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Consumer Confidential: Can California force companies to better protect customers? Former CFPB head has hope

David Lazarus, Los Angeles Times on

Published in Business News

Richard Cordray, appointed by then-President Obama in 2011 as the first director of the Consumer Financial Protection Bureau, thinks California is on the right track in creating its own watchdog agency.

"This is a commendably bold step," he told me. "It will put California at the forefront of consumer financial protection at the state level."

Gov. Gavin Newsom is proposing creation of a state Department of Financial Protection and Innovation, to be built atop the existing Department of Business Oversight, which has limited jurisdiction over financial firms.

The move, Newsom told me, is a response to efforts by the Trump administration to roll back federal financial safeguards and refocus the CFPB on educational outreach rather than law enforcement.

"As the Trump administration undermines and weakens the rules that protect consumers from predatory businesses, California is filling the void and stepping up to protect families and consumers," the governor said.

Cordray, who led the CFPB until 2017 and was at odds with President Trump over the agency's role in overseeing banks and other firms, said that by stepping up, California will serve as an example to other states seeking to protect consumers from potentially abusive practices.

 

California's financial oversight also will influence financial companies to straighten up and fly right nationwide, he said, noting that the state plays a similarly outsized role with its strict environmental and privacy rules.

"When California makes something a priority, national companies need to respond," Cordray observed. "California is too big, and it makes no sense to have different practices in different states."

As I reported last week, Newsom's proposed Department of Financial Protection and Innovation is a much-needed remedy to Trump's systematic dismantling of federal consumer regulations.

A study last year from the Consumer Federation of America found the CFPB's enforcement activity had plunged by 80% from 2015, when the agency was at the height of its power. Average compensation to aggrieved consumers was down by 96% per case.

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