Over the past two weeks, copious amounts of ink have been spilled about President Obama’s “recess” appointment of Richard Cordray, the Director of the Consumer Financial Protection Bureau (CFPB).  Although the Justice Department has issued a statement alleging the constitutionality of the appointment, it is inevitable that legal challenges will soon be filed and drag on for the foreseeable future. 

Since the Dodd-Frank financial reform law was passed more than a year and a half ago, I’ve heard from a number of community bankers who identify the creation of the CFPB as their single greatest concern arising from the law.  To be sure, their concerns have merit.  The CFPB’s power will not be limited to the biggest financial institutions. The rules they write have the potential to stifle product innovation and increase regulatory costs on community banks.  All of this without any oversight from Congress.

But, as in almost every story, there is some potential for good.  The naming of a Director for the CFPB means that the most abusive and unregulated entities providing financial services to consumers are now subject to the bureau’s rulemaking authority.  Payday lenders, private student lenders and other financial intermediaries who have been preying on the poor, unadvised and unsuspecting of our society will soon be reined in by the CFPB’s authority. 

The unscrupulous behavior of these entities has done more harm than good in the name of providing “service” to consumers.  If the CFPB can provide any assistance in ending or limiting the abuses they perpetuate then I believe we all have reason to celebrate.

As this takes shape community banks have an opportunity to distinguish themselves.   We know what it means to serve customers, understanding their financial needs and seeking solutions to help them meet their goals.  Community banks are built on the bedrock of long-term relationships, not short –terms profits.   

Only time will tell what the future holds for the CFPB and how the agency intends to implement “tiered regulation” and resist  the temptation to promulgate rules to fit all institutions as Director Cordray has promised. But as the banking industry looks to the uncertain future, we have the power to influence our lawmakers and the CFPB itself to enhance the bureau’s potential to do good. 

The recent appointment of Robert Cordray is the subject of a recent Op Ed IBAT is currently distributing to publications around the state.