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Last Friday, the CFPB announced several changes in senior leadership.  The individuals and their backgrounds as set forth in the CFPB’s press release are as follows:

  • Andrew Duke will serve as the Policy Associate Director for External Affairs.  Mr. Duke has 27 years of experience in public policy, including 20 years on Capitol Hill serving with three different members of Congress.
  • Laura Fiene will serve as West Regional Director.  Ms. Fiene joined the CFPB in 2011.  Ms. Fiene has more than 31 years of experience in regulating financial services companies, including 27 years dedicated to supervising and examining compliance with federal consumer financial laws and regulations.
  • Marisol Garibay will serve as the Acting Chief Communications Officer.  Ms. Garibay has 14 years of experience in policy communications focused on financial issues and served most recently as Senior Advisor and Acting Communications Director at the Office of Management and Budget.
  • Delicia Reynolds Hand will serve as Deputy Associate Director for External Affairs.  Ms. Hand joined the Bureau in 2012 and has 17 years of experience, having worked in consumer advocacy, community development, and on Capitol Hill.
  • Lora McCray will serve as Director for the Office of Minority and Women Inclusion.  Ms. McCray has 15 years of experience in diversity practice and management, most recently as the Assistant Vice President, Diversity and Inclusion at the Federal Reserve Bank of Boston.

Today was Kathy Kraninger’s first day at the BCFP.  According to her remarks at a press conference this afternoon,  she spent most of her day meeting staff.

In answer to questions from the press, she made the following points:

  1. She has not yet decided which policies of Acting Director Mick Mulvaney she will change. She noted the important difference in leadership posture between her and Mulvaney in that her status as Director will be full-time. She emphasized that she will be making her own decisions for which she will be fully accountable.
  2. She will take a fresh look at Mulvaney’s decision to change the Bureau’s name from the Consumer Financial Protection Bureau (CFPB) to the Bureau of Consumer Financial Protection (BCFP). She acknowledged the internal BCFP report finding that the name change would cost the industry $300 million. She stated that she cares “more about what the agency does than what it is called.” She said that this will be a “near-term” decision.
  3. She indicated that the Bureau’s budget is near and dear to her heart and that she will be prioritizing the budget because she soon needs to advise the Fed of how much funding the Bureau will need for the next quarter.
  4. She underscored that the Bureau will remain very focused on enforcement and that she will take seriously the Bureau’s mission to take enforcement actions against “bad actors” to the full extent of the law.
  5. She mentioned that she does not presently have an opinion regarding the use of the “disparate impact” theory in enforcing the Equal Credit Opportunity Act. She alluded to a conversation she had today with a member of the Bureau’s staff who is studying the issue.
  6. She indicated that her regulatory priorities are reflected in the Bureau’s most recent semi-annual regulatory agenda.
  7. Finally, she expects that she will be speaking at some time with former Director Richard Cordray since it has always been her policy to speak to her predecessors in office at other government jobs she has held.

Former CFPB Student Loan Ombudsman Seth Frotman, who abruptly resigned from the Bureau in August, has formed a nonprofit organization to advocate for additional oversight of the student loan industry. Called the Student Borrower Protection Center (SBPC), the group describes itself as “leading a nationwide effort to end the student debt crisis in America.”

The group’s website describes its projects as “supporting state and local officials” and “driving new actions in communities, in court, and in government.” These projects include: the Student Loan Law Initiative, a partnership with the University of California Irvine School of Law to generate additional research into student loan law and the economic impact of student loans; and the group’s partnerships with cities and states to advance borrower protections through legislations and policy proposals.

Among the legislative initiatives, the group describes as a discrete project the “California Borrower Bill of Rights.” The project solicits borrowers to join in lobbying the state of California to establish loan servicing standards, ban abusive practices, and create a state Student Loan Borrower Advocate to respond to consumer complaints, recommend legal reforms, and refer violators to law enforcement. The project acknowledges existing borrower protections established by the California’s Student Loan Servicing Act but does not describe what additional protections the group advocates.

The SBPC also has the explicit goal of assisting states and cities with “creative litigation strategy” in lawsuits against lenders and servicers. As part of its project on state partnerships, the group provides detailed resources on federal preemption of state regulations, borrower protections, and the nationwide impact of student debt on minorities, women, servicemembers, older Americans, and public servants.

As previously reported, Frotman’s departure from the Bureau included pointed criticism of Mulvaney’s leadership. The SBPC continues Frotman’s rehetoric with the accusations that when borrowers default, “it is often as a direct result of widespread illegal practices by student loan servicers” and that servicers “use the full weight of the government to wreak havoc on borrowers.”

In addition to Frotman, the organization includes several former CFPB employees. Bonnie Latreille, who was formerly part of the Office for Students and Young Consumers at the Bureau, serves as Director of Research and Advocacy. Mike Pierce, the SBPC’s Director and Managing Counsel, was formerly a deputy assistant director. The group’s advisory board includes Holly Petraeus and Nick Rathod, both former assistant directors at the Bureau.

This afternoon the Senate voted 50 – 49 to invoke cloture and proceed to debate and a final vote on the nomination of Kathy Kraninger to be the next Director of the Bureau of Consumer Financial Protection (“BCFP”).  The vote was along strict party lines, with Senator James Inhofe (R-OK) not voting.  The Senate could begin debate on Kraninger’s nomination as early as Monday.  If all 50 senators who voted affirmatively today do so again for the full Senate vote, Kraninger’s confirmation is assured.  Once confirmed by the Senate, Kraninger will serve a 5-year term as the Director of the BCFP.

Politico has reported that Senate Majority Leader Mitch McConnell filed cloture this afternoon on President Trump’s nomination of Kathy Kraninger to serve as CFPB Director.  The filing means that the full Senate will vote on the nomination once it returns after Thanksgiving, although the date of a vote remains uncertain.

 

 

 

A number of housing and financial industry trade groups, including the Mortgage Bankers Association and Real Estate Services Providers Council, Inc. (RESPRO®), recently sent a letter to Senators Mitch McConnell (R-KY) and Charles E. Schumer (D-NY) supporting the confirmation of Kathleen Kraninger as CFPB Director.

The trade groups state that Ms. Kraninger “has the ability to lead and manage a large government agency, like the Bureau, which is tasked to ensure consumers’ financial interests are protected,” and “also fulfill the equally important role of ensuring businesses have the necessary compliance support to further those interests.”

Addressing concerns regarding the CFPB, the trade groups state “Our members believe the Bureau must improve its examination, enforcement, rulemaking and guidance processes to assist with regulatory compliance and bring certainty in the marketplace. As evidenced during the Senate Banking Committee confirmation hearing, Ms. Kraninger’s testimony conveyed a commitment to such actions along with a thoughtful review of the law for corresponding administrative actions.”

As we reported previously, the Senate Banking Committee voted to approve Ms. Kraninger’s nomination as CFPB Director, but the full Senate has not acted on the nomination. If the Senate does not act on Ms. Kraninger’s nomination during the lame-duck session, the nomination will be returned to President Trump. Once the new Congress convenes next year, the President could re-nominate Ms. Kraninger or nominate another individual for CFPB Director. As we reported previously, under the Federal Vacancies Reform Act Mick Mulvaney can continue to serve as Acting CFPB Director for a 210-day period if Ms. Kraninger’s nomination is returned or rejected, and once another nomination is made he could serve as Acting Director during the Senate’s consideration of the second nomination.

Addressing the Mortgage Bankers Association (MBA) 2018 Annual Convention in Washington, DC on October 15, 2018, BCFP Acting Director Mick Mulvaney advised that regulation by enforcement is dead, and that he does not care much for regulation by guidance either. He noted to the members that they have a right to know what the law is.

Acting Director Mulvaney advised that if a party is doing something that is against the law, the BCFP will take action against them. However, he advised the difference between the BCFP now from its approach under the prior Director is that if someone is doing something that complies with the law and the BCFP doesn’t like it, the BCFP will not take action.

With regard to UDAAP, Acting Director Mulvaney stated that he believes the concepts of “unfair” and “deceptive” are well established in the law, but that is not so with regard to the concept of “abusive”. He noted he asked his staff to provide examples of what is abusive that is not also either unfair or deceptive. And he signaled that the BCFP will look to engage in rulemaking on abusive.

As we have reported the MBA and other trade groups recently sent a letter to the BCFB seeking reforms in connection with the BCFP’s loan originator compensation rule. When asked by MBA President and CEO Robert Broeksmit about the letter, Acting Director Mulvaney advised that he knew the letter was received and that it is being reviewed by staff, but that he had not actually seen the letter. Mr. Broeksmit then handed Mr. Mulvaney a copy of the letter, drawing laughs from the audience.

With regard to payday lending, Acting Director Mulvaney advised that it can be really dangerous for people given the high interest rates, but that people want it so it exists. He noted he has told payday lenders they exist because bank regulators forced banks out of the business. But he stated that the OCC has signaled it will allow banks back in, and that the way to fix payday lending is through competition.

 

Seth Frotman, the CFPB’s Student Loan Ombudsman, has sent a letter to CFPB Acting Director Mulvaney tendering his resignation effective September 1, 2018.  (In addition to Treasury Secretary Mnuchin and Department of Education Secretary DeVos, Mr. Frotman’s letter indicates that copies were sent to various Senate and House lawmakers.)

In his letter, Mr. Frotman is highly critical of the CFPB’s actions in the student loan arena.  He comments that the Bureau’s current leadership “has abandoned its duty to fairly and robustly enforce the law,”  “has made its priorities clear—it will protect the misguided goals of the Trump Administration to the detriment of student loan borrowers,” and “has turned its back on young people and their financial futures.”

 

 

By a 13 to 12 party-line vote today, the Senate Banking Committee approved President Trump’s nomination of Kathy Kraninger to serve as CFPB Director.

When the full Senate will consider her nomination and whether it will be approved remains uncertain.  We continue to believe that the full Senate is unlikely to consider her nomination before the mid-term elections.

 

According to media sources, the Senate Banking Committee has rescheduled a vote on President Trump’s nomination of Kathy Kraninger to serve as CFPB Director for August 23.

There is little doubt that the Committee will approve Ms. Kraninger.  It remains unclear, however, whether and when the full Senate will consider her nomination.  We continue to believe that it is unlikely that the full Senate will consider her nomination before the mid-term elections.