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House Republicans Clash With Consumer Protection Unit Chief

Before a presidential election that could decide its fate, the Consumer Financial Protection Bureau remains squarely in Republican cross hairs.

House lawmakers tangled on Wednesday with Richard Cordray, director of the bureau, accusing it of overstepping its bounds in overseeing areas as various as payday loans, mandatory arbitration clauses and discrimination in the auto market.

“Congress has made Mr. Cordray a dictator,” said Representative Jeb Hensarling, Republican of Texas, the chairman of the House Financial Services Committee. “And when it comes to the well-being and liberty of American consumers, he is not a particularly benevolent one.”

Republicans pressed Mr. Cordray on a number of issues, including a proposal imposing federal standards on the payday loans market. The bureau released an outline of the proposal last spring, before sending it to the agency’s small-business review panel for input. Officials had indicated the proposed rule could be released as soon as February, but additional delays are now expected.

Some committee members expressed concern that new restrictions would undermine state laws governing the payday industry.

“At issue are roughly 38 states that allow these products to be offered in some form and the federal pre-emption that will occur if your rule goes forward as outlined,” said Representative Randy Neugebauer, Republican of Texas.

Mr. Cordray played down the issue, saying “whatever we do in this area will coexist with state law.”

Republican lawmakers were also critical of the agency’s efforts to potentially limit the use of mandatory arbitration clauses in financial contracts, which can prohibit consumers from joining class-action lawsuits.

The bureau released an outline of the proposal in October to be considered by its small-business review panel, after issuing a report on the topic last March.

“The report was criticized by a number of academics and industry for completely ignoring major pieces of data,” said Representative Bill Huizenga, Republican of Michigan, adding that more than 80 members of Congress asked the bureau to reopen the study last June.

But Mr. Cordray defended his agency’s steps, noting that the Dodd-Frank financial overhaul directed the bureau to study the issue.

“Our report has been widely recognized as the single most comprehensive and informative report on this issue ever done,” he said. “Congress asked us to do a broad, comprehensive study – we spent three years on it. We’re now moving ahead with Congress’s direction to engage in policy intervention based on that.”

Committee members also had tough words for the bureau’s work in uncovering unintentional discrimination in auto lending, raising doubts about the statistical methods the bureau has used to determine cases of discrimination in actions against Toyota Motor Credit, Ally Financial and others.

Some Democrats raised questions about the bureau’s efforts to oversee the indirect auto-lending market and the methods used to determine circumstances where lending policies led to higher interest rates for some minorities. The bureau does not have jurisdiction over auto dealers, but it does oversee indirect auto lending, where a dealer negotiates financing for a consumer with a bank or other lender. The House, including 88 Democrats, passed a bill last November that would require the agency to toss out its 2013 auto lending guidance.

Still, Democrats were largely supportive of the bureau’s work.

“Republicans have turned the C.F.P.B. into a political punching bag, attempting to undermine its work at every turn,” said Representative Maxine Waters, Democrat of California, the ranking member on the panel.

Mr. Cordray also defended the consumer agency’s actions and outlined several areas it was looking into, including certain credit card promotions and completing a rule on prepaid debit cards.

“We’re just trying to put consumers in a position so they can make choices that they won’t regret later, so they can know what they really want to know at the time,” he said. “That empowers consumers and promotes personal liberty.”

He added that the bureau had “significant concerns” with deferred-interest promotions for credit cards, where interest rates on a credit card balance are delayed for a period under certain conditions.

“It’s an issue we’re looking at very carefully, and we’re going to be taking actions as appropriate,” Mr. Cordray said. “I think that credit card issuers should be mindful of thinking about their deferred-interest products and the harm that’s happening to a number of consumers who end up with back-end pricing that’s very different than what was represented to them up front.”

The bureau plans to complete its rule overseeing prepaid debt cards within months, he said. He cited an incident with the RushCard, a line of prepaid cards founded by Russell Simmons, an executive in the hip-hop music business, in which a technological breakdown froze consumer accounts for several days last year. He called it a “significant fiasco.”

“Many, thousands of consumers had prepaid money on these cards and could not get access to that money,” Mr. Cordray said. “If anything, that shows me we need strong consumer protections for prepaid cards, for which none exist today.”

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