WASHINGTON The Senate on Tuesday confirmed a director of the Consumer Financial Protection Bureau, ending a nearly two-year standoff in Congress and putting the new agency on sounder legal footing.
Democrats overcame long-held Republican objections to approve Richard Cordray's nomination to head the bureau, which was created by the 2010 Dodd-Frank Wall Street reform law.
Bureau advocates and consumer law experts said Senate confirmation clears up a number of questions, including Cordray's legal status as the temporary bureau director and the agency's authority to oversee certain financial sectors such as debt collection.
"There is no doubt that the consumer agency will survive beyond the crib," Senator Elizabeth Warren told reporters earlier on Tuesday. Warren, a Massachusetts Democrat, set up the consumer bureau before running for the Senate last year.
The consumer bureau, which opened in 2011 and oversees mortgages, credit cards and other consumer-oriented financial products, had been a source of controversy since its creation.
Opponents said it has too much authority over a wide array of financial products. Others said it should be run by a bipartisan board rather than by a single director and funded through the congressional appropriations process instead of the Federal Reserve.
In the face of fierce Republican resistance about the agency's structure, President Barack Obama in early 2012 installed Cordray as director through a controversial "recess appointment" maneuver.
Experts said they do not expect the existence of a confirmed director will unleash a much more aggressive posture from the already active agency.
So far, financial industry representatives have said the bureau has not been as overbearing as they feared, noting the CFPB has communicated with them about new regulations and has been open to suggestions about how to improve its rules.
"At the same time, removing the big legal threat that a lack of a confirmed director created...over their heads I think gives them greater confidence, particularly in the nonbank marketplace," said Ed Mierzwinski of US PIRG, a consumer advocacy group.
Critics of the agency had argued that Dodd-Frank appeared to require that the CFPB have a confirmed director before it could exercise its authority outside of responsibilities explicitly mentioned in the law. Those areas include debt collection and credit reporting agencies.
Larry Platt, a partner at K&L Gates law firm in Washington, said the financial services industry has been acting under the assumption that the bureau's rules would stand, so it would not be rattled by Cordray's confirmation.
"The industry itself had to pretend that none of this was happening," Platt said. "It's not as if any industry participant could refuse to follow new guidance simply because they thought the guidance was illegitimate."
In its first two years, the agency has passed rules to make mortgage applications easier to understand and lending less risky, warned auto lenders on discriminatory rates, and has hinted at a crackdown on the payday lending industry.
It has also issued a number of enforcement actions, with a particular focus on credit card companies for deceptive marketing.
"Today's action brings added certainty to the industries we oversee and reinforces our responsibility to stand on the side of consumers and see that they are treated fairly in the financial marketplace," Cordray said in a statement.
LEGAL CHALLENGE, COMPROMISE
The confusion surrounding Cordray's position as director stemmed from the recess appointment move, with Republicans arguing the Senate was not truly on a recess, and therefore appointments made at that time were illegitimate.
Legal challenges to other recess appointments made by Obama had raised questions of whether Cordray's standing could come under scrutiny.
On Tuesday, the Senate voted 66-34 to confirm Cordray, with 12 Republicans voting in favor of his nomination.
Earlier in the day, Democrats had threatened to change Senate rules for confirmations unless they got enough Republican votes to pass the 60-vote threshold to avert a filibuster on Cordray and other long-stalled nominations made by Obama. ID:nL1N0FM0RQ]
"This is a watchdog of Wall Street for the American consumer. That's the vote that we just had," Senator Harry Reid, the top Democrat, said after the Senate voted to close debate and move to a final decision. He also called Cordray a "very, very brilliant man."
Republican Senator Rob Portman of Ohio said some of his concerns were relieved after Cordray agreed to testify before the Senate Appropriations Committee, even though the consumer bureau's funding mechanism would not change.
Portman also said he would introduce a bill to create a separate inspector general at the bureau in an effort to boost oversight. Currently, the agency is overseen by the Federal Reserve's inspector general.
Warren and another Senate Democrat said they would not oppose Portman's effort but would block any moves to weaken the agency.