Seeking to Promote Innovation, the CFPB’s Cordray Sounds a Conciliatory Note

By John Stewart
@DTPaymentNews

In its short lifetime, the Consumer Financial Protection Bureau has already established itself as one of the most aggressive regulators confronting the financial-services industry, including payments services. But in a speech on Sunday the director of the 5-year-old federal agency sounded a number of conciliatory notes aimed at smoothing relations with industry players and encouraging innovation.

“We know we don’t have all the answers,” said Richard Cordray in addressing the audience on the opening night of Money20/20, a financial-technology trade show in Las Vegas. “Part of our job is to listen carefully to the people doing the innovating and try to understand the obstacles they’re running into. If we’re in the way, we should have a frank discussion around that and see how we can alleviate that.”

Cordray added the agency is open to changing its mind in light of new circumstances. “We’re not reluctant to change course,” he said. “We’ve done changes to rules even when the rules were fairly new.”

These remarks come in the wake of the CFPB’s most recent rule, a nearly 1,700-page set of regulations governing prepaid accounts, including mobile wallets, that emerged earlier this month . Some observers have been critical of the rule, asserting it represents regulatory overreach.

But Cordray, who was attorney general for the state of Ohio before taking over as the CFPB’s first director, acknowledged that financial-services executives confront an often confusing thicket of federal regulation from a welter of agencies. “We have a fragmented regulatory system,” he admitted. “It’s hard for innovators to work through.”

That fact, he said, requires agencies like the CFPB to have answers for companies seeking counsel about rules and laws. “We need to think more carefully about what we’re doing,” he said. “We can’t greet every new opportunity by saying, ‘We don’t know, we’re not sure.’”

As an example, Cordray cited a policy the CFPB adopted in February that allows companies working with new technologies the agency deems particularly promising to apply for a so-called no-action letter. If granted, the letter protects the company for a limited time from enforcement or supervisory action with regard to a particular product. The policy does not exempt companies from law or regulation already in force.

Cordray’s speech followed a ruling handed down earlier this month by the U.S. Court of Appeals for the District of Columbia that found unconstitutional the level of power Congress invested in the director’s office when it created the CFPB as part of the 2010 Dodd-Frank Act. “The bureau is considering options for seeking further review of the court’s decision,” a CFPB spokeswoman said at the time, according to The Wall Street Journal. She added the ruling “will not dampen our efforts or affect our focus on the mission of the agency.” Since its creation, the CFPB has grown to include a staff of some 1,600 employees.

Indeed, despite his conciliatory remarks, Cordray on Sunday insisted financial-services firms will be held accountable if they don’t put consumers’ interests ahead of all others. Firms, he said, must incorporate “compliance in their DNA.” He concluded with a piece of advice for his audience, which consisted primarily of payments and other financial executives: “Put the consumer first. Think of how you would serve members of your family with these products.”