U.S. consumer bureau under fire in Congress over reduced protection activity

NEW YORK(Thomson Reuters Regulatory Intelligence) - The Consumer Financial Protection Bureau’s track record of enforcement and consumer protection came under congressional scrutiny during an appearance last week by director Kathleen Kraninger before the Senate Banking Committee.

Under the leadership of Kraninger, and her predecessor Mick Mulvaney, the CFPB has significantly scaled back its enforcement actions.

U.S. Senator Elizabeth Warren, a candidate for the 2010 Democratic presidential nomination on a platform of financial system reform, told Kraninger at the hearing that she had failed in her role. “You are supposed to be the cop on the beat, but you are only watching out for the crooks who are cheating American consumers,” she said. “If you had any decency, you’d either do your job or resign.”

Kraninger, testifying on the bureau’s semi-annual reports to Congress from 2018, said she aimed “to create a fresh outlook at the agency under my leadership.”

“Looking ahead, I will be setting priorities for the Bureau, including setting the tone for how we will operate as an agency. I expect to emphasize stability, consistency, and transparency as hallmarks as we mature the agency and institutionalize the many partnerships that are key to our success,” she said.

In the area of student loans and fair lending, the bureau has filed no lawsuits for violations in the last year and a half. In contrast, under founding director Richard Cordray, the CFPB filed 15 cases and recovered $712 million for students that had been wronged, and 11 cases for lending discrimination, recovering $620 million for consumers.

On fair lending enforcement cases, "the Bureau did not refer any matters to the DOJ with regard to discrimination," CFPB's report for the fall of 2018 said{here}.

Cases involving credit reporting or debt collecting – constituting roughly two thirds of complaints made through a CFPB hotline, have similarly declined. Unlike the 20 debt collection cases and 24 credit reporting cases under Cordray, the Bureau has filed only three cases alleging violations since then.

A recent report by the nonprofit Consumer Federation of America (CFA), also spotlighted a steep decline in enforcement{here} under the administration of President Donald Trump, who appointed Mulvaney as acting director when Cordray stepped down in November 2017.

“Enforcement activity at the CFPB has declined to levels that are either nonexistent or significantly below that of the prior administration,” the report stated. It said the bureau’s enforcement actions plummeted from 55 in 2015 to 11 in 2018.

In congressional testimony last week, former CFPB student loan ombudsman Seth Frotman said the bureau has been rendered ineffectual by ideological considerations. “The last 15 months at the bureau have been plagued with inaction and incompetence,” he told the House of Representatives Financial Services Committee.

The growing student debt has become a “trillion-dollar black hole in our financial market,” he said, leaving people “drowning under the weight of this unprecedented burden.”

In a letter accompanying his resignation last August, Frotman had said, the agency had “abandoned its duty to fairly and robustly enforce the law.”

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(Bora Yagiz, FRM is a New York-based Regulatory Intelligence Expert for Thomson Reuters Regulatory Intelligence, specializing in risk. )