CFPB blasted by Congressional committee over ex-members' 'extortion racket'

by Adam Smith02 Aug 2013

A Congressional committee has expressed concern over CFPB employees profiting off rules they helped to create.

MPA reported in June that former CFPB deputy director Raj Date had launched a new startup mortgage lender and business advisory firm named Fenway Summer LLC. Now, House Financial Services Chairman Jeb Henserling, R-Texas and House Oversight and Government Reform Committee Chairman Darrell Issa, R-Calif., have sent a letter to CFPB director Richard Cordray over concerns over Date's firm, saying several senior CFPB employees have left to join the business.

“Simply put, it appears that former CFPB employees are now offering financial products in a market sector created by the very rules they were in a position to influence while working in senior leadership positions at the CFPB,” the letter said.

The letter points out that Date, along with senior CFPB employees Gary Reeder, Chris Haspel and Mitch Hochburg who joined Date's business, helped craft a series of rules defining qualified mortgages.

"Many stakeholders and policymakers, including members of our Committees, warned that 'if the CFPB is not careful, this rule could price millions of Americans out of the mortgage market at a time where it has already become more difficult to qualify for affordable home loans'," the letter said.

The letter argued that Date and other employees then left the CFPB to form a firm specializing in borrowers who did not meet the standards for qualified mortgages.

"In testimony before the House Financial Services Subcommittee on Financial Institutions and Consumer Credit last July, Mr. Date said qualified mortgages 'are structurally safer and pose lower risk for borrowers'. However, in an interview with Bloomberg in July 2013 following his departure from the CFPB, Mr. Date opined that 'there are plenty of borrowers who are eminently responsible people who fall outside of the bright-line boundaries'," the letter said.

The Committee told Cordray it was not alone in its concerns over "the appearance of impropriety" in Date's move to Fenway.

"Richard Painter, a former White House ethics officer, characterized Fenway as 'an extortion racket' that 'hires alumni of the agency and they'll call up their buddies in the agency to call off the dogs'."

COMMENTS

  • by richard | 8/2/2013 9:18:52 AM

    And this surprises anybody
    Dodd-Frank went from one extream to the other all started with Bush/Paulson and continues with this administration and as for CFPB they have way to much power.
    Lets remember that few bad mortgage programs and originators are gone.
    Let the good folks in our industry help homeowners and make a fair living doing so

  • by Kenny F Powers | 8/2/2013 9:30:34 AM

    The guys that invented to radar gun are now selling the radar detectors. This is America, if they can prosper from it and aren't breaking the law, so be it.

  • by Griff | 8/2/2013 9:35:04 AM

    There are almost no words to express the further disappointment Washington is to Main Street. I am glad to see this situation brought to the forefront although I have no hope it will change anything. The cfpb has taken up the dodd frank mess and it can only end in situations just like this. The entire agency is overpaid, inexperienced in the areas for which they are writing rules and have the public buffaloed into believing they are the good guys.

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