What’s Next for the House and the CFPB

Inside Subprime: Nov 20, 2018

By Lindsay Frankel

Newly elected House Democrats are committed to restoring the authority of the Consumer Financial Protection Bureau since the agency has moved from curtailing the payday loan industry toward reducing oversight under Trump-appointed acting director Mick Mulvaney.

“You can’t protect consumers without looking at and investigating the CFPB under Mick Mulvaney,” said Karl Frisch, executive director of Allied Progress. He added that uncovering the motivation behind this past year’s decisions should be a priority.

Investigating the agency’s handling of fair lending practices and the regulation of student loan servicers are top priorities for Democrats. Since Mulvaney moved the agency’s fair lending office to the supervision and enforcement unit, there haven’t been any new fair lending cases introduced. At the same time, the CFPB announced in its rulemaking agenda that it would re-examine its obligation to police credit discrimination. The bureau is also expected to reduce the requirements under a mortgage disclosure law intended to track discrimination. The CFPB’s setbacks in monitoring discrimination gained media attention when it was revealed that a Mulvaney-appointed fair lending official once wrote racially offensive articles under a pen name.

A departed CFPB official also charged that political appointees had thwarted the bureau’s efforts to enforce protections for student loan borrowers, which included the suppression of a report on banks charging questionable fees to students.

Democrats and consumer advocates have also questioned Mulvaney’s involvement with payday loan industry donors and how that may have impacted the agency’s plan to revisit the Obama-era payday lending rule. The January release of the CFPB’s revisions to the plan will give Democrats a chance to scrutinize the bureau’s motivations.

Politicians from both parties were dissatisfied with Mulvaney’s decision to cease routine examinations for compliance with the Military Lending Act, and there is bipartisan consensus that the CFPB’s rulemaking process should achieve greater transparency. But Democrats will have to battle for other changes that would strengthen the CFPB’s oversight.

Maxine Waters, the California Democrat set to chair the Financial Services Committee, plans to prioritize protecting the CFPB. Last month, she introduced legislation that would reduce the number of political appointees to the agency and renovate the structure of the fair lending and student loan offices, which Mulvaney had dismantled into larger divisions. The new bill would also require public access to the complaint database and bring back the panel of Consumer Advisory Board members that Mulvaney previously discharged.

It may be impossible for Democrats to reverse Mulvaney’s actions or impact current policies – there’s no legal path to reopening agency settlements deemed unsatisfactory, and new legislation won’t pass through a divided Congress – but House Democrats could be effective at halting new legislation that would further limit the agency’s power. For example, Republicans have proposed changes to the way the agency is led and funded, moves which advocates say would diminish the CFPB’s authority and leave the bureau vulnerable to political pressure.

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