The reshaping of the Consumer Financial Protection Bureau at the hands on Acting Director Mick Mulvaney continued unabated this week.
After embattled CFPB Director Richard Cordray vacated his post on Nov. 24, a prelude to launching a gubernatorial campaign in his home state of Ohio, President Trump appointed White House Budget Director Mick Mulvaney as the agency’s interim leader.
Mulvaney recently made his mark on the agency’s budget.
The CFPB, unlike other agencies and in an effort by its Dodd-Frank Act architects to secure its political independence, is exempt from the process of Congressional budget approval. Instead, funding requests filter through the Board of Governors of the Federal Reserve and funded by the Federal Reserve.
“This letter is to inform you that for the second quarter of Fiscal Year 2018, the Bureau is requesting $0,” Mulvaney wrote in his first quarterly budget request. “Simply put, I have been assured that the funds currently in the Bureau Fund are sufficient for the Bureau to carry out its statutory mandates for the next fiscal quarter.”
Last quarter, Cordray’s request was for $217.1 million.
Mulvaney has also initiated a public comment process that may be a prelude to reshaping the entire agency.
The Bureau is issuing a call for evidence to ensure that it is “is fulfilling its proper and appropriate functions to best protect consumers.”
The Bureau will be publishing in the Federal Register a series of Requests for Information seeking comment on enforcement, supervision, rulemaking, market monitoring, and education activities. “These RFIs will provide an opportunity for the public to submit feedback and suggest ways to improve outcomes for both consumers and covered entities,” the announcement says.
The first RFI issued by the Bureau will seek public comment on Civil Investigative Demands, which are issued during an enforcement investigation. Comments received in response to this RFI will help the Bureau evaluate existing CID processes and procedures and determine whether any changes are warranted.
The CFPB may also be turning away from some of its most controversial rulemakings. Among them, the so-called “payday rule.”
“The Bureau intends to engage in a rulemaking process so that it may reconsider the Payday Rule,” Mulvaney wrote.
In related news, on Jan. 18, Bloomberg reported that the CFPB is dropping a lawsuit against payday lenders accused “of deceiving consumers and failing to disclose the true cost of the loans, which carried interest rates as high as 950 percent a year.” The lenders attempted to mask and insulate themselves through an association with a Native American tribe.
Another beneficiary: World Acceptance Corp., one of the largest small-loan consumer finance companies in North America. A donor to Mulvaney when he was a legislator, the company last week announced a letter from the CFPB “indicating the investigation into the company’s marketing and lending practices has been completed.”
“The CFPB noted it does not intend to recommend enforcement action,” a company press release says. As a result, [we are] relieved of the document-retention obligations required by the bureau’s investigation.”
The lastest development is an “all hands” memo from Mulvaney to CFPB employees that was intended to elaborate on his plans for the Bureau.
“When I arrived at CFPB, I told folks that despite what they might have heard, I had no intention of shutting down the Bureau,” he wrote, in the memo obtained by ProPublica. “Indeed, the law doesn’t allow that, and as members of the Executive Branch we are charged with faithfully executing the laws. So, let’s be clear: the law mandates that we enforce consumer protection laws, and we will continue to do exactly that under my watch.”
“I think it is fair to say that the previous governing philosophy here was to aggressively ‘push the envelope’ in pursuit of the ‘mission;’ that we were the ‘good guys’ and the ‘new sheriff in town,’ out to fight the ‘bad guys.’ Simply put: that is what is going to be different,” Mulvaney added. “In fact, that entire governing philosophy of pushing the envelope frightens me a little… We are government employees. We don’t just work for the government, we work for the people. And that means everyone: those who use credit cards, and those who provide those cards; those who take loans, and those who make them; those who buy cars, and those who sell them. All of those people are part of what makes this country great. And all of them deserve to be treated fairly by their government.”
“It is not appropriate for any government entity to ‘push the envelope’ when it comes into conflict with our citizens,” he added. “The damage that we can do to people could linger for years and cost them their jobs, their savings, and their homes. If the CFPB loses a court case because we ‘pushed too hard,’ we simply move on to the next matter. But where do those that we have charged go to get their time, their money, or their good names back? If a company closes its doors under the weight of a multi-year Civil Investigative Demand, you and I will still have jobs at CFPB. But what about the workers who are laid off as a result? Where do they go the next morning?”
Mulvaney added that, in his office, there is a copy of “A Man for All Seasons” about the life of St. Thomas More.
“My favorite passage,” he said, “is an exchange between the famous lawyer and his son-in-law, who encouraged More to arrest a man for simply being ‘bad.’ His response is one of the most concise and articulate defenses of the rule of law in history: ‘This country is planted thick with laws, from coast to coast —Man’s laws, not God’s —and if you cut them down do you really think you could stand upright in the winds that would blow then? Yes, I’d give the Devil the benefit of the law, for my own safety sake.’”
What does all of this mean, in terms of how the CFPB operates?
“Simply put, we will be reviewing everything that we do, from investigations to lawsuits and everything in between,” Mulvaney said. “When it comes to enforcement, we will be focusing on quantifiable and unavoidable harm to the consumer. If we find that it exists, you can count on us to vigorously pursue the appropriate remedies. If it doesn’t, we won’t go looking for excuses to bring lawsuits.”
“On regulation, it seems that the people we regulate should have the right to know what the rules are before being charged with breaking them,” he added. “This means more formal rulemaking on which financial institutions can rely, and less regulation by enforcement… If Congress wants us to do more than is set forth in the Dodd-Frank Act, they can change the law. Until then, we will enforce the law as currently written.”