During Richard Cordray’s tenure as director of the Consumer Financial Protection Bureau, the CFPB pummeled American consumers and the economy while doing little to promote financial stability. The pain was especially acute for low- and middle-income consumers who lost access to credit cards, faced higher bank fees and reduced access to free checking, and found it harder and costlier to obtain mortgages, especially as first-time homebuyers. In response, consumers turned to payday loans and alternative products as financial life rafts—only to have Mr. Cordray poke holes in them by imposing regulations that would effectively outlaw payday lending.
Yet despite its rocky start, the original promise of the CFPB is sound: to protect and empower consumers, promote fair and competitive markets, and stabilize the financial system. Well-designed consumer-credit regulation and vigorous enforcement of consumer-protection laws make markets more transparent and give consumers confidence to borrow and save. But poorly designed regulations choke off access to credit, drive up interest rates and eliminate choices, forcing consumers to turn to less desirable financial options—even loan sharks.