Kraninger Questioned Over Proposed Changes to Payday Loan Rule

Inside Subprime: March 19, 2019

By Lindsay Frankel

During her initial appearance before the Senate Banking Committee, Kathy Kraninger, director of the Consumer Financial Protection Bureau, faced interrogation by lawmakers over the bureau’s recent failures to protect consumers. Lawmakers scrutinized the agency’s decisions to rescind portions of the Obama-era payday lending rule and cease routine examinations for violations of the Military Lending Act. Kraninger was also questioned about the agency’s lack of enforcement against student loan lenders since she took control of the CFPB three months ago.

Democrats criticized Kraninger for going soft on bad actors, highlighting a drastic difference in the number of lawsuits brought by the agency under the Trump administration when compared to the record of previous enforcement actions under the Obama administration.

Sen. Elizabeth Warren, D-Mass, pointed out that under Kraninger’s direction, the CFPB hasn’t filed even one lawsuit against a student lender, when compared to 50 cases brought by the agency under former Director Richard Cordray. Under Cordray, the bureau returned $712 million to consumers harmed by bad financial practices.

Warren also noted a reduction in discrimination lawsuits under Kraninger and former acting director Mick Mulvaney, and expressed concerns over the bureau’s lack of attention to debt collection and credit reporting problems.

“You are supposed to be the cop on the beat, but you are only watching out for the crooks who are cheating American consumers,” Warren said. “If you had any decency you’d either do your job or resign.”

And, after Mulvaney ceased examinations for violations of the MLA, Kraninger asked Congress for “clear authority” to supervise financial firms for compliance with the act rather than resume the examinations, even though the CFPB had conducted the exams regularly for years under the Obama administration.

Several senators grilled Kraninger over her lack of action to protect service members, including Jack Reed, D-R.I., a military veteran. “You’ve chosen to read the statute to protect payday lenders,” Reed said. “What is so frustrating to me is if this is the policy of the administration, you decide you shouldn’t supervise these companies. Supervision prevents the need for enforcement.”

Kraninger also received sharp criticism for the CFPB’s proposed changes to the payday lending rule, which has yet to go into effect. Chris Van Hollen, D-Md., asked Kraninger if she was aware just how much the decision to scrap the underwriting requirements of the rule would benefit the payday lending industry. “Are you familiar with the fact that you found the payday loan industry would save $7.3 billion to $7.7 billion?” he asked.

“I understand what you’re getting at,” Kraninger responded. “There are a number of facts here; we’re in active litigation on this issue.”

Kraninger was vague in her responses to Republicans’ questions regarding the direction of the bureau as well. When Sen. Tim Scott, R-S.C., asked whether the agency would provide regulatory relief for credit unions, Kraninger said: “It is certainly an objective of the bureau to understand and reduce regulatory burden. But it’s also important how this impacts consumers.”

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