Cop on the Beat or Rogue Agency? CFPB Enforcement Under Cordray

By Jeff Bater

Richard Cordray would like to be remembered for creating “a cop on the beat” during five years as the Consumer Financial Protection Bureau’s first director.

Cordray announced plans to leave the agency at the end of November in an email today to CFPB employees.

The agency’s Republican critics accuse Cordray of creating a “rogue” agency that went beyond the powers granted by the Dodd-Frank Act.

Cordray’s aggressive approach to enforcement became the hallmark of his tenure and the biggest magnet for criticism. Here are five takeaways about CFPB enforcement under Cordray.

Built From the Ground Up

Cordray quickly assembled strong supervisory, regulatory, and enforcement teams, and dove into new territory, such as supervising credit reporting bureaus and debt collectors, according to Ira Rheingold, executive director of the National Association of Consumer Advocates.

“There’s never been an agency like it before,” said Elizabeth Corbett, who is now counsel at Alston & Bird after spending five years at the CFPB in various roles, including acting chief of staff, before leaving the agency in March 2017.

Different Approach

Cordray took a more public and aggressive approach to enforcement than the prudential banking regulators did prior to Dodd-Frank.

“He was the bureau’s first enforcement director when they were just starting up,” said Lucy E. Morris, a partner at Hudson Cook in Washington who previously led the CFPB’s deputy enforcement director for litigation. “He built a big, strong team, making sure enforcement was an important tool of the bureau, and then went on as director to support use of enforcement in an aggressive way.”

Rulemaking by Enforcement

Cordray came under fire for using enforcement actions against one or two companies to set the CFPB’s expectations for an entire sector, a practice critics dubbed rulemaking by enforcement.

Enforcement actions allow the agency to move faster than rulemakings, which can take 18 months of more. The agency is still working on a debt collection rule, nearly four years after it asked for comment on a preliminary bid to craft consumer protection rules under the Fair Debt Collection Practices Act. In the interim, the agency has taken multiple enforcement actions against both small actors and large banks such as JPMorgan and Citibank over debt collection practices, according to according to Bloomberg Law’s CFPB Enforcement Tracker and CFPB Enforcement Analytics.

The CFPB’s crackdown on auto lenders and debt collectors are two examples of how the agency addressed what it saw as bad practices using its broad Dodd-Frank Act powers to act against unfair, deceptive, or abusive acts and practices (UDAAP).

“Enforcement actions and the regulation by enforcement, that is something that I think is a fair criticism,” Gerald Blanchard, a partner at Bryan Cave in Atlanta, told Bloomberg Law. The CFPB was “establishing policy, if you will, by calling something unfair or deceptive and pushing for civil money penalties or settlements,” he said.

Battles With Congress

The auto lending guidance was just one of many points of contention between Cordray and House Republicans, who labeled the CFPB an unaccountable agency.

He received a typically hostile reception during his last appearance before the Republican-led House Financial Services Committee in April, with Chairman Jeb Hensarling (R-Texas) telling Cordray he was surprised President Donald Trump hadn’t fired him yet.

“I’m not sure there’s anything he could have done per se to have gotten along better with the Republicans,” Blanchard said. “I think the Republicans were predisposed to oppose it the way it was created under Dodd Frank.”

The hostility may have made Cordray “more resolute and more aggressive than they would have been otherwise,” said Philip R. Stein, an attorney at Bilzin Sumberg Baena Price & Axelrod in Miami. “But it’s also true that Cordray’s activism and aggressiveness seem to have made House Republicans even more intent on eliminating or defanging the CFPB.”

PHH: Reaching Too Far?

Critics point to how the CFPB approached an enforcement action against PHH, a New Jersey-based mortgage company, as exhibit A in agency overreach under Cordray.

An administrative law judge recommended $6.5 million in disgorgement against PHH, which the CFPB accused of referring consumers to mortgage insurers in exchange for kickbacks. Cordray raised the disgorgement amount to $109 million, a decision that prompted a legal challenge that has jeopardized the agency’s structure and empowered other enforcement targets to resist more forcefully.

The U.S. Court of Appeals for the District of Columbia Circuit last October ruled in favor of PHH’s challenge to Cordray’s $109 million disgorgement order. The court went further and said that the CFPB itself is unconstitutional because it gives too much power to Cordray, as sole director of an independent agency. The court struck the for-cause clause, meaning the director serves at the pleasure of the president. The CFPB is seeking a rehearing of the case.

“That type of aggression crystallizes a lot of opposition to the agency, and may end up, through litigation, weakening the agency,” said Brian Knight, a senior research fellow with the Mercatus Center at George Mason University. “The CFPB was going to be controversial no matter what. A director who focused on bread-and-butter fraud issues could potentially have defused some of that controversy.”

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To contact the editor responsible for this story: Michael Ferullo at

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