He's Back: Cordray Working with California on Mini-CFPB

Richard Cordray, former director of the Consumer Financial Protection Bureau (CFPB), is back in the spotlight. According to the Los Angeles Times, Cordray advised California's Governor Gavin Newsom on the creation of the state's own "mini-CFPB." 

The idea of a mini-CFPB in California first came to light in April 2019, when a California Assemblywoman explored the idea at a press conference with Cordray. This month, almost exactly nine months later, the proposition for the mini-CFPB made its way into the Governor's proposed budget for 2020-2021.  Lauren Valenzuela, Corporate Counsel for Performant Financial Corp., wrote an article for insideARM on the issue and summarized what role of the mini-CFPB:

The DFPI would have expanded enforcement authority to pursue “unfair and deceptive practices” and would give DFPI jurisdiction to supervise debt collectors, credit reporting agencies, FinTech companies, and other financial services providers previously unlicensed and unregulated by the Department of Business Oversight. 

...

Specifically, the DFPI’s activities would include:

• Offering services to empower and educate consumers, especially older Americans, students, military service members, and recent immigrants; 
• Licensing and examining new industries that are currently under-regulated;
• Analyzing patterns and developments in the market to inform evidence-based policies and enforcement;
• Establishing a new Financial Technology Innovation Office that will proactively cultivate the responsible development of new consumer financial products;
• Offering legal support for the administration of the new law; and 
• Expanding existing administrative and information technology staff to support the Department’s increased regulatory responsibilities. 

Cordray, who was appointed by President Obama and served as the CFPB's first director, announced he was resigning from the top role in November 2017, eleven months after President Trump took office. Following his departure, there was some uncertainty about who would succeed him, but ultimately President Trump's pick, Mick Mulvaney, became acting director while a new permanent director was sought. The permanent role went to current Director Kathleen Kraninger, who was confirmed in December 2018. 

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insideARM Perspective

Oh boy, here we go again. California, already known as a weird state for its laws and regulations in general, is about to get even more weird, at least for the financial services industry. While at the CFPB, Cordray implemented some tactics questioned by the industry during his tenure, including the often-criticized practice of regulation-by-enforcement. 

The Los Angeles Times quoted Cordray as saying things like, "[i]t was astonishing to me that California wasn’t in the business of regulating debt collectors" and that the mini-CFPB will "have to constantly be fighting to protect consumers" due to expected push-back from the industry.

Time will only tell what California's mini-CFPB will ultimately look like, but it sounds like debt collection regulation, enforcement, and supervision will definitely be on the table.