“It is clear that we need to do all we can to help prevent such a collapse from ever happening again, but how?” Cordray said of the 2008 financial crisis. “We know that over-regulation can indeed stifle entrepreneurship, but we also must not forget that under-regulation can also lead to terribly anti-business results.”
Cordray said that the “bad practices” of non-bank lenders “drove out the good.”
“We saw with the meltdown in the mortgage market how a partial and incomplete regulatory scheme was doomed to fail,” Cordray said. “Banks, thrifts and credit unions were subject to explicit oversight, whereas many other mortgage participants, such as lenders and brokers and originators, were held to no standards of accountability at all.”
Cordray said that the CFPB is working with other federal agencies to ensure a consistent approach to regulation.
“Through such cooperation, we will be able to increase our understanding of the effects of prior federal regulations and guidance, which will enable us to make the most informed decisions we can about how to address these issues,” Cordray said.
Cordray also highlighted some of the agency’s initiatives, including the “Know Before You Owe” program and a prototype credit card contract that is simpler and less complex than current contracts. Cordray stressed the importance of consumer education to ensure the health of the U.S. economy.
“In short, we see financial education and disclosure as a problem of closing the sizeable gap between where consumers actually are in their financial capability and where they need to be to navigate consumer finance markets successfully,” Cordray said.
Cordray stressed the importance of good business-consumer relationships in a healthy and viable economy.
“A financial marketplace that actually works for consumers must be understood as a long-run proposition, based not on isolated transactions but on lasting relationships between good businesses and their customers,” Cordray said. “If those customer relationships are not built upon sustainable economics, then the viability of the financial system will be placed at risk, perhaps not today or tomorrow, but inevitably at some point in the future.”