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Consumer Financial Chief Calls For Increased Accountability For Individuals

Going after individuals can “achieve just and effective results in more fully redressing legal violations,” Richard Cordray said Friday in a speech.

Jason Reed / Reuters / Reuters

Richard Cordray, the head of the Consumer Finance Protection Bureau waded into the debate over punishing corporate or individual wrongdoing for financial malfeasance Friday, , with a speech at a conference in Chicago where he argued that regulatory enforcement actions against individuals and executives can “achieve just and effective results in more fully redressing legal violations.”

In his tenure as the CFPB’s inaugural director, Cordray has won large settlements with large financial companies like the mortgage services Ocwen, Ally Bank, JPMorgan Chase, and Bank of America. But the CFPB, created in 2010 as part of the Dodd-Frank Wall Street Reform and Consumer Protection Act, has also been going after individuals, typically in the debt settlement and loan servicing industry. The CFPB oversees a wide range of consumer finance products like debit and credit cards and non-bank financial like mortgage servicers (the companies that collect and process mortgage payments), debt collectors, and non-bank student loan servicers.

“We have named such individuals as parties in a variety of cases, and they have been required to finance restitution to consumers and submit to injunctive relief,” Cordray said. “Individuals have also been barred, sometimes permanently, from offering certain kinds of financial products or services.”

In October, the CFPB agreed to a settlement with debt payment processor Meracord and its CEO Linda Remsberg that included a $1.376 million civil penalty. The CFPB said that Remsberg had illegally charged debtors upfront fees and barred her from processing payments for debt collectors.

In May of last year, the CFPB filed a complaint against debt relief companies that it claimed charged illegal advance fees. This complaint included Michael Levitis, who ran the Law Office of Michael Levitis and the Mission Settlement Agency. Levitis also faced criminal charges and pleaded guilty to mail and wire fraud in April, marking the first criminal convictions from a referral to prosecutors by the CFPB. The CFPB, as a regulator, can use enforcement actions and civil suits, but cannot charge individuals or companies criminally.

Federal prosecutors and other financial regulators like the Securities and Exchange Commission have been criticized for reaching settlements and delayed prosecution agreements with companies for their conduct leading up to the financial crisis and other actions and not pursuing criminal or civil cases against individuals, although these are in cases involving institutions far larger than the ones the debt settlement and online lending companies where the CFPB has pursued individual sanctions.

Criminal prosecutors face a higher standard for bringing cases and can correspondingly lead to harsher sanctions like jail time for individuals; criminal charges against banks also risk regulatory action that can effectively bankrupt them.

Cordray said in Friday’s speech that “a company only acts through individuals — both decision-makers and those who carry out decisions,” and that “there are legitimate occasions where it is appropriate to pursue not only the company that was a party to the consumer’s transaction, but also individuals who were decision-makers or actors relevant to that transaction.”

Cordray’s comments echo those from another head of a new regulatory agency that has flexed its weight with high-profile and high-dollar amount settlements and enforcement actions against a wide range of financial institutions — the New York state financial regulator Benajamin Lawsky. In a March interview with BuzzFeed, Lawsky said, “In large institutions, you can have the best managers in the world, but if you don’t have individual deterrence, you will continue to have problem after problem.”

Lawsky, himself a former federal prosecutor who has sometimes moved ahead of federal regulators in pursuing sanctions of large banks, said in January that Cordray “is a bright shining light of the Obama administration.”

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