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House Republicans recommend contempt proceedings against CFPB Director

Republican members of the House Financial Services Committee released a report Aug. 4 recommending that Congress pursue contempt proceedings against Consumer Financial Protection Bureau Director Richard Cordray for allegedly failing to comply with the committee's subpoena requests.

The report claims that Cordray refused to "adequately comply" with committee subpoenas for records and other information related to the agency's arbitration rule, which bans financial companies from using clauses that block consumers from filing group lawsuits.

At the center of the report is an April 20, 2016, request from Rep. Sean Duffy, R-Wis., for CFPB communications relating to pre-dispute arbitration agreements. The subpoena asked for two "specifications": all correspondence among CFPB employees and agency contact with five advocacy groups, including the National Consumer Law Center and the National Association of Consumer Advocates.

Republicans allege that the CFPB submitted "far from complete" records and then failed to work with committee counsel to fulfill the request. On May 11, the committee said it had considered the CFPB to have defaulted on the subpoena request.

The report claims that the CFPB felt it had sufficiently complied with the committee's request, arguing that the subpoena required only "robust" and not full compliance. The CFPB further defended that it had already provided the relevant information through prior information requests.

The agency disputed that it was in default, further alleging that the committee had unfairly burdened it with too large of a request. In one example, the CFPB said that a search of every CFPB employee’s email for the word "arbitration" would have yielded over 1.37 million emails.

Jennifer Howard of the CFPB's communications office said in a statement that the agency will "completely" respond to one of the two specifications at issue by next week.

"We have been working diligently with the committee's oversight on a number of fronts," Howard said.

Committee staff wrote that the CFPB was being hypocritical in complaining about reporting burden, quipping that the committee's subpoena "pales in comparison to what the CFPB regularly requires of its [civil investigative demand] recipients." The report claims that committee staff made themselves readily available for help. When staff started to get frustrated with supposedly insufficient responses, the committee even threatened the publishing of the report itself to motivate the CFPB to comply.

The committee eventually issued 10 deposition subpoenas to current and former CFPB employees to investigate potential obstruction of investigations.

"It is not, and cannot be, the law that Congress is required to negotiate against itself until the CFPB receives what the CFPB subjectively believes is a good deal," the report says.

Congress is not the only body to fight with the CFPB over records related to the arbitration rule. Acting Comptroller of the Currency Keith Noreika engaged in a public spat with Cordray when his agency requested data from the CFPB so it could assess "safety and soundness" concerns with the rule, which was finalized in July. After days of back-and-forth letters, the CFPB agreed to hand over its data.

Congressional Republicans, meanwhile, are continuing to work through efforts to repeal the rule through a disapproval resolution, arguing that the rule enriches lawyers while exposing companies to expensive class-action lawsuits. Although the House has already voted to disapprove the rule, the Senate still needs to whip together a simple majority of vote in order to pass its own disapproval and have the White House sign the repeal into law.

The report may convince some on-the-fence Senate Republicans to vote on party lines against the arbitration rule. But other than that, Alan Kaplinsky, a partner for Ballard Spahr who watches the CFPB, doesn't think the report will affect the future of the bureau. Cordray is reportedly considering an early exit from the CFPB anyway to run for Ohio governor.

Still, Kaplinsky said he hadn't seen anything like contempt proceedings against a lead regulator.

"This is unusual," Kaplinsky said in an interview.