Regulatory Reform : Mulvaney Presents His CFPB Vision to Congress

Highlights from Mulvaney’s Testimony to Congress

In April, Acting CFPB Director Mick Mulvaney appeared for the first time before House and Senate Congressional Committees to present the Consumer Finance Protection Bureau’s (CFPB) Semi-Annual Report.

Not surprisingly, he was welcomed by Republicans and often disparaged by Democrats, notably Senator Elizabeth Warren (D-MA). At both hearings, he adhered to his strategic priority of taking a more consistent, moderate and humble approach to consumer finance regulation and enforcement. Here are some of the highlights from his testimony:

Clearer and More Quantifiable Regulations

The CFPB is committed to making sure that its regulations “work not only for those who use consumer financial products and services but also for those who provide them…This means clear rules that, where appropriate, can be tailored to the business models of the companies that are subject to these rules.” The Bureau also will use a more robust quantitative analysis of the potential costs and benefits of regulations to both consumers and industry. It is willing to revisit existing rules to find ways to ease undue burdens and protect consumer choice.

No More Regulation by Enforcement

The CFPB practice of “regulation by enforcement” has ceased. It will continue to enforce the laws under its jurisdiction, but “financial service providers should be allowed to know what the law is before they are accused of breaking it.”

An Enforcement Status Report

The CFPB has initiated no new enforcement actions during Mulvaney’s tenure, although it is “actively litigating” 25 pending cases and continues to manage over 100 investigations.  Mulvaney puts enforcement actions into three “buckets” – investigate, sue or settle, and litigate. He has not stopped enforcement, but so far nothing has moved out the “sue or settle” bucket into the “litigation” bucket.

A New Approach Towards HMDA

The CFPB will open a rulemaking to reconsider aspects of the 2015 Home Mortgage Disclosure Act (HMDA) rule, such as reporting thresholds and transactional coverage.  Along with its banking regulatory agency partners, it has announced that supervisory examinations of 2018 HMDA data will be diagnostic to help companies identify any weaknesses and that the CFPB will credit good-faith efforts to comply.

A More Efficient Fair Lending Supervision and Enforcement Process

The Bureau will continue to enforce fair lending laws but is restructuring the fair lending offices to make enforcement and supervision “more efficient, effective, and accountable.”  The current fair lending supervision and enforcement functions will be housed in a soon-to-be-renamed Division of Supervision, Enforcement, and Fair Lending.  Accordingly, the Bureau will have one office, not two, that handles enforcement matters.  It will have one office, not two, that will handle supervision policy, and one office, not two, that handle supervision examinations.   This will make enforcement and supervision more efficient, effective, and accountable.

A Critique on CFPB Salaries and Budget Process

The salaries of 370 CFPB employees exceed the $174,000 annual salary of Members of Congress.  The Bureau spends $40 million annually on “advertising.”  The Federal Reserve pays the CFPB’s budget, and the CFPB sends a letter requesting funds for specific budgetary items. Congress should pass legislation requiring the CFPB to annually present lawmakers with a detailed list of proposed spending items.

More Congressional Guidance Needed on UDAAP

Dodd-Frank gave the CFPB broad authority to target unfair, deceptive or abusive acts or practices (UDAAP). While there is case history defining what “unfair” and deceptive” means, there is no definition of “abusive” in the statute or case history.  “Help me with a definition of “abusive,” Mulvaney asked Members of Congress.

One Further Note

The same day Mulvaney testified before the Senate, the D.C. Circuit Court of Appeals held oral argument on the appeal brought by CFPB Deputy Director Leandra English, former CFPB Director Richard Cordray’s chosen successor, on a district court’s denial of her application for a preliminary injunction to block Mulvaney’s appointment. If Ms. English’ request is granted, she could be installed as Acting CFPB Director until Congress confirms President Trump’s nominee for permanent Director (who has not yet been named).

It’s possible that Mulvaney’s vision for a new CFPB could be set aside for an indefinite period in the future.  Nevertheless, his Congressional testimony makes clear how this Republican Administration views its role and functions in the financial marketplace.

Sue JohnsonAuthor Bio: Sue Johnson is a strategic alliance consultant and is the former executive director of RESPRO (Real Estate Services Providers Council Inc.)