WASHINGTON Feb 26 The U.S. Consumer Financial
Protection Bureau is working with the states to crack down on
payday lenders that are located offshore and operating online,
the agency's director Richard Cordray said on Tuesday.
Payday lenders are regulated differently in each state, with
some states regulating the industry more loosely and others
banning the practice outright.
Consumer advocates say some lenders, including those located
outside the United States, are moving online to skirt the rules
in states that are tougher on payday lending. Payday loans are
high-interest, short-term loans, usually for small amounts, that
are often used by low-income borrowers.
The consumer bureau, which has new federal authority over
payday lenders, wants to make sure consumers can get emergency
cash without being trapped by loans with extremely high fees
that must be paid back quickly, Cordray said during a conference
of the National Association of Attorneys General.
"We also recognize that effective enforcement of the law can
be challenging when it comes to lenders that lack a physical
presence," he said.
"Our enforcement teams have met with some of your offices in
multi-state meetings to consider how best to coordinate our
efforts on loans that involve off-shore or other jurisdictional
The 2010 Dodd-Frank financial law created the consumer
bureau and charged it with overseeing payday lending. Consumer
groups say these loans can come with such high fees that
borrowers must take out additional loans to pay them back,
leading to a cycle of debt that is difficult to escape.
Cordray has said the bureau would keep an eye on short-term
loans from payday lenders, credit unions, banks and other
But his comments on Tuesday appeared to go further,
indicating that the bureau could work with states on enforcement
against lenders who operate online and break state rules.
Cordray did not elaborate, and a CFPB spokeswoman declined
to comment further. The watchdog did not specify the countries
where the offshore lenders operate.
Critics of the bureau, including financial services industry
representatives and congressional Republicans, say the CFPB's
broad power to regulate a range of products could stifle
Americans' access to credit.
Representative Jeb Hensarling, a Republican who leads the
House of Representatives Financial Services Committee, on
Tuesday called Cordray a "credit czar" and said the bureau is
unaccountable to Congress.
"They have the ability to outlaw credit products that can
help fulfill the American dream," Hensarling told a packed room
at the Credit Union National Association's annual conference in
He also criticized President Barack Obama's controversial
appointment of Cordray to lead the bureau, which was set up by
Elizabeth Warren, now a Senator.
Senate Republicans refused to confirm a CFPB head until the
White House agreed to let the bureau be run by a commission
instead of a single director, so Obama used a procedural
maneuver to install Cordray a year ago.
A court recently struck down similar "recess appointments"
in a case that did not directly involve Cordray but that has led
Republicans to question his authority to lead the CFPB.
"The type of sweeping authority that has been given to this
unelected, unaccountable individual is mind-boggling,"
Democrats, including Massachusetts Senator Elizabeth Warren,
who set up the agency after Dodd-Frank created it, have said the
CFPB's current structure is working and allows it to work
quickly on behalf of consumers.
Obama has since renominated Cordray to the post. A Senate
aide said the Banking Committee is tentatively looking at the
week of March 11 for a confirmation hearing with both Cordray
and Mary Jo White, who has been nominated to head the Securities
and Exchange Commission.