WASHINGTON (Reuters) - The head of the U.S. Consumer Financial Protection Bureau, Richard Cordray, will resign at the end of the month, paving the way for President Donald Trump to appoint his own director and reshape an agency that has been a scourge of Wall Street.
Created by Democratic President Barack Obama in the wake of the financial crisis, the CFPB under Cordray has imposed steep penalties on banks, auto dealers, student lenders and credit card companies for alleged predatory lending practices.
Cordray, the agency’s first and so far only director, has been a bulwark against efforts by Trump and the president’s fellow Republicans in Congress to roll back Obama-era financial policy. Whoever replaces him is expected to take the opposite tack.
”One thing I have tried to reinforce this year is that the Consumer Bureau is far more than its director,“ Cordray said in a statement. ”I am confident that you will continue to move forward, nurture this institution we have built together, and maintain its essential value to the American public.
“And I trust that new leadership will see that value also and work to preserve it – perhaps in different ways than before, but desiring, as I have done, to serve in ways that benefit and strengthen our economy and our country.”
Cordray, 58, told staff of his departure in a note on Wednesday. He gave no reason for his resignation, which comes ahead of the official end of his term next July. A CFPB spokesman declined to give further details.
Trump is expected to quickly move into place an acting director who shares his desire to deregulate.
“The administration will announce an acting director and the president’s choice to replace Mr. Cordray at the appropriate time,” said Raj Shah, a White House deputy press secretary.
Trump could circumvent a potentially contentious confirmation process, in the short run, by tapping Treasury Secretary Steven Mnuchin to take on the CFPB. Mnuchin would then be able to delegate day-to-day operations to subordinates, according to lawyers who closely follow the CFPB. [nL2N1LS1KZ]
The president has relied extensively on private-sector experience in staffing top financial regulatory posts, regularly pulling executives from large banks and financial firms who have taken a less restrictive approach to the sector.
He named Keith Noreika, a veteran banking lawyer, as acting Comptroller of the Currency, while waiting for former banker Joseph Otting to be formally confirmed.
Some of the names mentioned by lobbyists as potential permanent successors to Cordray include Republican Representative Jeb Hensarling, a longtime CFPB critic, who has tried to curb the agency’s oversight powers and urged Trump to fire Cordray months ago.
Hensarling announced plans to retire from Congress at the end of 2018. A spokesman for the congressman did not immediately respond to a request for comment.
Another potential successor is Republican Representative French Hill, who has also been a vocal CFPB critic. His spokeswoman did not respond to a request for comment.
Another, less likely, outcome could be that Congress pushes to change the CFPB’s structure. Republicans have long sought to replace the sole-director position with a bipartisan commission, arguing it would make the agency more balanced. But Democrats have fiercely resisted the idea.
In the immediate future, Cordray’s exit clears the way for an industry-friendly replacement to take a softer approach when it comes to enforcement and supervision of financial institutions.
Rewriting existing CFPB rules would take much longer.
“The good news is they just can’t make the rules go away by waving a wand,” said Lisa Donner, executive director of the Americans for Financial Reform coalition. “There’s a process to write them, and there would need to be a process to undo them.”
The brainchild of Elizabeth Warren, the CFPB has been a source of constant conflict with prominent Republican Party members, including Trump, saying the agency overreaches its authority and should be more accountable to lawmakers and voters.
Consumer advocates say it plays a critical role in protecting Americans against financial abuse.
In a tweet, Warren, now a Democratic U.S. senator, urged the White House to appoint someone who could hold major financial firms accountable.
“The new Director of the @CFPB must be someone with a track record of protecting consumers & holding financial firms responsible when they cheat people. This is no place for another Trump-appointed industry hack,” she wrote.
Cordray, who is widely rumored to be considering a run for governor as a Democrat in his home state of Ohio, made no mention of his future plans.
He suffered a major defeat last month when the Senate killed a rule the CFPB released in July which would have allowed borrowers to band together to sue banks, credit card issuers and other financial companies.
The defeat set a precedent for Congress to curtail other CFPB rules, and lawyers and lobbyists expect a similar attempt to push back a new rule curbing payday lenders.
Additional reporting by Lisa Lambert,; Writing by Carmel Crimmins; Editing by Jonathan Oatis and Alistair Bell