This article was published in the Winter 2018 issue of Delaware Banker. It is reprinted here with permission.
Speculation about the future of the Consumer Financial Protection Bureau (CFPB) has been ever-present since Donald Trump’s victory in the 2016 Presidential election was first announced. Many industry experts initially predicted that Congress would quickly agree to replace the CFPB’s single-Director structure with a multi-member commission, which did not happen and now seems unlikely. On the other hand, few, if anyone, foresaw that the formerly obscure Congressional Review Act would emerge as a device for voiding rules and regulations issued under former Director Richard Cordray’s leadership. The November 25, 2017 resignation of Director Cordray has given rise to a fresh batch of conjecture.
Attempts to predict the future are inherently suspect, as they necessarily draw from knowledge of past events, which may not be indicative of what follows.1 The CFPB’s new leadership is quickly making major changes in policies and practices, especially in the areas of enforcement and rule-making, but the agency’s new approach has yet to emerge. Mindful of the above caveat regarding the inherent unreliability of predictions, below we offer our thoughts on the changes in focus and direction—or lack thereof—that we expect to unfold at the CFPB during 2018.
New 'Cop on the Beat'2
A change in the top position at the CFPB has a greater impact than a similar change at the FDIC or the OCC. This is because a sitting CFPB Director can only be removed by the President for cause, which gives that incumbent an unparalleled degree of independence in his or her decision-making. Former Director Cordray often referred to himself as a “cop on the beat,” but many would contend that he was additionally lawmaker, judge, and jury. The constitutionality of the CFPB’s unique agency structure has been the subject of lawsuits, most notably PHH Corp. v. Consumer Fin. Prot. Bureau.3
In his initial press conference, on November 27, 2017, acting CFPB Director Mick Mulvaney outlined his basic plan for leading the agency as follows:
The rumors that I’m going to set the place on fire, or blow it up, or lock the doors are completely false. I’m a member of the executive branch of government and we intend to execute the laws of the United States, including the provisions of Dodd-Frank that govern the CFPB. That said, the way we go about it, the way we interpret it, the way we enforce it, will be dramatically different. . .4
During the week of January 14, the CFPB took four significant actions. First, on January 16, the CFPB announced its intent to undertake a new rulemaking for the purpose of reconsidering its controversial new rule titled “Payday, Vehicle Title, and Certain High-Cost Installment Loans” (the Payday Loan rule). Second, on January 18, acting Director Mulvaney announced that the CFPB would be requesting no funding from the Federal Reserve Board for the first quarter of 2018. The reason given for this decision was that the CFPB already has adequate funds because former Director Cordray had held sizeable funds in reserve, which the new leadership considers unnecessary. This action was seen by many as an indication that the CFPB plans to scale back on its activities. Third, the same day, the CFPB announced its decision to drop a pending lawsuit in Kansas against a group of payday lenders associated with American Indian tribes. Finally, also on January 18, the CFPB announced plans to solicit public input regarding the agency’s enforcement, supervision, rulemaking, market monitoring, and education activities, including its use of civil investigative demands (CIDs) through Requests for Information to be published in the Federal Register. According to the CFPB’s press release, the goal of these requests will be to “ensure the Bureau is fulfilling its proper and appropriate functions to best protect consumers.”
Although some may see the above actions as the first steps toward dismantling of the CFPB, the statutory mandate that drives and determines the CFPB’s activities serves as a break on such efforts. That mandate includes the following:
- ensure that consumers have timely and understandable information to make responsible decisions about financial transactions
- protect consumers from unfair, deceptive, and abusive acts or practices, and from discrimination
- reduce outdated, unnecessary, or overly burdensome regulations
- promote fair competition by enforcing the federal consumer financial laws consistently, and
- advance markets for consumer financial products and services that operate transparently and efficiently to facilitate access and innovation.5
More specifically, the Dodd-Frank Act (Dodd-Frank) gives the CFPB supervision and enforcement authority over a vast array of consumer financial products and services, including deposit taking, mortgages, credit cards and other extensions of credit, loan servicing, check guaranteeing, collection of consumer report data, debt collection, real estate settlement, money transmitting, and financial data processing. In addition, Dodd-Frank transferred to the CFPB from other federal agencies rule-making authority for 14 of the most important federal consumer protection laws and attendant regulations.6 In light of these broad responsibilities, absent new federal legislation fundamentally restructuring the CFPB,7 acting Director Mulvaney’s statements about not seeking to dismantle the agency merely acknowledged reality; i.e., the CFPB will continue to be staffed appropriately and provided with sufficient financial resources to meet its statutory obligations.
Although acting Director Mulvaney cannot completely remake the CFPB, he can institute significant changes in emphasis and execution. Those changes have already begun. As one of his initial acts, acting Director Mulvaney revised the agency’s mission statement to provide as follows:
The Consumer Financial Protection Bureau is a 21st century agency that helps consumer finance markets work by regularly identifying and addressing outdated, unnecessary, or unduly burdensome regulations, by making rules more effective, by consistently enforcing federal consumer financial law, and by empowering consumers to take more control over their economic lives.
In comparison, below is the prior mission statement:
The Consumer Financial Protection Bureau is a 21st century agency that helps consumer finance markets work by making rules more effective, by consistently and fairly enforcing those rules, and by empowering consumers to take more control over their economic lives.
The revised mission statement acknowledges an important facet of the agency’s statutory mandate that was missing from the prior version, namely, the agency’s duty to promote more efficient regulation by...
