Richard Cordray, appointed by then-President Obama in 2011 as the first director of the Consumer Financial Protection Bureau, thinks California is on the right track in creating its own watchdog agency.

“This is a commendably bold step,” he told me. “It will put California at the forefront of consumer financial protection at the state level.”

Gov. Gavin Newsom is proposing creation of a state Department of Financial Protection and Innovation, to be built atop the existing Department of Business Oversight, which has limited jurisdiction over financial firms.

The move, Newsom told me, is a response to efforts by the Trump administration to roll back federal financial safeguards and refocus the CFPB on educational outreach rather than law enforcement.


“As the Trump administration undermines and weakens the rules that protect consumers from predatory businesses, California is filling the void and stepping up to protect families and consumers,” the governor said.

Cordray, who led the CFPB until 2017 and was at odds with President Trump over the agency’s role in overseeing banks and other firms, said that by stepping up, California will serve as an example to other states seeking to protect consumers from potentially abusive practices.

California’s financial oversight also will influence financial companies to straighten up and fly right nationwide, he said, noting that the state plays a similarly outsized role with its strict environmental and privacy rules.

“When California makes something a priority, national companies need to respond,” Cordray observed. “California is too big, and it makes no sense to have different practices in different states.”


As I reported last week, Newsom’s proposed Department of Financial Protection and Innovation is a much-needed remedy to Trump’s systematic dismantling of federal consumer regulations.

A study last year from the Consumer Federation of America found the CFPB’s enforcement activity had plunged by 80% from 2015, when the agency was at the height of its power. Average compensation to aggrieved consumers was down by 96% per case.

Cordray said he offered input as Newsom put together his plan for a “mini-CFPB.” He advised the governor to make sure the agency has the authority and resources to be an effective overseer.

Cordray said he was particularly encouraged by Newsom’s proposal for California to implement regulations for debt collectors — an industry the state previously left to federal officials to monitor.


“It was astonishing to me that California wasn’t in the business of regulating debt collectors,” he said.

Federal law allows for states to enact rules for debt collectors that are “not inconsistent” with what’s already on the books at the national level. Cordray said California could be a powerful enforcer of the federal Fair Debt Collection Practices Act.

He’s also supportive of Newsom’s pick to run the new agency, Manny Alvarez, who has served as commissioner of the Department of Business Oversight since last May.

Alvarez previously served as an enforcement lawyer at the CFPB and before that as a California deputy attorney general.


“Californians deserve a world-class financial regulator,” Alvarez told me. “It will be our goal to work zealously on behalf of consumers.”

He said he hopes to start staffing the new agency this summer. Enforcement actions probably wouldn’t begin in earnest until next year.

Alvarez was careful in our conversation not to come off as adversarial to businesses. “I sincerely believe that the best companies, those that are the most responsible, understand the value of regulation,” he said.

Cordray said his former CFPB subordinate will recognize soon enough that pushback from the financial sector is inevitable.


“You’re going to have to be constantly fighting to protect consumers,” he said when I asked what tips he had for Alvarez. “It’s a constant struggle.”

After exiting the CFPB in 2017, Cordray launched an unsuccessful bid to be governor of Ohio. He has since completed a book, titled “Watchdog,” scheduled for publication next month.

I asked what it was like going from a president like Obama, who gave his full backing to the CFPB’s mission of consumer protection, to a president like Trump, who made no secret of his desire to weaken the agency.

Cordray said he had no meaningful one-on-one interactions with Trump during his final year running the CFPB. But he said a senior White House official made clear to him that the administration was fishing around for a reason to give Cordray the heave-ho.


After Cordray submitted his resignation, Trump installed his then budget chief (now acting chief of staff) Mick Mulvaney to run the CFPB. This raised more than a few eyebrows seeing as Mulvaney had previously dismissed the agency as a “sick, sad joke.”

Cordray said he had “no real relationship” with Mulvaney, but described his successor as “a bomb thrower,” and as “a wretched, awful choice” to serve as the nation’s chief financial watchdog.

Mulvaney was followed in the gig by the current CFPB director, Kathleen Kraninger, who has continued to throttle back the bureau’s enforcement work. In Cordray’s view, however, she isn’t as willfully destructive as Mulvaney.

“That’s a very low bar,” he acknowledged, describing Kraninger, a former White House official, as “a career administrator” who probably doesn’t want to burn too many bridges while delivering on Trump’s desire for a consumer advocate that’s more bark than bite.


Kraninger last week appointed four agency critics to a CFPB task force on overhauling consumer financial laws.

George Mason University law professor Todd Zywicki, who will chair the task force, has referred to the CFPB in the past as “the most powerful and unaccountable bureaucracy that I’ve ever been aware of.”

Cordray said California lacks the resources to fully supplant the CFPB as the nation’s consumer financial protection leader. But he said the state is in a position to make up for much of the shortfall at the federal level.

His main advice to California officials: Be strong, be committed. “A lot depends on willpower,” Cordray said.


The Golden State has never lacked for that.