Trump appointee promises 'dramatically different' CFPB

Mick Mulvaney has broad authority to slow watchdog agency's crackdowns, refunds

Fred O. Williams
Senior Reporter
Expert on consumer credit laws and regulations.

New head of CFPB promises dramatic changes to the agency

The Trump administration’s new head of the U.S. Consumer Financial Protection Bureau has broad powers to halt the agency’s crackdowns on corporations and stop the payment of refunds to harmed consumers, legal experts say.

Mick Mulvaney, who started as acting director of the CFPB on Monday, told reporters that he put payments from the agency’s approximately $50 million civil penalty fund on hold for at least 30 days for review. The fund compensates consumers who were harmed by companies but cannot collect a refund.

Mulvaney also said the consumer protection bureau’s enforcement actions – about 100 ongoing crackdowns – are under review.

The deregulation-minded former South Carolina congressman, who co-sponsored legislation to eliminate the CFPB in 2015, signaled big changes coming in the way the bureau operates.


Mick Mulvaney

A 'dramatically different' operation at CFPB

In remarks to reporters, Mulvaney said he will meet the bureau’s legal requirements, not “set the place on fire.”

“That being said, the way we go about it, the way we interpret it, the way we enforce it, will be dramatically different than it was under the last administration,” he said.

Mulvaney is currently head of the White House Office of Management and Budget, a leader in administration deregulation efforts, as well as acting director of the CFPB.

The director of the consumer protection bureau has wide leeway when it comes to pursuing crackdowns and getting payback for consumers.

“You cannot settle or file a lawsuit unless you’ve gone through the director,” said Anthony Alexis, former head of the consumer bureau’s enforcement office.

Alexis, who left the agency earlier this month to become a partner at the Goodwin Procter law firm in Washington, said that in his experience at the bureau, investigations of companies can begin without the director’s approval.

"The way we go about it, the way we interpret it, the way we enforce it, will be dramatically different than it was under the last administration."

But once an investigation has found reason to bring an enforcement action, he said, the director’s sign-off was required – as part of an executive approval process – before the agency would either make a settlement with a company or take it to court.

The review of existing cases Mulvaney announced is a step that any new administration would undertake, another former CFPB lawyer said.

“Any new director is going to review the actions of the previous administration’s director,” said Allyson Baker, an enforcement attorney at the CFPB from 2011 to 2013 now with the Venable law firm in Washington. “I don’t think you’re going to see a radical change in enforcement in the near term,” she added.

While the new acting director announced a halt of payments from its civil penalty fund, halting payments to consumers already in progress under a settlement or court order would be difficult, former CFPB enforcement attorney Jenny Lee said. Lee is now a trial partner at Dorsey & Whitney in Washington.

"Any new director is going to review the actions of the previous administration’s director. I don’t think you’re going to see a radical change in enforcement in the near term."

A court triumph for Trump

Mulvaney will be in charge of the consumer bureau as acting director for some time, after passing a crucial test Tuesday.

U.S. District Judge Timothy J. Kelly rejected a request from the agency’s deputy director, Leandra English, to issue an injunction blocking Mulvaney from taking the position, under succession provisions of the Dodd-Frank Act that created the bureau. The previous director, Obama appointee Richard Cordray, left the job Friday.

While the case continues in U.S. District Court in Washington, the rejection of the injunction means Mulvaney will exercise the director’s authority over rule-making, enforcement actions and other agency functions. The White House is reportedly considering candidates for a permanent director, who will face confirmation by the Senate.

The bureau, created in 2011 by the Dodd-Frank Act, has been a significant source of redress for consumers who were taken in by practices of financial companies, including credit card issuers.

Possible slowdown in fraud crackdowns, consumer refunds

The consumer bureau has crackdowns in progress on the nation’s largest debt settlement company, for example, as well as high-cost tribal lenders and an online loan marketing and servicing company that allegedly collected debts not legally owed.

In a series of crackdowns on faulty card “add-on” products, a dozen card issuers and affiliates were hit with penalties that refunded $2.8 billion to card users.

Those payments were part of a total of $29 billion in refunds, including debts that were erased, that the agency has put in consumer’s pockets. Consumer advocates now predict that the refunds will slow to a trickle.

“Expect Mulvaney to throttle ongoing investigations and enforcement actions,” Ed Mierzwinski, consumer program director at U.S. Public Interest Research Group, said in an email interview. “There’s a new sheriff in town and he is not expected to reduce corporate crime.”

"Expect Mulvaney to throttle ongoing investigations and enforcement actions. There’s a new sheriff in town and he is not expected to reduce corporate crime."

Advice to consumers: Be more vigilant now

If the bureau eases its enforcement efforts as expected, consumers should be more vigilant, as lenders and other financial services may take advantage of the new environment, consumer advocates say.

However, legal experts said the agency could hardly cease bringing enforcements against companies, particularly ones that had caused widespread consumer harm. 

The CFPB referred questions to an OMB press spokesman, who did not respond to requests for comment on Wednesday.

At stake, CFPB complaint database's future

Also in question is the future of the CFPB’s public complaint database, with information on nearly 1 million consumer problems with credit cards, debt collectors and other companies.

In Congress, Mulvaney sponsored a bill requiring the CFPB to verify people’s complaints before publishing them. The bill’s requirement that all facts alleged in each complaint be verified would have made it more difficult for complaints to be published.

While the existence of the database is mandated under Dodd-Frank, the agency’s director has broad authority to implement the one-paragraph provision of the law.

See related: Consumer protection chief resigns, Trump to pick successor, Rewards cards draw a surge of complaints to CFPB

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Updated: 12-13-2018