PART 3: A New, More Balanced Era for the CFPB?
In the Cordray years, businesses learned that treating consumers honestly and maintaining good compliance programs might not save them from politically motivated CFPB enforcement actions. In this way, punitive fines lost most of their power to incentivize good behavior.
The election of Donald Trump to the Presidency and Republican majorities in the House and Senate held out the promise CFPB reform. In October 2016, the United States Court of Appeals for the District of Columbia Circuit ruled that it was unconstitutional for the CFPB Director to be removable by the President of the United States only for cause, such as “inefficiency, neglect of duty or malfeasance.” Circuit Judge Brett Kavanaugh (now a Supreme Court Justice) wrote that the law was “a threat to individual liberty” and instead found that the President could remove the CFPB Director at will. The ruling essentially made, for the first time, the CFPB part of the United States federal executive departments.
This paved the way for the November 2017 resignation of Richard Cordray as Director of the CFPB, sparking a legal dispute over who would succeed him, as acting director. In the event, President Trump appointed the Director of the Office of Management and Budget Mick Mulvaney to the position, where he remains.
Director Mulvaney is on the record arguing that the Consumer Financial Protection Bureau is “trampling on capitalism”. During his first day as the watchdog agency’s acting director on Monday, Mulvaney announced a 30-day freeze on new regulations so he can make sure they are not “choking off” lending. He also changed the name of the agency to the Bureau of Consumer Financial Protection (BCPF), a demotion in the language of the federal government. Significantly, and as reported previously on this website, Director Mulvaney also announced that the days of the CFPB “pushing the envelope” are over – a clear indication that the days of CFPB activism are coming to an end.
President Trump has nominated Kathleen Kraninger to replace Director Mulvaney at the BCFP, a nomination supported by NILA, on the grounds that she has all of the attributesrequired to steer a path for the Bureau that protects citizens from exploitation while preserving their access to safe and affordable credit. Ms. Kraninger, who is currently employed in the Office of Management and Budget, was confirmed by a committee vote split along party lines, in August and is expected to face opposition from Senate Democrats in a final, full-senate vote on confirmation.
In addition to a likely new Director, 2019 can be expected to deliver a number of changes of interest to installment lenders, including adjustments to the payday lending rule (which exempts installment loans), and, according to Director Mulvaney, a new regulation defining how the bureau views unfair, deceptive or abusive acts or practices, known as Udaap. NILA has long been concerned that the lack of a definition in this area increases the compliance burden, and makes it unnecessarily difficult to predict the triggering of enforcement actions.
NILA will continue to watch with interest all developments relating to the BCFP.