someone who is pro-industry and in favor of deregulation,” said Scott Pearson, a partner at law firm Ballard Spahr who has represented companies facing bureau regulatory actions. “Under a new director, I think it’s fair to assume you will no longer see the CFPB pushing the envelope.”
Consumer advocacy groups and proponents of tighter financial regulation praised Cordray as a fierce defender of ordinary Americans and agreed a Trump-appointed successor will probably seek to undo some of the bureau’s accomplishments — or at least slow the bureau’s pace of making and enforcing rules.
“You can expect a lot less enforcement,” said Ed Mierzwinski, consumer program director for the U.S. Public Interest Research Group.
There has been widespread speculation that Cordray, a Democrat, will run for governor of his home state of Ohio, but he made no comment on his future in the email sent to staff announcing his departure.
In his message, Cordray touted new rules created by the bureau, including toughening mortgage safeguards to try to prevent a repeat of the subprime housing market crash. And he noted that the bureau has provided about $12 billion in refunds, mortgage principal reductions and other relief to nearly 30 million consumers since opening in 2011.
“I am confident that you will continue to move forward, nurture this institution we have built together, and maintain its essential value to the American public,” Cordray told his colleagues.
“And I trust that new leadership will see that value also and work to preserve it — perhaps in different ways than before, but desiring, as I have done, to serve in ways that benefit and strengthen our economy and our country,” he said.
One of the bureau’s fiercest critics, Rep. Jeb Hensarling (R-Texas), cheered the news of Cordray’s imminent departure. Hensarling has urged Trump to fire Cordray and has pushed legislation that would sharply reduce the bureau’s authority.
“We are long overdue for new leadership at the CFPB, a rogue agency that has done more to hurt consumers than help them,” said Hensarling, chairman of the House Financial Services Committee.
The bureau’s supporters, though, applauded Cordray, calling him a tough and effective regulator who led the first federal financial regulatory body dedicated exclusively to protecting consumers.
Cordray “leaves behind a legacy of accomplishment that has benefited millions of Americans,” Anna Laitin, director of financial policy for advocacy group Consumers Union, said in a statement Wednesday.
During Cordray’s tenure the bureau added protections for consumers who use prepaid debit card accounts and, most recently, put strict limits on the payday lending industry — though that rule could still be struck down by Congress.
That’s what happened to another recent CFPB regulation, one that would have allowed consumers to bring class-action suits against financial firms, even if those firms demand that disputes be handled in private arbitration.
Advocacy groups hailed it as a victory for consumers when the bureau finalized the rule in July, but Congress and the president moved to scrap it this fall, illustrating the depth of the divide between Cordray and today’s GOP-dominated Washington.
Cordray’s departure could trigger a messy succession fight at the bureau.
It’s unclear who would take over as acting director. And Democrats — led by Sen. Elizabeth Warren (D-Mass.), who conceived of the idea for such an agency — are expected to mount a fierce campaign against whomever Trump nominates as a replacement.
The Dodd-Frank law says the deputy director becomes the acting head “in the absence or unavailability of the director.”
David Silberman, associate director of the bureau’s Research, Markets and Regulations Division, has been serving as acting deputy director since January 2016.
But the law is unclear about whether the deputy director would take over in the case of a director’s resignation.
That could open the door for Trump to pick an outsider as acting director in accordance with the Federal Vacancies Reform Act. That person would run the agency while a nominee moved through what could be a lengthy Senate confirmation process.
The vacancy law allows the president to designate someone who already has been confirmed by the Senate to perform acting duties. That could be Treasury Secretary Steven Mnuchin, who would take on the CFPB duties in addition to his Treasury role.
Raj Shah, deputy White House press secretary, would only say Wednesday that “the administration will announce an acting director and the president’s choice to replace Mr. Cordray at the appropriate time.”
In the long term, Trump is expected to pick a markedly more conservative director to lead the bureau. His pick could come from within the financial services industry, but could also be a conservative academic or even a current or former lawmaker.
Some consumer advocates said they feared Hensarling may be considered for the post. The conservative Republican recently announced he won’t be running for reelection next year.
1:10 p.m.: This article was updated with quotes from consumer advocates Ed Mierzwinski, Dennis Kelleher and Anna Laitin and attorney Scott Pearson.
10 a.m.: This article was updated with comment from the White House.
9:30 a.m.: This article was updated with additional details and background information, and comments from Rep. Jeb Hensarling.
This article was originally published at 9 a.m.