Republicans say ex-staffers of consumer financial agency profiting

Reuters News
Posted: Aug 01, 2013 3:29 PM
Republicans say ex-staffers of consumer financial agency profiting

By Margaret Chadbourn and Emily Stephenson

WASHINGTON (Reuters) - Republicans in the House of Representatives demanded information on Thursday about several former top staffers of the Consumer Financial Protection Bureau who the lawmakers say have turned their inside knowledge of the agency into a lucrative business.

House Oversight Committee Chairman Darrell Issa of California and Financial Services Committee Chairman Jeb Hensarling of Texas sent the bureau a letter accusing former key staffers of profiting from rules they helped write while at the new consumer agency.

Raj Date, the first deputy director of the CFPB, left the agency and started Fenway Summer LLC, a private consulting firm, this year. He has since brought several other key bureau officials to his firm, including former bureau chief of staff Garry Reeder.

Fenway Summer's website says it advises industry clients on financial products and invests directly in "new approaches to consumer finance."

"It appears that former CFPB employees are now offering financial products in a market sector created by the very rules they were in a position to influence," the Issa-Hensarling letter said. "This conduct raises serious questions about the integrity of the CFPB's rule-making process."

Three years after its enactment, Republicans remain harshly critical of the Dodd-Frank Wall Street overhaul law. They oppose the CFPB, which was created in 2011 by Dodd-Frank, and have made numerous attempts to weaken and defund the consumer bureau.

The Obama administration says the bureau is a crucial part of efforts to fix a financial system that failed borrowers, leading to catastrophic results for individuals, small businesses and the financial services sector.

The bureau oversees mortgages, credit cards and other consumer-oriented financial products.

Date helped set up the agency and was its first deputy director. He briefly led the bureau before President Barack Obama named Richard Cordray director in January 2012.

One of the Republicans' concerns involves a controversial bureau rule that requires lenders to verify that borrowers can repay loans. Certain basic loans, known as "qualified mortgages," will be treated as meeting this requirement.

Critics of the rules argue that lenders will stop issuing all but these most basic loans. Date has said his group may get involved with making loans that are not qualified mortgages.

"We are deeply concerned that this close relationship between the CFPB and its former officials ultimately could harm consumers," the letter from Republicans said.

Date's firm does not lobby for clients or provide input on government relations. In an emailed statement, he said he was proud of his work in public service.

Enough's Enough
Walter E. Williams

"I was part of a team that focused on carrying out congressional intent, listened openly to lots of points of view, and tried to create transparent rules of the road for the marketplace," Date said. "Now I'm back in the private sector, and I'm 100 percent focused on building a great business."

The Republican lawmakers asked the CFPB to provide documents on how much work the former regulators now at Fenway Summer completed on new mortgage rules established during their time at the consumer bureau.

They also requested any communications between Date and other bureau employees that relate to the start-up of his firm and that were shared with the CFPB. They also asked where other former staffers are now employed.

A spokeswoman for the consumer bureau defended the process it used in crafting the mortgage rules, saying that they were fair and considered all perspectives.

(Editing by Bill Trott and Eric Walsh)