President Obama took a bold and important step this week, standing up for student consumers by making a recess appointment of former Ohio Attorney General Richard Cordray to head the new Consumer Financial Protection Bureau (CFPB). The president’s action means that the CFPB now has all its powers to protect students from unfair financial practices that pile on student debt, including lenders offering dangerously expensive private student loans and aggressive credit and debit card marketing.
Every year, students graduate owing tens of thousands of dollars before they’ve even earned their first paycheck. The average student now graduates with over $25,000 in debt — while student loan debt nationally has surpassed all credit card debt, reaching a whopping $1 trillion.
Even worse, hundreds of thousands of students also assume expensive private student loans before exhausting more consumer-friendly college financing options. Private student loans pile more debt on students because they provide the worst rates and terms to students with the greatest financial need. In addition, students are targets for high interest, high-fee credit cards and debit cards on campus.
The CFPB is a new kind of regulator designed to do one job and do it well — protect Americans from toxic financial products. However, since July 21, the CFPB has been up and running, but only with partial powers. Now, with a director in place, the CFPB has additional abilities that kick in — including the right to regulate private student lenders like Sallie Mae.
An agency to protect students from toxic financial products sounds like it should be a no-brainer with bipartisan support — and it is. Recently, 37 state Attorneys General, on a bi-partisan basis, had sent a letter to the Senate urging confirmation of Rich Cordray.
Yet, at the behest of both the Wall Street banks, some Senators had opposed confirmation of any CFPB director. In May, 45 Senators had written the president and told him that they would block confirmation of any director until and unless the CFPB’s independence and authority were first restricted. They want the CFPB weak and powerless and with a tin cup in hand. Then, on Dec. 8, 45 Senators blocked Cordray’s nomination. (Final vote: 53 Aye — 45 Nay, but 60 Ayes needed to invoke cloture (aka defeat a filibuster)).
Fortunately, President Obama has acted to protect students and rejected these outrageous demands to weaken the bureau. The president did his job with the recess appointment of Richard Cordray to direct the CFPB. Now, the CFPB can do its job, protecting students from unfair financial practices.