The new head of the Consumer Financial Protection Bureau wasted little time getting to work, using the agency's new powers to start supervising payday lenders and other firms outside the conventional banking system.
The bureau's main goal will be ensuring that consumer loans, mortgages and other financial products are easier to understand, but the new director, Richard Cordray, warned companies that "transparency alone is not enough."
"The consumer bureau will make clear that there are real consequences to breaking the law," Cordray said in a speech Thursday at the Brookings Institution, a Washington think tank.
It will be a few weeks before the agency has supervisors ready to go into companies to examine their practices. But the preparations began Thursday, amid cheers from consumer advocates and others who have pushed for mortgage brokers, debt collectors and others to face the same federal oversight as banks.
"There's a new sheriff in town," said Bill Bartmann, chief executive of CFS II, a debt-collection company in Tulsa, Okla.
The industry is rife with abuses, said Bartmann, who supports the new federal regulation. He cited, for instance, firms that immediately take consumers to court instead of trying to work out a repayment plan.
"Most of the debt-collection industry is filled with scoundrels and scalawags who are abusing consumers right and left," Bartmann said. "I would like the bad actors to go away because they give all of us a bad reputation and they're hurting people."
The industry is ready to work with Cordray, and representatives met last year with bureau staff, said Mark Schiffman, a spokesman for ACA International, a trade group for debt-collection companies. Debt collection "is not an easy job to do, but it's essential for our economy," he said.
"We're not making excuses for any bad behavior," Schiffman said. "We believe debt collection can and should be done following state and federal guidelines."
The consumer bureau now is allowed to regulate debt collectors and many other companies because it finally has a director.
The agency was created by the 2010 financial reform law and took responsibility from other banking regulators last summer for previously existing consumer protection laws. And last year it began supervising large banks for compliance.
But the bureau had been unable to exercise new powers under the law, including the oversight of nonbank financial firms, until a Senate-confirmed director was in place.
Frustrated by Republican opposition to filling the position, President Obama broke with two decades of precedent Wednesday and installed Cordray while the Senate was in a short recess. The move is expected to lead to legal challenges.
Cordray said Thursday that his appointment was valid and the controversy won't slow down the agency.
"The most important thing we can do as a bureau is keep our nose to the grindstone and keep doing our work," Cordray said. "I think the work that we're doing is so important and can make such a difference for people in this country that as we attack this problem … we will prove our own case both to the people who represent the public and to the public at large."
In his first full day on the job, Cordray talked tougher than he had during his Senate confirmation hearing last fall.
He promised then to use government lawsuits judiciously after learning in two years as Ohio attorney general that they can be a "very slow, wasteful and needlessly acrimonious way to resolve a problem."
Cordray said Thursday that some problems brought to the consumer bureau might be resolved "through cooperative efforts." But others might require enforcement action.
He noted the bureau has taken over some investigations from other banking regulators and has started some of its own. It also has given whistle-blowers and informants "direct access to us."
Since opening in July, the agency has received thousands of comments about problems such as exorbitantly expensive payday loans and abuses by mortgage servicers.
"These nightmares are happening to people from all walks of life — from people who have fallen on hard times to people who still consider themselves financially secure," Cordray said. "They do not expect any special favors. They just want a fair shake."
To help consumers, the bureau will start supervising many companies that largely have faced lighter oversight from the Federal Trade Commission and state agencies.
Jamie Fulmer, vice president of public affairs for Advance America, Cash Advance Centers Inc., the nation's largest nonbank provider of payday loans, said his company has tried to help the bureau with its in-house research on industry practices.
The bureau's new authority adds some uncertainty about future regulation, he said.
"Based on what we've heard and what we've seen to this point, we think this is something that can be positive for consumers and something we look forward to being a constructive partner in," Fulmer said.
"What you always worry about is if there's some type of overreach … in which someone tries to go into the market and tries to pick winners and losers," he said.