Consumer Bureau's Cordray Jousts With Republicans Over Ally Dealby
House members say agency used undue pressure to win settlement
Director says lawmakers have gotten events `exactly backwards'
A U.S. regulator aggressively sparred with House lawmakers over allegations that his agency strong-armed Ally Financial Inc. into settling discrimination claims by threatening to stall a change in its business structure.
“I’m glad to have a chance to correct the record on that,” Consumer Financial Protection Bureau Director Richard Cordray told Financial Services Committee members Wednesday in response to questions about whether the agency conspired to hold up the company’s application while negotiating in the bias case. House Republicans had the sequence of events “exactly backwards,” he said at a hearing on the agency’s semiannual report to Congress.
Ally agreed to pay $98 million in December 2013 to settle CFPB and Justice Department claims that the Detroit-based auto lender helped dealers inflate the cost of loans to African-American and Hispanic borrowers. Days after that accord was announced, the Federal Reserve approved Ally’s request to convert to a financial holding company from a bank holding company, a key step in the company’s efforts to reorganize and exit a government bailout program.
House Republicans have said that the consumer bureau had knowledge that Ally was in talks with other regulators to change its status and used “undue leverage” to reach the settlement, according to reports prepared by the committee. Cordray said his agency had begun its investigation at least a year before it was informed by Ally of the pending application with the Fed.
Gina Proia, a spokeswoman for Ally, declined to comment.
Ally sought to change its holding-company status -- which allowed the firm to keep some business units and avoid a material adverse effect on earnings -- as part of a broader restructuring as it worked to exit the government’s Troubled Asset Relief Program. In December 2014, the U.S. government disposed its remaining stake in the company, resolving the last big bailout from the 2008 financial crisis.
Representative Jeb Hensarling of Texas, who leads the Financial Services Committee, is among Republican lawmakers who have tried to rein in the Consumer Bureau since it was created under the 2010 Dodd-Frank Act. Their efforts -- which have included calls to change the agency’s leadership and funding structures -- are likely to escalate this year as Hensarling prepares new legislation to undo the landmark regulatory overhaul.
“The Bureau operates with such secrecy, unaccountability and bureaucratic tyranny it would make a Soviet Commissar blush,” Hensarling said Tuesday in a speech where he outlined his plans. “The Bureau typifies not only the shadow regulatory system but also the unfair Washington system that Americans have come to loathe: powerful government administrators, arbitrary rules and unchecked power to punish or reward.”