Director Kraninger was sharply criticized by Democrats at today’s hearing on the Bureau’s semi-annual report held by the Senate Banking Committee.

Ms. Kraninger’s opening remarks and written testimony repeated nearly verbatim her opening remarks and written testimony to the House Financial Services Committee last week.  She indicated once again that the Bureau’s primary goal would be prevention of harm, that the Bureau would focus its enforcement activities on “bad actors, and that she would emphasize stability, transparency, and consistency. 

Like their Democratic counterparts on the House committee, Democratic members were highly critical of the Bureau’s proposal to eliminate the ability to repay (ATR) requirement in its payday loan rule, its decision to discontinue MLA compliance examinations, and the decline in CFPB enforcement activity with regard to fair lending and student loan servicing.  Several Democratic members also criticized the Bureau’s continued employment of Eric Blankenstein as Policy Associate Director of the Bureau’s Office of Supervision, Enforcement, and Fair Lending.  Mr. Blankenstein is alleged to have made racially offensive comments in 2016.

As she did during her House appearance, Ms. Kraninger held steadfast to her view that the CFPB lacks clear authority to examine financial institutions for MLA compliance and referred lawmakers to the proposed legislation submitted by the CFPB that would amend the Dodd-Frank Act to expressly provide such authority.

With regard to the Bureau’s proposal to eliminate the payday loan rule’s ATR requirement, Democratic members called into question the sufficiency of the CFPB’s basis for its proposal and highlighted the more than $7 billion in additional revenue that the CFPB has estimated lenders would receive as a result of eliminating the ATR requirement.  Despite Ms. Kraninger’s statement that she would approach the rulemaking with an “open mind,” Democratic members expressed skepticism as to whether the Bureau would objectively consider the evidentiary record.  

In response to a question from Senator Doug Jones regarding the Bureau’s use of the disparate impact theory in future fair lending cases, Ms. Kraninger referenced the CFPB’s Fall 2018 rulemaking agenda which indicated in its preamble that the future rulemaking under consideration included the requirements of the Equal Credit Opportunity Act regarding the disparate impact doctrine.  Ms. Kraninger declined to express her personal views on the doctrine but indicated that she was involved in internal discussions regarding potential pre-rulemaking activities.   

As might be expected, Senator Elizabeth Warren was perhaps Director Kraninger’s harshest critic, highlighting the lack of new Bureau fair lending and student lending enforcement actions filed since Director Cordray’s departure.  Senator Elizabeth Warren concluded her questioning with the comment that if Ms. Kraninger had “any decency,” she “would do [her] job or resign.”

In addition to the questions asked by Democratic members about topics also covered at the House hearing, Senator Mark Warner asked Ms. Kraninger about the CFPB’s “GSE patch” for qualified mortgages.  The “patch” is an exemption created by the CFPB’s QM rule from its 43 percent debt to income ratio cap for mortgages eligible for purchase by Fannie Mae or Freddie Mac.  It is a temporary measure that is set to expire in January 2021 or on the day the GSEs exit conservatorship, whichever occurs first.  Senator Warner stressed the need for the CFPB to take steps to address the patch to avoid potential adverse consequences to the mortgage market should the patch expire.

Like their Republican counterparts on the House committee, Republican members renewed their criticism of Director Cordray’s “regulation by enforcement” approach.  They also expressed continuing concern over the Bureau’s data collection practices, praised former Acting Director Mulvaney’s creation of an Office of Cost Benefit Analysis, and voiced support for the Bureau’s use of such an analysis in carrying out its authorities.

 

 

Yesterday’s hearing on the CFPB held by the House Financial Services Committee highlighted the continuing partisan divide over the CFPB’s implementation of its consumer protection mission but with Democratic and Republican committee members switching roles from those taken at the hearings at which former Director Cordray appeared.  While Republicans took on the role of CFPB Director Kraninger’s champions, Democrats assumed the role of her critics.

The overall theme of Democratic members was praise for the CFPB’s activities under Director Cordray’s leadership and the need for Director Kraninger to undo the actions taken by Mick Mulvaney during his tenure as CFPB Acting Director.  (Numerous references were made to the Consumers First Act introduced on Wednesday by Chairwoman Waters which would amend the Dodd-Frank Act to reverse Mr. Mulvaney’s actions.)  The overall theme of the Republican members was renewed criticism of Director Cordray’s “regulation by enforcement” approach and the Bureau’s unaccountability to Congress due to its leadership structure and funding, with several Republican members voicing support for the creation of a bipartisan commission to replace the single Director structure.

As might be expected, Democratic members took aim at the Bureau’s proposal to eliminate the ability to repay (ATR) provisions of its payday loan rule, its decision to discontinue MLA compliance examinations, the decline in CFPB enforcement activity, the elimination of the Office of Students and Young Consumers (which was folded into the Office of Financial Education together with the Student Loan Ombudsman), and the transfer of the Office of Fair Lending from the Supervision, Enforcement, and Fair Lending Division to the Director’s Office.  In response to criticism from Democratic members about the length of time (6 months) that the Student Loan Ombudsman position has been vacant, Ms. Kraninger indicated that she has acted as quickly as possible to complete the steps necessary for refilling the position and that the job opening had been posted on Wednesday afternoon.  (Ms. Kraninger was unwilling to agree with Democratic members that there is a student loan “crisis.”)  She also indicated that a new Assistant Director to head the Office of Servicemembers would be announced next week.

Ms. Kraninger resisted the suggestion of Democratic lawmakers that the changes made by Mr. Mulvaney to the two offices would make them less effective in carrying out their responsibilities.  In fact, she indicated that the Office of Fair Lending has been strengthened by its placement in the Director’s Office.  She also gave no comfort to Democratic members regarding continued public disclosure of consumer complaint data.  (During his tenure as Acting Director, Mr. Mulvaney had signaled that he planned to discontinue the CFPB’s policy of publicly disclosing complaint data.)

With regard to the Bureau’s proposal to eliminate the ATR requirement from its payday loan rule, Ms. Kraninger repeated several times that the Bureau’s focus will be on the sufficiency of the evidence and legal support for the Bureau’s determination that it is an unfair or abusive practice to make payday loans without regard to a consumer’s ATR and that she had an “open mind” on the issue.  In response to comments from Republican members critical of the CFPB’s decision not to revisit the payday loan rule’s payment provisions, Ms. Kraninger indicated that the Bureau would be responding to a petition it has received seeking changes to the payment provisions.  (Presumably she was referring to the rulemaking petition to exempt debit card payments that was referenced in the Bureau’s payday loan rule proposal.)

Despite expressions of outrage from Democratic members, Ms. Kraninger held steadfast to her view that the CFPB lacks authority to examine financial institutions for MLA compliance and referred lawmakers to the proposed legislation submitted by the CFPB that would amend the Dodd-Frank Act to expressly provide such authority.  She also indicated that the Bureau’s primary goal would be prevention of harm through use of the CFPB’s rulemaking and supervisory authorities, with enforcement to focus on “bad actors” who have not self-reported or sought to correct their improper conduct.

In response to urging from Republican members for the CFPB to abandon any pending enforcement actions where there is no showing of actual consumer harm, Director Kraninger indicated that she planned to review the factual basis for the pending actions.  Ms. Kraninger also promised that the CFPB would engage in a thorough five-year lookback at  its mortgage rules, and expressed her willingness to discard any provisions that are not achieving their objectives.

In her written and live testimony, Ms. Kraninger indicated that she would be setting priorities for the Bureau as well as the “tone” for how the Bureau operates and would emphasize stability, transparency, and consistency.  Consistent with the Bureau’s Fall 2018 rulemaking agenda, Ms. Kraninger indicated that the Bureau was considering possible pre-rulemaking activities regarding the meaning of “abusive” under section 1031 of the Dodd-Frank Act.”  Although the CFPB’s overdraft rulemaking activities were designated “inactive” in its Spring 2018 rulemaking agenda, Ms. Kraninger indicated in response to a question from a Democratic member that the Bureau was continuing to look at overdrafts.

The five members of the panel that followed Director Kraninger gave live testimony that closely tracked their written testimony.  The panel members were:

  • Hilary Shelton, Director & Senior Vice President for Advocacy and Policy, National Association for the Advancement of Colored People
  • Linda Jun, Senior Policy Counsel, Americans for Financial Reform
  • Jennifer Davis, Government Relations Deputy Director, National Military Family Association
  • Seth Frotman, Executive Director, Student Borrower Protection Center  (Mr. Frotman was formerly the CFPB’s Student Loan Ombudsman and has been a vocal critic of the Bureau since his departure.)
  • Scott Weltman, Managing Shareholder, Weltman, Weinberg & Reis Co., L.P.A  (Mr. Weltman’s law firm defeated a lawsuit filed against it by the CFPB that alleged the law firm’s debt collection letters violated the FDCPA and CFPA.)

 

 

The House Financial Services Committee has updated its website to confirm that CFPB Director Kraninger is scheduled to appear at the Committee’s hearing tomorrow entitled “Putting Consumers First? A Semi-Annual Review of the Consumer Financial Protection Bureau.”

The update also indicates that Director Kraninger’s appearance will be followed by a panel consisting of the following individuals:

  • Hilary Shelton, Director & Senior Vice President for Advocacy and Policy, National Association for the Advancement of Colored People
  • Linda Jun, Senior Policy Counsel, Americans for Financial Reform
  • Jennifer Davis, Government Relations Deputy Director, National Military Family Association
  • Seth Frotman, Executive Director, Student Borrower Protection Center
  • Scott Weltman, Managing Shareholder, Weltman, Weinberg & Reis Co., L.P.A.

In addition, the Committee’s majority staff issued a memorandum to Committee members about the hearing that indicates former Acting Director Mulvaney was invited to appear but failed to respond to the Committee’s requests.  The memorandum includes a summary of the Bureau’s Spring 2018 and Fall 2018 Semi-Annual Reports that notes the “significant drop in enforcement actions” and that the Spring 2018 report “included only one instance of public enforcement action regarding fair lending” while the Fall 2018 report “reported no public fair lending enforcement actions during the covered April-September 2018 period, despite issuing a higher number of supervisory actions against institutions.”  It also notes the Bureau’s reduced spending in 2018 as well as the reduction in its workforce.

 

The Senate Banking Committee has announced that it will hold a hearing on March 12, 2019 entitled “The Consumer Financial Protection Bureau’s Semi-Annual Report to Congress” at which CFPB Director Kraninger is scheduled to appear.

Director Kraninger is also expected to appear at the hearing of the House Financial Services Committee scheduled for March 7, 2019 entitled “Putting Consumers First? A Semi-Annual Review of the Consumer Financial Protection Bureau.”  However, the Committee’s website does not yet indicate that she is scheduled to appear.

 

 

The pendency of three cases in circuit courts challenging the CFPB’s constitutionality has given rise to speculation as to whether the CFPB will continue to defend its constitutionality under Director Kraninger’s leadership.  The CFPB continued to defend its constitutionality in these cases while under former Acting Director Mulvaney’s leadership.  It did so, however, as a fallback to its primary argument that because Mr. Mulvaney was removable at will by the President and had ratified the CFPB’s decision to bring the lawsuit in question, any constitutional defect that may have existed with the CFPB’s initiation of the lawsuit was cured.

On January 9, a Ninth Circuit panel heard oral argument in CFPB v. Seila Law LLC, one of the three pending circuit court cases.  The appellant in Seila Law is asking the Ninth Circuit to overturn the district court’s refusal to set aside a Bureau civil investigative demand, arguing that the CID is invalid because the CFPB’s structure is unconstitutional.  In its answering brief filed with the Ninth Circuit, the CFPB relied on the ratification argument and its fallback constitutionality argument. (Mr. Mulvaney was Acting Director at the time of briefing.)

At the oral argument, the CFPB maintained the positions taken in its brief, namely that Mr. Mulvaney’s ratification cured any constitutional defect and, in any event, the Bureau’s structure is constitutional under U.S. Supreme Court precedent and the D.C. Circuit’s en banc PHH decision.  This would suggest that Director Kraninger, like former Acting Director Mulvaney, will continue to defend the CFPB’s constitutionality in the other pending cases.

Should she do so, however, Ms. Kraninger will be at odds with the position of the Department of Justice.  In opposing the petition for certiorari filed by State National Bank of Big Spring (which the Supreme Court denied this week), DOJ argued that while it agreed with the bank that the CFPB’s structure is unconstitutional and the proper remedy would be to sever the Dodd-Frank Act’s for-cause removal provision, the case was a poor vehicle for deciding the constitutionality issue.  It also noted that its position “is that of the United States, not the position of the Bureau to date.”  The DOJ had asked the Supreme Court to allow the CFPB to weigh in should it grant the petition for certiorari.  (The DOJ’s position could have added significance because of the Dodd-Frank provision that requires the Bureau to seek the Attorney General’s consent before it can represent itself in the Supreme Court.)

If Director Kraninger does have a change of heart, she will be following in the shoes of Joseph Otting, who was appointed Acting FHFA Director by President Trump (and also serves as Comptroller of the Currency).  Next week, the Fifth Circuit is scheduled to hold oral argument in the en banc rehearing of Collins v. Mnuchin, in which a Fifth Circuit panel found that the FHFA is unconstitutionally structured because it is excessively insulated from Executive Branch oversight.  The plaintiffs, shareholders of two of the housing government services enterprises (GSEs), are seeking to invalidate an amendment to a preferred stock agreement between the Treasury Department and the FHFA as conservator for the GSEs.

The Fifth Circuit panel had determined that the appropriate remedy for the constitutional violation was to sever the provision of the Housing and Economic Recovery Act of 2008 (HERA) that only allows the President to remove the FHFA Director “for cause” while “leav[ing] intact the remainder of HERA and the FHFA’s past actions.”  The plaintiffs sought a rehearing en banc to overturn the panel’s rulings that the FHFA acted within its statutory authority in entering into the agreement and that the FHFA’s unconstitutional structure did not impact the agreement’s validity.  The FHFA also sought a rehearing en banc but with the goal of overturning the panel’s determination that the plaintiffs had Article III standing to bring a constitutional challenge.

Despite having argued in its petition for rehearing that the panel’s constitutionality ruling was incorrect, the FHFA has now announced that it will not defend the FHFA’s constitutionality to the en banc court.  In the En Banc Supplement Brief of the FHFA and Mr. Otting, the FHFA states that Mr. Otting “has reconsidered the issues presented in this case.”  It further states that while it remains the FHFA’s position that the plaintiffs’ lack of standing makes it unnecessary for the en banc court to reach the constitutionality issue, to the extent the court concludes it is necessary to do so “FHFA will not defend the constitutionality of HERA’s for cause removal provision and agrees with the analysis in Section II.A of the Treasury’s Supplemental Brief that the provision infringes on the President’s control of executive authority.”

The two other pending circuit court cases challenging the CFPB’s constitutionality are the All American Check Cashing case pending in the Fifth Circuit and the RD Legal Funding case pending in the Second Circuit.  Oral argument is tentatively calendared for the week of March 11, 2019 in the All American Check Cashing case and briefing is scheduled to begin next month in the RD Legal Funding case.

 

 

According to an American Banker report, CFPB Director Kathy Kraninger recently sent an email to CFPB staff that provides a window into what her approach to running the CFPB will be.

The report quotes Ms. Kraninger as having said in the email that the CFPB must do its work “with an open mind and without presumptions of guilt, and to always carefully weigh the costs and benefits to consumers of our enforcement activities and regulatory rulemakings.”  She is also reported to have said that on her watch as Director, “the CFPB will vigorously enforce the law,” and that she wants the Bureau “to respect the rights of all we serve and interact with, to safeguard their personal information, and to be transparent in its operations.”  In addition, Ms. Kraninger is reported to have stressed the need for the CFPB to make sure that “the marketplace is innovating in ways that enhance both choice and the needs of the consumers.’

In our view, the email is a welcome signal that Ms. Kraninger does not intend to cast industry as the villain but instead intends to be fair-minded in her leadership of the CFPB and continue former Acting Director Mulvaney’s efforts to promote innovation.

 

 

Seventy-four organizations that describe themselves as “consumer, community, civil rights, faith, labor and legal services groups” have sent a letter to CFPB Director Kathy Kraninger to “reiterate our concerns about widespread debt collection abuses that we have raised in the past and the ongoing need for better protection against these abuses.”

In the letter, the groups make recommendations regarding the following:

  • Preventing telephone harassment and increasing consumer privacy.  The groups seek to limit collectors to one live call per week and up to three attempted calls, require collectors to honor a consumer’s verbal request to stop calls, allow text and email communications from collectors only if the consumer has agreed to electronic communications, prohibit collection calls and emails to the consumer’s work phone number and email unless in response to the consumer’s request, and make all collector contacts, including “limited content” calls or messages requesting a call back, subject to the FDCPA.
  • Prohibiting collection of time-barred debt.  The groups seek to entirely prohibit collectors from attempting to collect time-barred debt.  Alternatively, if the Bureau allows collectors to communicate regarding time-barred debts, the groups urge the Bureau to require that such communications be in writing and that a disclosure be provided to inform the consumer he or she cannot be sued on the debt.
  • Improving accuracy and clarity of debt collection notices.  The groups want the CFPB to create a model validation notice and statement of rights.

The issues raised by the groups are likely to be addressed by the Bureau in its anticipated debt collection rulemaking for debt collectors subject to the FDCPA.  In its Fall 2018 rulemaking agenda, the Bureau stated that it “expects to issue [a NPRM] addressing such issues as communication practices and consumer disclosures by spring 2019” and estimated the issuance of a NPRM in March 2019.

 

 

 

CFPB Director Kathy Kraninger has sent an email to CFPB employees informing them of her decision to halt “all ongoing efforts to make changes to existing products and materials related to the name correction initiative.”  That initiative was initiated by former Acting Director Mulvaney.  Under his leadership, the Bureau began using “Bureau of Consumer Financial Protection” as its name, together with the acronym “BCFP,”  instead of, respectively, “Consumer Financial Protection Bureau” and “CFPB.”

Ms. Kraninger identified the name change as an “early priority” because of implementation decisions that must be made.  In initiating the name change and commissioning a seal reflecting the change, Mr. Mulvaney had pointed to the Dodd-Frank Act’s use of “Bureau of Consumer Financial Protection” to refer to the agency.  Ms. Kraninger stated that the new seal and “the statutory name we were given in Dodd-Frank” would be used for “statutorily required reports, legal filings, and other items specific to the Office of the Director.”  However, for all other materials, the Bureau will continue to use the name “Consumer Financial Protection Bureau”  and “the existing CFPB logo.”

Ms. Kraninger indicated that she made her decision “after being fully briefed on the costs, operational challenges and the effect on stakeholders.”  Her decision closely follows Senator Elizabeth Warren’s sending of a letter to the Inspector General for the Fed and CFPB asking for an investigation into Mr. Mulvaney’s decision to change the Bureau’s name.  In her letter, Senator Warren cited reports and an internal Bureau analysis indicating that the name change would cost the CFPB between $9 million and $19 million and would cost entities subject to CFPB supervision approximately $300 million to update internal databases, regulatory filings, and disclosure forms with the new name.

We applaud Director Kraninger for quickly addressing this issue and addressing it in a practical manner.

 

Despite agreeing on the merits with State National Bank of Big Spring (SNB) and the other petitioners for certiorari that the CFPB’s structure is unconstitutional, the Department of Justice has filed a brief in which it argues that the U.S. Supreme Court should deny the petition.  (The other petitioners are two D.C. area non-profit organizations that in 2012, together with SNB, brought one of the first lawsuits challenging the CFPB’s constitutionality.)

The D.C. District Court initially dismissed the petitioners’ complaint for lack of standing but on appeal, in an opinion authored by Judge (now Justice) Kavanaugh, the D.C. Circuit held that the plaintiffs did have standing and remanded the case to the district court.  Further proceedings in the case were held in abeyance by the district court pending the outcome of the PHH case in the D.C. Circuit.

Following the D.C. Circuit’s en banc PHH decision that held the CFPB’s structure is constitutional, the district court lifted its abeyance order and, with the parties having agreed that PHH foreclosed the district court from ruling in favor of the plaintiffs on their constitutional challenge, entered judgment against the plaintiffs.  On June 8, 2018, the D.C Circuit entered an order summarily affirming the district court’s judgment.  Citing its en banc PHH decision, the D.C. Circuit order stated that “the merits of the parties’ positions are so clear as to warrant summary action.”

In its brief, the DOJ calls the principal question presented by the case—whether the Bureau’s single-director-removable-only-for-cause structure violates the separation of powers—is an “important one that warrants [the Supreme] Court’s review in an appropriate case” and that “absent legislative action eliminating the restrictions on removal…will ultimately need to be settled by [the Supreme] Court.”  Nevertheless, the DOJ asserts that the SNB case “would be a poor vehicle to consider the question for multiple reasons.”

Such reasons consist of the following:

  • If the Supreme Court were to grant the petition, it is unlikely the case would be considered by the full Court because of Justice Kavanaugh’s previous participation in the case while a D.C. Circuit judge, and his authoring of the D.C. Circuit’s standing decision.  The DOJ asserts that “[p]articularly for a question of this magnitude, the Court may wish to wait for a vehicle in which all nine Justices are likely to participate.”  (It is not surprising that the DOJ would want Justice Kavanaugh to participate given that he authored the D.C. Circuit panel decision in PHH that held the CFPB’s structure is unconstitutional and a dissent in the D.C. Circuit’s en banc PHH decision that reversed the panel’s decision and held the structure is constitutional.)
  • Before it could reach the merits of the constitutionality issue, the Supreme Court would have to resolve in the petitioners’ favor the jurisdictional issue of whether the petitioners have standing.  According to the DOJ, “petitioners’ standing is sufficiently questionable to present a significant vehicle problem.”
  • There are other cases pending in the courts of appeal that raise a similar constitutional challenge and “one or more of those cases may not present the same obstacles that could impede the full Court from considering the merits of this important issue.”  The pending cases cited by the DOJ are the All American Check Cashing case pending in the Fifth Circuit, the RD Legal Funding case pending in the Second Circuit, and the Seila Law case pending in the Ninth Circuit.  (Seila Law involves an appeal from the district court’s refusal to set aside a Bureau civil investigative demand.  Oral argument in the Ninth Circuit is scheduled for January 8, 2019.)

On the merits, the DOJ argues that the Bureau’s structure is unconstitutional and the proper remedy is to sever the Dodd-Frank Act’s for-cause removal provision.  The DOJ notes, however, that its position “is that of the United States, not the position of the Bureau to date.”  Citing the Dodd-Frank provision that gives the Bureau independent litigation authority in the lower courts, the DOJ observes that while the Bureau continued to defend the constitutionality of its structure in the lower courts under Acting Director Mulvaney, a new Director, Kathy Kraninger, will assume (and now has assumed) leadership of the Bureau.

The DOJ then notes that if the Supreme Court were to grant the petition for certiorari, it would be the Court’s “usual practice to appoint an amicus curiae to defend the judgment of the court of appeals” when no party is doing so.  The DOJ then cites the Dodd-Frank provision that requires the Bureau to seek the Attorney General’s consent before it can represent itself in the Supreme Court and asks the Court, before appointing an amicus curiae, to give the Bureau’s new Director “a reasonable opportunity…to determine whether the Bureau will seek to defend the court of appeals’ judgment in this Court and for the Acting Solicitor General to determine whether he will authorize the Bureau to do so.”  (The DOJ indicates in a footnote that the Solicitor General (Noel Francisco) is recused in the case.  Presumably, the reason for the recusal is that Mr. Francisco’s former law firm is representing one of the amici that has filed a brief with the Supreme Court in support of SNB.)

We note that although the Bureau did continue to defend its constitutionality under Acting Director Mulvaney, it did so as a fallback to its primary argument that because Acting Director Mulvaney is removable at will by the President and had ratified the CFPB’s decision to bring the lawsuit in question, any constitutional defect that may have existed with the CFPB’s initiation of the lawsuit was cured.  The continued viability of that argument is questionable given that Ms. Kraninger, who is now Director, can only be removed by the President for cause.  In its Fifth Circuit appeal, All American Check Cashing recently filed a letter in which it noted the Senate’s confirmation of Ms. Kraninger and stated that “[t]his refutes once and for all the CFPB’s contention that a purported ratification by the former Acting Director somehow cured the defects in the CFPB’s structure.”  It bears observing that a ruling by the Supreme Court that the CFPB’s structure is unconstitutional and the proper remedy is to sever the for-cause removal provision would mean that Ms. Kraninger’s five-year term could be cut short should a Democratic President be elected in 2020.

 

The CFPB has issued a new annual report covering its fair lending activities during 2017.  Since Mick Mulvaney did not become Acting Director until the end of November 2017, the fair lending activities described in the report largely took place under former Director Cordray’s leadership.

The Bureau’s last annual fair lending report under former Director Cordray (which covered its fair lending activities in 2016) identified the Bureau’s 2017 fair lending priorities.  Consistent with those priorities, the new report indicates that, in 2017, the Bureau focused on redlining, mortgage and student loan servicing, and small business lending.  The new report, however, provides no insights into the Bureau’s 2019 fair lending priorities.

Indeed, even if the report had identified 2019 priorities, it is unclear how meaningful that would have been given that the CFPB will be led by Kathy Kraninger, its new Director, in 2019.  Ms. Kraninger is likely to play a significant role in setting the Bureau’s fair lending agenda going forward.  During her initial press conference as Director earlier this week, Ms. Kraninger deflected questions she was asked about fair lending matters, including the Bureau’s use of the disparate impact theory to prove violations of ECOA, by saying that she has not reached any conclusions about the Bureau’s future fair lending policy and awaits staff briefings.

In the report’s section on supervisory activities, the Bureau reviews information previously provided in its Spring 2017 and Summer 2017 editions of Supervisory Highlights.  In the section on enforcement, the Bureau reviews its two public 2017 fair lending enforcement actions and its implementation of several consent orders.  It also reports that it referred two matters with ECOA violations to the Justice Department in 2017 and the DOJ declined to open its own investigation, deferring to the Bureau’s handling of both matters.  The Bureau states that at the end of 2017, it had a number of pending redlining investigations as well as a number of pending investigations in other areas.

In the section on rulemaking, the Bureau discusses various HMDA/Regulation C developments and its final rule amending Regulation B to facilitate Regulation C compliance.  In discussing its progress in developing rules on the collection of small business lending data to implement Section 1071 of Dodd-Frank, the Bureau references its May 2017 RFI seeking information on the small business lending market.  (Dodd-Frank Section 1071 amended the ECOA to require financial institutions to collect and maintain certain data in connection with credit applications made by women- or minority-owned businesses and small businesses.  Such data includes the race, sex, and ethnicity of the principal owners of the business.)  In the Bureau’s Spring 2018 rulemaking agenda, the Section 1071 rulemaking was included in the list of current rulemakings, with an estimated March 2019 date for prerule activities.  Its Fall 2018 agenda, however, reclassifies the Section 1071 rulemaking as a long-term action item.

The report also contains sections that discuss the Bureau’s coordination with other federal agencies on fair lending issues and outreach to industry and consumers (such as through speaking engagements and roundtables, blog posts, and supervisory highlights).  Another section is intended to satisfy certain ECOA and HMDA reporting requirements, including providing a summary of other agencies’ ECOA enforcement efforts and reporting on the utility of certain HMDA reporting requirements.