The CFPB has issued its twelfth Semi-Annual Report to the President and Congress covering the period April 1, 2017 through September 30, 2017.

The report begins with a message from Acting Director Mulvaney in which he makes recommendations for legislative recommendations for changes to the CFPB and invites members of Congress to question him about those recommendations when he testifies at future hearings.  (Mr. Mulvaney is scheduled to appear before the House Financial Services Committee on April 11.)  According to Mr. Mulvaney, section 1012(c)(4) of the Dodd-Frank Act contemplates that the CFPB Director will submit independent legislative recommendations to Congress.

That provision states: “No officer or agency of the United States shall have any authority to require the Director or any other officer of the Bureau to submit legislative recommendations, or testimony or comments on legislation, to any officer or agency of the United States for approval, comments, or review prior to the submission of such recommendations, testimony, or comments to the Congress, if such recommendations, testimony, or comments to the Congress include a statement indicating that the views expressed therein are those of the Director or such officer, and do not necessarily reflect the views of the Board of Governors or the President.”  Mr. Mulvaney’s message contains a footnote indicating that no office or agency of the United States other than him has approved his legislative recommendations and that the views he has expressed are his views and do not necessarily reflect the views of the Board of Governors or the President.

Mr. Mulvaney makes the following recommendations to address “the Bureau’s lack of accountability to any representative branch of government”:

  • Fund the CFPB through Congressional appropriations (rather than through transfers from the Federal Reserve up to a set cap as currently provided by Dodd-Frank)
  • Require legislative approval of major CFPB rules  (presumably in lieu of the current Congressional Review Act disapproval procedure)
  • Ensure the Director answers to the President in the exercise of executive authority  (perhaps intended to suggest that the President should be able to remove the Director at will rather than only for cause as currently provided by Dodd-Frank)
  • Create an independent Inspector General for the CFPB (rather that share an Inspector General with the Federal Reserve as the Inspector General Act currently provides)

Nearly all, if not all, of Mr. Mulvaney’s proposals have previously appeared in various House bills introduced during former Director Cordray’s tenure, including the Financial CHOICE Act passed by the House in June 2017.

Although we agree with Mr. Mulvaney’s view that Congress vested way too much power in one individual when it created the CFPB, we think the better way to address that concern is by creating a bi-partisan 5-member commission similar to the FTC.  We strongly disagree with Mr. Mulvaney’s proposal to require legislative approval for all “major Bureau rules.”  Given the filibuster rule which requires at least 60 votes for a bill to pass the Senate, requiring legislative approval would typically be tantamount to not permitting the CFPB to promulgate any “major Bureau rules.”

While the consumer financial services industry has often opposed prior rules adopted by the CFPB (two perfect examples being the arbitration and payday lending rules), the industry sometimes needs the CFPB to issue rules in order to create more certainty as to  what is and what is not lawful.  For example, the debt collection industry needs regulations that address debt collection practices in the age of the Internet and smart phones.  The FDCPA was enacted in the pre-Internet era.  The mortgage industry also wants the CFPB to revise its very rigid mortgage rules which are impeding mortgage originations.

Mr. Mulvaney has stated previously that he wants the CFPB to be more focused on giving guidance to the industry through regulations rather than consent orders.  His proposal seems inconsistent with that approach.  One wonders whether Mr. Mulvaney has considered the possibility that a requirement to obtain legislative approval for all major rules could mean that he could not change the CFPB’s payday lending rule without gaining 60 votes in the Senate for a revised rule – a rather Herculean task.

With respect to the substance of the report itself, it is notable that the new report consists of 55 pages in contrast to the CFPB’s last semi-annual report which consisted of 178-pages.  In his introductory message, Mr. Mulvaney states that section 1016(c) of Dodd-Frank lists nine elements for inclusion in the CFPB’s semi-annual report and the new report “precisely meets this mandate.”

Among the changes contributing to the new report’s shorter length is the elimination of the numerous exhibits contained in prior reports and significantly abbreviated discussions of consumer complaints and the CFPB’s budget.  In addition to its substantially shorter length, another notable difference from prior reports is the absence in the new report of any aggregate numbers for how much consumers obtained in consumer relief and how much was assessed in civil money penalties in supervisory and enforcement actions during the period covered by the report.

Like past reports, the new report discusses ongoing and past developments that we have covered in previous blog posts.  However, while the report states that it covers the period April 1, 2017 through September 1, 2017, it also includes post-September 1 developments, including developments that have occurred since Mr. Mulvaney became Acting Director.  The report’s summaries of enforcement actions in which the CFPB was a party from October 1, 2016 through September 1, 2017 references developments in those cases after September 1, such as the CFPB’s dismissal in January 2018 of a case it had filed against four tribal lenders.  The report also lists the eleven RFIs already issued by the CFPB under Mr. Mulvaney and the twelfth RFI expected to be issued next week.

Most significantly, the report includes the CFPB’s plans for upcoming rules.  The upcoming proposed rules listed are:

  • A rulemaking to reconsider the CFPB’s rule on payday, vehicle title, and certain high-cost installment loans
  • A rule to be issued jointly with the Federal Reserve amending Regulation CC (Expedited Availability of Funds Act)
  • A proposed debt collection rule “concerning FDCPA collectors’ communications practices and consumer disclosures”
  • A rulemaking to reconsider various aspects of the CFPB’s 2015 HMDA rule