While all eyes were on the recess appointment of its first director Wednesday, the Consumer Financial Protection Bureau (CFPB) quietly released guidance that directs supervised banks to turn over any and all information it requests.

The bureau said supervised institutions — banks with more than $10 billion in assets, and in the near future, certain nonbanks — may not selectively withhold documents based on their judgment that the materials "are not necessary to the bureau's execution of its responsibilities or that other materials would be sufficient to suit the bureau's needs."

"The supervisory process is based on the supervisor's full and unfettered access to information, and the supervisor is entitled — indeed, duty bound — to ensure that it thoroughly understands the institution in question and has access to all information that, in its independent judgment, may bear on its supervisory responsibilities," the bulletin said. "Failure to provide information required by the bureau is a violation of law for which the bureau will pursue all available remedies."

The industry, however, has said the CFPB's jurisdiction only extends to consumer financial laws. As such, it may only collect information, documents and other materials that relate to consumer financial products and servicers, they said.

"It has a defined jurisdiction, which is consumer retail transactions, and that is not the same thing as safety and soundness examination," said Oliver Ireland, a partner with Morrison & Foerster. "I think there's a real question as to what they can look at and how far their examination authority goes within the organization."

CFPB on Mortgage Lenders and Servicers

In other CFPB news, Brian Collins of ASR sister publication National Mortgage News reported that President Obama's recess appointment of Richard Cordray on Wednesday will clear the way for the CFPB  to use its full enforcement and regulatory powers to police all mortgage lenders and servicers.

During a standoff with Republicans who were blocking Cordray's confirmation by the Senate, the White House acknowledged that CFPB's enforcement powers were limited to federally insured banks until a permanent director was installed.

Until then, the CFPB could not exercise its authority to take enforcement actions against nonbank mortgage lenders and servicers. But all that will change now that Cordray is the first official director of the CFPB, an agency created under the controversial Dodd-Frank Act of 2010.

"I am pleased to say that we will now be able to exercise the full authorities granted to us under the law and begin to supervise these nonbanks," director Cordray said in a blog posting Wednesday afternoon.

The former Ohio attorney general had been serving as the CFPB's director of enforcement. The bureau is expected to take its first enforcement actions early this year.

The recess appointment also clears the way for director Cordray to approve final rules for streamlining mortgage disclosures and creating an "ability to repay" standard for mortgage loans.

Legal experts raised doubts about the CFPB's authority to approve new rules authorized by the Dodd-Frank Act without the agency having a director to take charge of the bureau.

Meanwhile, Senate Richard Shelby, R-Ala., said the recess appointment will install an "unaccountable bureaucrat who will have immense power over the economy."

The ranking Republican on the Senate Banking Committee led the effort to block Cordray's nomination. Sen. Shelby and 43 other Republicans insisted on restructuring the bureau, changing its governance to a five-member commission with Congress approving its budget. 

"Instead of working in a productive way with Congress, the administration has chosen to undermine any attempt to bring accountability and balance to the bureau," said Sen. Bob Corker, R-Tenn.

The White House communications director Dan Pfeiffer noted that critics of the bureau don't want a "tough watchdog" to protect consumers. "Because of the President's leadership and decisive action, the American people will have a consumer watchdog fighting tooth and nail on their behalf," Pfeiffer said. 

Consumer and civil rights groups, and many state AGs welcomed the President's decision to install Cordray as the CFPB chief.

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