For months, it was a question foremost on the minds of lawyers inside and outside the Consumer Financial Protection Bureau: Would the agency’s first director, Richard Cordray, resign early or stick it out through the July 2018 end of his five-year term?
On Wednesday, the answer arrived. Cordray, in an email to staff, said he would step down by the end of this month, a move that will give President Donald Trump the chance to install a new leader.
With the Obama-era agency about to move fully into the era of Trump, Cordray used his internal announcement to reflect on the bureau’s accomplishments and address the CFPB’s future. “I will always be immensely proud of you and what you have done,” Cordray wrote in the email, after listing the agency’s accomplishments during his tenure.
Outside of the CFPB, lawyers are looking out for whether Cordray’s successor will hit the brakes on pending enforcement actions, delay or roll back regulations and soften the agency’s supervision efforts. As the repeal of the CFPB’s arbitration rule recently showed, these are perilous times for the CFPB with or without Cordray.
We reached out to financial services lawyers for their thoughts—and predictions—on the news of Cordray’s departure. Here’s a roundup of what lawyers are saying, in their own words, edited for length and clarity.
Mayer Brown partner Ori Lev, a former deputy enforcement director at CFPB: While I didn’t always agree with his aggressive enforcement approach, Rich Cordray was a dedicated public servant who worked tirelessly on behalf of consumers and did a remarkable job of building a brand-new federal agency. The difficulty of that task is often overlooked by his critics. His departure will mark a stark change for the CFPB. The agency’s single-director structure means that the person in the director’s chair wields enormous power—approving all enforcement actions and rules and otherwise unilaterally setting the agency’s direction.
Hudson Cook partner Lucy Morris, a former CFPB deputy enforcement director: Rich Cordray has been a tireless and aggressive law enforcer, and he will be missed by the agency’s staff and consumer advocates generally. While it’s too soon to say what comes next, it’s safe to say that the CFPB and its dedicated staff are not going away. It’s best to take the long view with the CFPB. It’s a powerful agency with a host of tools, and it will still find a way to do its job to protect consumers.
Gerald Sachs, Venable partner and a former CFPB enforcement attorney: Rich Cordray’s announcement begs the question: what’s next? We will know if he is going to run for governor of Ohio soon. What we don’t know is how much the next director will change the CFPB. Will there be a freeze of supervision, enforcement and regulatory activity? Will there be a partial or complete rollback of regulations? Regardless, one thing is certain: many state attorneys general offices are poised to pick up any lull in CFPB activity.
Ballard Spahr partner Alan Kaplinsky, co-leader of the firm’s consumer financial services group: I’m delighted with his resignation and my expectation now is that a successor will be appointed who will listen much more carefully to the concerns of industry. My biggest concern right now is who will be the acting director until the Senate confirms Trump’s nominee. There is a cloud of uncertainty over that.
Venable partner Allyson Baker, a former CFPB enforcement attorney: Richard Cordray’s announcement will have many speculating about what this means for the bureau’s enforcement agenda. It is quite possible that there will not be significant changes to the enforcement agenda that soon. And, in any event, other law enforcement agencies, especially at the state level, will remain extremely active in the consumer finance space, as we have seen for the last year.
Richard Gottlieb, co-chairman of Manatt, Phelps & Phillips’ consumer financial services practice: The new: (1) regulated entities will be far more likely to challenge bureau action to the new director; and (2) the CFPB will reconsider its positions on fair lending, indirect auto, debt collection and, more broadly, its regulation through enforcement. What won’t change immediately: day-to-day supervisory activities; examinations are where current CFPB policy is implemented and enforced.
Dorsey & Whitney partner Jenny Lee, a former CFPB enforcement attorney: As the only federal consumer regulator created in this century, it can’t be disputed that Director Cordray maximized the opportunity to effectuate change, leaving a lasting and arguably irreversible legacy in the bureau’s culture. The future for the bureau will entail evolving and aggressive policy positions because of the ethos that senior leadership embedded in the agency’s DNA at its creation.
Kathleen Ryan, counsel at BuckleySandler and a former deputy assistant director in the CFPB office of regulations: During Director Cordray’s tenure, he used the agency’s sweeping authorities to go from a start-up agency to consumer protection super-power. I expect the agency to continue to carry out its mission according to precedents set over the last six years, until a new Director changes the agency’s direction.
Hogan Lovells partner Allison Schoenthal, head of the consumer finance litigation practice: The CFPB faces challenges on many fronts—legislative, legal and now a new director—leaving a lot of questions about its future. If the Acting Deputy Director Silberman assumes the role temporarily, don’t expect change. If Trump fills the position—through the Federal Vacancies Reform Act or a knock-down-drag-out fight in Congress—the agency will be surely be redirected or reshaped. If the agency survives, a less aggressive CFPB, which partners with financial institutions to make reforms and protect consumers, would benefit the bureau, the market and consumers.