WASHINGTON (Reuters) - A U.S. financial regulator on Thursday criticized the Consumer Financial Protection Bureau for how it polices credit unions, in a sign of growing tensions between regulators appointed by President Donald Trump and holdovers from the Obama administration.
Republicans have been critical of the CFPB, saying it is too unaccountable to Congress because its budget is not appropriated and it is governed by a single director. The Trump Administration has called for reforms to the CFPB, but has been silent on whether it intends to try to have CFPB Director Richard Cordray removed before his term expires next summer.
In a July 6 letter to Cordray, the National Credit Union Administration’s chairman asked the CFPB to stop conducting compliance exams of large credit unions and complained about “aggressive punitive fines.”
Last year, the CFPB fined Navy Federal Credit Union $28.5 million for allegedly making false threats about debt collection to active duty and retired members of the military. The case was resolved without the credit union admitting or denying wrongdoing.
NCUA Chairman J. Mark McWatters wrote that imposing “aggressive punitive fines on the very consumers the CFPB is tasked with protecting... is tantamount to imposing a ‘the beatings will continue until morale improves’ approach to consumer protection enforcement.
“I believe there is a better way,” he added.
“We have received Chairman McWatters’ letter and we are reviewing it,” CFPB Spokesman David Mayorga told Reuters.
McWatters, a Republican, was first appointed to the NCUA by President Barack Obama in 2014. Trump designated him acting NCUA chairman in January and made him chairman last week.
The NCUA is the primary regulator over most credit unions. But the CFPB was granted examination and primary enforcement powers by the Dodd-Frank law over large credit unions with assets of more than $10 billion.
In his letter, McWatters said the CFPB should exempt those credit unions from its oversight to avoid duplicative regulations.
If “in the unlikely case” Cordray refuses this request, McWatters said he will demand the two regulators conduct joint compliance examinations.
Mortgage lender PHH Corp PHH.N is currently locked in a legal battle with the CFPB over whether Cordray’s appointment violates the U.S. Constitution because he can be removed by the president only for cause, and not at will.
Reporting by Sarah N. Lynch; Editing by Dan Grebler