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The consumer bureau's director says his agency will work with financial companies.

Associated Press

WASHINGTON - The government's new consumer finance watchdog agency is prepared to sue companies that offer unfair or deceptive mortgages and credit cards, its director said Tuesday.

Addressing a congressional panel, Consumer Financial Protection Bureau director Richard Cordray defended his appointment to the post and assured critics that the agency will work with financial companies whenever possible.

But "we will not hesitate to use enforcement actions to right a wrong," he told the Republican-controlled subcommittee of the House Oversight Committee.

Cordray was addressing Congress for the first time since his appointment by President Barack Obama this month. He faces questions about the bureau's actions and the legitimacy of his appointment.

Republicans call the appointment illegal because they say the Senate technically was not in recess. Republicans were holding minutes-long sessions during their vacation to prevent the president from making any appointments.

The new bureau might lack credibility in part because it is run by a director whose "appointment was constitutionally questionable," said Rep. Patrick McHenry, R-N.C., chairman of the subcommittee.

McHenry is a major beneficiary of political donations from the payday lending industry, which will face much stricter oversight because of Cordray's appointment.

Cordray said he is aware of objections to his appointment, but, "I'm in the job, it's an important job, it's a big job, it commands all of my time and attention, and all I can do is try to carry out the responsibilities."

Oversight Committee Chairman Darrell Issa, R-Calif., asked whether the agency has made plans for what to do if Cordray's nomination is invalidated by a legal appeal.

"We have to carry out the intent of that law," Cordray replied. "Either we do or we don't. It seems to me that the right answer is that we do."

The bureau is required by law to create boards of community bankers and small businesses that can give input on rules that it is writing. Cordray said it is considering creating additional groups for others affected by its actions.

He also tried to calm fears that the agency will haphazardly ban products that carry high fees but are used by many consumers, such as payday loans.

"I don't look at these issues in terms of banning products," Cordray said. "Nobody's going to wave a magic wand and undo personal responsibility" for financial decisions. He said that was one reason why the bureau is responsible for improving the government's financial literacy programs.

Senate Republicans had refused to confirm Cordray because many opposed creating the agency. They argued that it will add unnecessary regulation, increase costs for lenders, and prevent people and businesses from getting loans.

The White House justified the recess appointment by saying that Republicans were holding up Cordray's nomination to paralyze the agency.

The bureau was required to have a permanent director before it could start policing nonbank financial companies, such as mortgage servicers and payday lenders.

The agency's defenders say it is needed to patch gaps in oversight that made the mortgage bubble possible.