Richard Cordray has been tapped by President Obama to head the Consumer Financial Protection Bureau.
President Obama’s selection of Richard Cordray to head a new federal consumer agency is winning accolades from many higher education groups, who say Cordray and the new agency may promote consumer education and help limit unscrupulous student loan practices.
Cordray will lead the Consumer Financial Protection Bureau, created by Congress in 2010 as a way to consolidate consumer protection and education programs scattered across seven federal agencies. The bureau’s creation was part of the “Dodd-Frank” financial reform legislation approved after the 2008 financial meltdown.
The selection of Cordray, a former attorney general of Ohio, is controversial because the president made the move as a “recess appointment,” a rare practice invoked when Congress is out of town. The president had nominated Cordray last summer, but Senate Republicans had indicated they would not consent to the appointment, with some arguing that the agency should be abolished or not have a director at all.
While the bureau’s initial focus may be on mortgage and payday lenders, education groups expect that it will take an interest in student loans, particularly private loans issued by banks.
The bureau “can set rules of the game to rein in the worst abuses in the campus marketplace and, ultimately, to drive down the cost of college,” said Rich Williams, higher education advocate at US PIRG. By appointing Cordray despite opposition, he said, the president is “standing up to Wall Street and its backers on Capitol Hill.”
Williams said Senate opponents of the agency will continue to oppose any permanent director unless Congress takes steps to weaken the agency from its original design. Democrats controlled both houses of Congress when lawmakers voted to create the agency two years ago.
Obama’s appointment signals “the beginning of the end of the ‘Wild West’ of student lending,” said Pauline Abernathy, vice president of The Institute for College Access and Success, or TICAS.
“There will finally be a sheriff in town to protect consumers in the woefully underreuglated private student loan market,” she added.
Even before Cordray’s appointment, Abernathy said, the bureau had created a Student Debt Repayment Assistant to help borrowers examine repayment options as well as a “shopping sheet” to compare different college options.
With steadily rising tuition, more students and their families are relying on costly private loans to pay for college. Among those who graduated from public and non-profit colleges in 2010, private loans comprised at least 22 percent of their student debt, TICAS said. At for-profit colleges, most graduates have both federal and private loans.
Despite praise from some in the education sector, the appointment brought heavy criticism from House Speaker John Boehner, R-Ohio, who was critical of Obama for making the move without congressional approval.
“This is an extraordinary and entirely unprecedented power grab by President Obama that defies centuries of practice and the legal advice of his own Justice Department,” he said.
He said many lawmakers opposed the appointment because the consumer agency is not in the best interests of the U.S. economy. “The position had not been filled for one reason: the agency it heads is bad for jobs and bad for the economy.”
The move also drew the fire of Mitt Romney, the frontrunner for the Republican presidential nomination in 2012. Romney called the recess appointment “Chicago-style politics at its worst” and labeled the consumer agency “perhaps the most powerful and unaccountable bureaucracy in the history of our nation.”
