Thursday, January 5, 2012

Cordray Recess Appointment May Benefit Unions

There is one group that may benefit big time from the recess appointment of Richard Cordray to head the Consumer Financial Protection Bureau: Unions.

Unions have always been hovering around Elizabeth Warren and her monster creation. Warren planted union members all over the CFPB. It is not easy to see why, but unions, when it comes down to it, are large financial institutions.

There are union banks, which face stiff competition from check-cashing operations and pay day loan operations.

With Codray now heading the CFPB, pay day loan and check-cashing operation may come under the regulatory control of the CFPB.

HuffPo partially explains:
Without a director, the CFPB's regulatory authority only extends to actual, formal banks, those financial institutions that accept deposits insured by the FDIC. But lots of companies offer all kinds of financial services without accepting deposits, including some of the most predatory firms targeting consumers: payday lenders, check-cashing services, specialty mortgage shops, debt collectors and other firms that go after customers who do not have a traditional bank account.

These "non-bank" lenders compete directly with ordinary banks in a host of ways; payday loans and overdraft fees, for instance, are both techniques to charge much higher interest rates to consumers who need money to survive between paychecks.
With a CFPB director now in place, they now may come under the regulatory control of the CFPB, which you can be assured will be all to the benefit of union banks and credit unions.

There is one thread, though, that still needs to be cut, before the regulatory control does take place. Here's HuffPo again:
...there is some legal dispute as to whether or not the recess appointment will, in fact, give the CFPB new powers over non-banks. While many legal experts expect the appointment itself to stand up to a legal challenge, the authority over non-banks may not.

"Dodd-Frank limited the CFPB's authority to regulate nonbanks until a Director is confirmed by the Senate," wrote KBW's Gardner. "Technically, Mr. Cordray has not been confirmed, so we expect a legal challenge regarding the scope of his legal authority."
Depending how such a legal challenge plays out, it is possible that the environment for payday lenders and check cashing operations will become much more onerous, all to the benefit of union finance operations--which will then get the opportunity to screw its members even more so, without competition from outside finance outfits.


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