CFPB director Richard Cordray has claimed that the pre-crisis lack of oversight in areas of the mortgage market let consumers down, and has defended the role of the CFPB.
In an interview with The Washington Post, Cordray argued in favor of Dodd-Frank oversights, saying that pre-financial crisis oversight was not adequate.
"It recognizes that only supervising chartered institutions is not a very workable model because in the actual marketplace for several of these products — mortgage origination, mortgage servicing, small-dollar lending — you have chartered institutions and non-chartered institutions competing against each other.
"That model really failed us in the mortgage market and in the lead-up to the crisis. And it was a lot of the unsupervised areas where some of the most irresponsible practices occurred. We have line of sight now across markets, which is critical for regulatory success," he said.
Cordray said many financial institutions were accustomed to regulation, but not from the standpoint of consumer protection. Others, he said, were unaccustomed to any oversight at all.
"But in the nonbank sphere, they’re often not used to being regulated at all, or only on the state level. In that area, there has been a real shift toward more of a compliance mentality. And our being on the scene and doing this work has caused that shift. And it’s an important one if we’re going to get to where we have a leveled playing field in these markets," Cordray said.
Cordray conceded that the CFPB's oversight has caused consternation in the financial services industry, but said the regulator has been reasonable in the way it's gone about its job.
"I understand there has been a lot of anxiety. People aren’t sure what to make of it. They’re worried about a new agency and how it will exercise its authority. But we’ve been reasonable, open-minded, accessible and genuinely focused on trying to get this right," Cordray said.