Jul 19, 2016
Welcome to today's episode with my very special guest. He
is the Director of the Consumer Financial Protection Bureau,
Richard Cordray.
We got together in Washington to mark the fifth anniversary
of the CFPB's opening its doors, on July 21, 2011. I had the
pleasure of serving on the Bureau's Consumer Advisory Board, or
CAB, for its first three years. It's been fascinating to watch the
launch of this agency, which is the first in many years to be built
from scratch, as opposed to something like, say, Homeland Security,
that amalgamated existing agencies. As Director Cordray says in our
discussion, the CFPB has actually faced many of the same challenges
as private sector startup. There are obvious differences, of
course, but they still began with a small team, like founders, and
went through the stresses of very rapid growth amid having to
deliver against a lot of tough deadlines - and under a bright
floodlight of scrutiny.
A unique thing about the CFPB is that it looks at consumer
financial services as a holistic marketplace. Most of our financial
regulatory system is bank-centric, with numerous agencies closely
overseeing bank activities, while nonbank financial companies -
while generally subject to the same rules -- don't normally face
the constant, close scrutiny that banks do. This has led to a
highly uneven marketplace in terms of both de facto regulatory
standards and compliance burdens. That unevenness, in turn,
produces some unintended consequences. One is uneven protection of
consumers based on what financial company they deal with. Another
is some distortion of what products banks and nonbanks are willing
to offer, based on their assessments of the related regulatory
risks. Moving toward a more uniform framework lays groundwork for a
system that can potentially be more fair and workable for both
consumers and providers.
The CFPB has also been a leader in pioneering regulatory
exploration of innovation. Its Project
Catalyst was the first initiative in the
world, to my knowledge, to create a learning laboratory for looking
at regulatory issues in innovative fintech. In our
conversation, Director Cordray mentions that they have special
powers to allow trial waivers of disclosure rules for companies
that have better ideas. They're open for proposals on this -- it
would be great to see some new thinking come out of those tests, to
move toward updating our old, low-tech disclosure
models.
I think you'll enjoy hearing Director Cordray's thoughts
about Project Catalyst; about how the Bureau thinks about
innovation and fintech; and about CFPB itself being a startup and
how hard it is to do that inside government. You'll also be
interested in what we discussed about the agency's priorities as it
enters year six, and about what he has learned from the first five
years.
Here's more information:
The Consumer Financial Protection Bureau at age 5!
Enjoy my conversation with Director Richard Cordray.
And a note about our next
show....
My guests next time will be the chief compliance officers of
two of America's largest banks -Yvette Hollingsworth Clark of Wells
Fargo and Kathryn Reimann of Citi, who are leaders in - if you can
imagine this phrase - innovating in regulatory
compliance.