CFPB 101: What Kathy Kraninger Needs To Know About Enforcement

The CFPB Has Broad Authority To Enforce Federal Consumer Financial Laws.

The Dodd-Frank Act Gave The CFPB Broad Authority To Enforce Federal Consumer Financial Laws.

The CFPB Has Broad Authority To Investigate And Enforce “Federal Consumer Financial Laws” And Has “Primary Enforcement Authority” Over Banks “With Assets Totaling Over $10 Billion.” The Dodd-Frank Act gave the CFPB broad authority to investigate and enforce “federal consumer financial laws,” which includes those that did not originate at the bureau or under Dodd-Frank. It has “primary enforcement authority” over banks “with assets totaling over $10 billion.” [“Dodd-Frank: Title X – Bureau of Consumer Financial Protection,” Cornell Law School, accessed 12/06/18]

The CFPB Initiates The Enforcement Process By Issuing Civil Investigative Demands (CIDs).

The CFPB Initiates The Enforcement Process By Issuing A Civil Investigative Demand (CID). “When the Office of Enforcement needs to gather information, it may issue a Civil Investigative Demand (CID) to people and institutions that may have materials relevant to an investigation. The law that created the CFPB gives us the authority to gather information this way, and several other federal agencies have similar processes.” [“Enforcing consumer protections by gathering information for investigations,” Consumer Financial Protection Bureau, 09/21/12]

Enforcement Actions Have Returned Billions To Harmed Consumers.

Through Enforcement Actions, The CFPB Has Returned Billions Of Dollars To Harmed Consumers.

The CFPB Has Used Enforcement Actions To Return Billions Of Dollars To Harmed Consumers. “Before Mulvaney, the bureau used enforcement actions to extract billions of dollars in relief for consumers from financial companies and to stop companies from doing harm. Bank of America was ordered to return $727 million to consumers for deceptive credit card practices in 2015 — the largest award in the bureau’s history — but the CFPB has issued dozens of smaller actions to get relief for student borrowers, victims of debt collection companies and bank customers. In the roughly seven years it has been in existence, the bureau has returned $3.97 billion in cash back to American consumers through enforcement actions and an additional $7.93 billion in other types of relief, such as lower loan balances or debt relief, based on the CFPB’s records. The bureau estimates roughly one of every 10 Americans has received some sort of reimbursement or relief due to the bureau’s enforcement work since it was created.” [“Consumer Financial Protection Bureau enforcement actions halt under Mulvaney,” Associated Press, 04/10/18]

CFPB Enforcement Actions Are Under Threat

Mick Mulvaney’s CFPB Has Opened The Enforcement Process To Industry Review.

Under Mulvaney’s Leadership, The CFPB Issued A Request For Information Regarding The Bureau’s Enforcement Process.

In February 2018, the CFPB Issued A Request For Information (RFI) about On Their Enforcement Processes. On February 7, 2018, the CFPB “issued a Request for Information (RFI) about the Bureau’s enforcement processes. […] This is the third in a series of RFIs announced as part of Acting Director Mick Mulvaney’s call for evidence to ensure the Bureau is fulfilling its proper and appropriate functions to best protect consumers.” [“CFPB Issues Request For Information On Enforcement Processes,” Consumer Financial Protection Bureau, 02/07/18]

  • The RFI Sought Public Comment on The Efficiency And Effectiveness Of The CFPB’s Enforcement Processes, Potential Improvements That Can Be Made While Also Maintaining A Fair Process For All “Parties Subject To Enforcement Authority”. The RFI sought “public comment on how best to achieve meaningful burden reduction or other improvement to the processes used by the Bureau to enforce Federal consumer financial law (enforcement processes) while continuing to meet the Bureau’s statutory objectives and ensuring a fair and transparent process for parties subject to enforcement authority.” [Request for Information Regarding Bureau Enforcement Processes, Consumer Financial Protection Bureau, 02/07/18]

The CFPB Dramatically Softened Enforcement Under Mick Mulvaney’s Leadership

The CFPB Softened Enforcement Actions Under Mulvaney’s Leadership. 

During His Tenure Atop The CFPB, Mulvaney “Took Steps To Soften The Blow Of CFPB Enforcement.” “In charge of the agency for a little over a year, Mulvaney took steps to soften the blow of CFPB enforcement; ease rules for payday and mortgage lenders; reduce the impact of fair-lending policies; put in place a dozen political appointees to run the agency’s daily operations; and change the name of the agency to the Bureau of Consumer Financial Protection, or BCFP.” [Neil Haggerty, “‘I am very excited to be here’: Kraninger signals new tone atop CFPB,” American Banker, 12/17/18]

Mulvaney Dropped Enforcement Actions Against Predatory Payday Lenders…

In January 2018, Mulvaney Dropped A Lawsuit Against Four Payday Lenders Associated With An American Indian Tribe. “The Consumer Financial Protection Bureau is dropping a lawsuit against a group of payday lenders associated with an American Indian tribe in a sign the regulator is changing direction under Mick Mulvaney, the acting director appointed by the Trump administration.” [Zeke Faux, “CFPB Signals Shift by Dropping Payday Lender Lawsuit,” Bloomberg, 01/18/18]

  • The Companies Had Engaged In “Rent-A-Tribe” Lending, Which Allows Them To “Charge Interest Rates Higher Than What States Allow.” “The case was filed in Kansas because the CFPB alleged that the companies largely operated out of a call center in Overland Park, despite being formally organized on an American Indian reservation in California… The business model used by the four companies mirrors what’s referred to as the “rent-a-tribe” structure, where a payday lender nominally establishes its business on American Indian reservations, where state regulations generally do not apply. Some payday lenders favor the model because they can charge interest rates higher than what states allow.” [Steve Vockrodt, “CFPB drops Kansas payday lending case, stoking fears Trump is backing off the industry,” Kansas City Star, 01/19/18]

…Trimmed Their Fines, Sometimes By Up To A Million Dollars…

Mulvaney’s CFPB Settled With Triton Management Group Regarding Their Deceptive Loan Practices. “The Bureau of Consumer Financial Protection… announced a settlement with Triton Management Group, Inc., a small-dollar lender that operates in Alabama, Mississippi, and South Carolina under several names including ‘Always Money’ and ‘Quik Pawn Shop.’” [Press Release, Consumer Financial Protection Bureau, 07/19/18]

  • The Fine Mulvaney’s CFPB Agreed To Was Only One Third Of What The Previous CFPB Director Had Sought. “The U.S. consumer finance watchdog ordered [the] Alabama-based payday lender… to return $500,000 to borrowers who were overcharged, a fine that people familiar with the matter said was only a third of what the prior Obama-era head of the agency had sought.” [Patrick Rucker, “S. consumer watchdog slashes fine in payday lender settlement,” Reuters, 07/19/18]
  • The Mississippi Payday Lender Was Found To Be “Routinely” Overcharging Borrowers And Hiding The True Cost Of Their Loans. “Triton Management, which operates about 100 storefront lending offices across the South, routinely overcharged borrowers in Mississippi, the CFPB said. Customers who went in to borrow a few hundred dollars for about a month could end up paying more than twice that sum if they extended the life of the loan. Triton did not disclose the true costs to borrowers, the CFPB concluded.”

Mulvaney’s CFPB Settled With The Hydra Group Over Their Unlawful Payday Loan Practices. “…a federal district court in the Western District of Missouri entered an Order effectuating a settlement between the Bureau of Consumer Financial Protection (Bureau) and Richard Moseley, Sr., Richard Moseley, Jr., and 20 interrelated corporate entities controlled by Moseley, Sr. and Moseley, Jr., in the Bureau’s lawsuit regarding the unlawful origination and servicing of short-term, small-dollar online loans to consumers nationwide.” [Press Release, Consumer Financial Protection Bureau, 08/10/18]

  • In Addition To Forfeiting Assets, The Settlement Called For Just A $1 Civil Fine Against The Men Involved In The Scheme. “The consent order entered into… calls for the Moseleys to forfeit approximately $14 million in frozen assets. A $69 million order to pay defrauded borrowers was suspended. According to the order, the suspended judgment and $1 civil fine were set because of the “defendants’ limited ability to pay.” [Brian Kaberline, “KC-based payday lenders will pay civil fine of just $1,” Kansas City Business Journal, 08/13/18]
  • The Group Was Accused of making loans to consumers “that the borrowers had not authorized and charged biweekly ‘finance charges’ indefinitely.” “Federal officials say the Moseleys operated a group of companies, referred to as the Hydra Lenders, that made $227.7 million in loans, generating $69.6 million in gross profits, since January 2008, according to a consent order. A bureau complaint alleges that the Hydra Group made loans to consumers that the borrowers had not authorized and charged biweekly “finance charges” indefinitely.” [Brian Kaberline, “KC-based payday lenders will pay civil fine of just $1,” Kansas City Business Journal, 08/13/18]

…And Even Dropped The Investigation Into A Payday Lender That Gave Him Thousands In Campaign Cash.

Also in January 2018, Mulvaney’s CFPB Dropped An Investigation Into World Acceptance Corporation, A Payday Lender That Has Donated Thousands To Him. “World Acceptance Corporation, one of the largest small-loan consumer finance companies in North America, today announced the company received a letter from the Consumer Financial Protection Bureau indicating the investigation into the company’s marketing and lending practices has been completed. More importantly, the CFPB noted it does not intend to recommend enforcement action. As a result, the company is relieved of the document-retention obligations required by the bureau’s investigation.” [Press Release, World Acceptance Corporation, 01/22/18]

  • “World, which does business as World Finance, was the subject of an investigation by ProPublica and Marketplace last May. Our story showed how the company’s loans are deceptively expensive and often trap borrowers in a cycle of debt. World’s business hinges on convincing low-income borrowers to renew their loans over and over again, a practice that can radically increase the amount of interest they pay.  The company also packages nearly useless insurance products with its loans in many states, allowing it to skirt state interest rate caps, our investigation found. World boasts more than 800,000 customers.” [Paul Kiel, “High-Cost Lender World Finance Target of Federal Probe,” ProPublica, 03/13/14]

Kathy Kraninger Said She Supported Enforcement Actions Against Wells Fargo And Equifax…

Kraninger Said She Supported The CFPB’s Enforcement Actions Against Wells Fargo And Equifax.

Kraninger Said She Supported The CFPB’s Enforcement Actions Against Wells Fargo And Equifax. When Kraninger was asked, “But can you come up (ph) with an example [of a CFPB enforcement action Kraninger agrees with] — I’m sorry to interrupt — can you — can you come up — OK (ph).” She responded: “Sorry, Senator, specifically — specifically two areas that I — the — the investigations that were launched under Director Cordray’s leadership and that were continued under the current administration. I can note Equifax, certainly. A lot of members — we discussed extensively concerns about credit reporting agencies and their practices. The Equifax fallout is going to be something that’s going to be with us for a long time as a nation and — and an issue that I know many are grappling with, and if confirmed, I would be grappling with the — the steps that need to be taken there, so that was certainly something launched under his leadership. And I would say, too, the Wells Fargo enforcement actions as well. That is an area that — that again, completely inappropriate activities” [“Consumer Financial Protection Bureau and Export-Import Bank Confirmations,” C-SPAN, 07/19/18]

…But Believes The CFPB Has Limited Authority To Engage In “Small Business Oversight.”

Kraninger Believes The CFPB Has Limited Authority To Engage In “Small Business Oversight.”

Kraninger Believes The CFPB Has Limited Authority To Engage In “Small Business Oversight.” When Kraninger was asked, “But can you confirm, do you agree with my interpretation that 1071 is the only respect in which Dodd-Frank mandates the bureau to deal with small business?” She responded, “Senator, it is very clearly one, and I have not read all of the enumerated consumer laws; as you know, there are many. At the same time, I absolutely believe that there is a limited intent for the bureau to be engaged in small business oversight or — or engagement there. So that’s something that should be limited.” [“Consumer Financial Protection Bureau and Export-Import Bank Confirmations,” C-SPAN, 07/19/18]

Rhetoric Vs. Reality: Correcting The Record About Enforcement Actions

The CFPB’s Purposefully Broad Regulatory Authority Has Allowed It To Successfully Return Billions To Harmed Consumers.

RHETORIC: The CFPB’s Enforcement Authority Is Overly Broad And Burdensome For Industry.

The Chamber Of Commerce Criticized “The CFPB’s Approach Of ‘Regulation By Enforcement,’“ Saying That The CFPB Lacked “‘Meaningful Guidance’“ For Auto Lenders. In February 2014, the U.S. Chamber of Commerce’s Center for Capital Markets Competitiveness sent a letter to former CFPB Director Cordray criticizing “the CFPB’s approach of ‘regulation by enforcement settlement combined with issuance of brief guidance statements’ in lieu of engaging in rulemaking or otherwise soliciting public input.” The Chamber also said that “the CFPB should provide ‘meaningful guidance, whether through rulemaking or less formal means, that allows indirect auto lenders to build effective compliance regimes.’“ [Alan S. Kaplinsky, “Trade group criticizes CFPB reliance on enforcement and informal guidance,” Ballard Spahr LLP, 02/18/14]

The Mortgage Bankers Association Claimed That The CFPB Enforcement Strategy “Causes Uncertainty About What Is And What Is Not Permissible.” “The CFPB’s enforcement-first strategy:… Causes uncertainty about what is and what is not permissible.” [“The CFPB “Regulation through Enforcement” Paradigm,“ Mortgage Bankers Association, accessed 03/26/18]

The Independent Community Bankers Association Claimed That “The CFPB’s Reliance On Enforcement Actions” “Creates Compliance Uncertainty For Community Banks And Threatens To Reduce Access To Credit And Other Financial Products And Services.” “ICBA and community banks are concerned the CFPB’s reliance on enforcement actions, rather than authoritative written guidance, creates compliance uncertainty for community banks and threatens to reduce access to credit and other financial products and services. The CFPB should work with community banks and other responsible industry participants to develop authoritative written guidance regarding problematic practices and regulatory expectations.” [“CONSUMER FINANCIAL PROTECTION BUREAU,“ Independent Community Bankers Association, accessed 03/27/18]

REALITY: Before The CFPB, Consumer Protection Enforcement Was Fractured And Inadequate.

Before The CFPB’s Broad Enforcement Authority Was Granted, The Responsibility “Was Spread Among Numerous Government Agencies, And Consumer Protection Was More Of An Afterthought.” “Prior to the CFPB’s existence, financial industry regulatory and enforcement authority was spread among numerous government agencies, and consumer protection was more of an afterthought. The establishment of the CFPB represented the centralization of authority over the consumer financial products and services industry. It also meant consumers now had a single agency where they could lodge complaints against financial businesses and find educational resources to help them navigate complex financial products and services.”  [“How The Consumer Financial Protection Bureau Affects You,” Better Business Bureau, 06/15/17]

  • Treasury Secretary Timothy Geithner noted that prior to Dodd-Frank the “current regulatory regime [did] not offer adequate protections to consumers and investors…The crisis…revealed the inadequacy of consumer protections across a wide range of financial products — from credit cards to annuities.” [Timothy Geithner and Lawrence Summers, “The Case for Financial Regulatory Reform,Washington Post, 06/15/09]

REALITY: The CFPB a High Success Rate for its Enforcement Actions, Which Have Returned $12 Billion to Consumers.

The CFPB has a high success rate in terms of winning cases, which has allowed it to return $12 billion to consumers” through enforcement.

Between 2011 and 2015, the CFPB completed 122 enforcement actions “without losing a single one.” [Kate Berry, “More companies challenging CFPB enforcement actions,” American Banker, 03/31/17]

For consumers, the process has been successful. As of November 2017, it “has returned $12 billion to consumers” through enforcement. [Patrick Temple-West, “Why the CFPB has become one of Washington’s biggest battlegrounds,” Politico, 11/27/17]

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