CFPB 101: What Kathy Kraninger Needs To Know About Fair Lending

The CFPB’s Office Of Fair Lending And Equal Opportunity Is Responsible For Fighting Discriminatory Lending Practices And Ensuring Nondiscriminatory Access To Credit

The Office Of Fair Lending And Equal Opportunity “Works To Ensure Fair Equitable, And Nondiscriminatory Access To Credit.”

The CFPB’s Office Of Fair Lending And Equal Opportunity, A Part Of The Division For Supervision, Enforcement, And Fair Lending, “Works To Ensure Fair Equitable, And Nondiscriminatory Access To Credit.” The division “ensures compliance with federal consumer financial laws by supervising market participants and bringing enforcement actions when appropriate. […] The Office of Fair Lending and Equal Opportunity works to ensure fair, equitable, and nondiscriminatory access to credit for all consumers.” [Supervision, Enforcement, And Fair Lending, Consumer Financial Protection Bureau, accessed 12/4/18]

  • The Office Of Fair Lending And Equal Opportunity Enforces Federal Law, Including The Equal Credit Opportunity Act, And Combats “Unlawful, Discriminatory Practices.”In a statement, the CFPB said it “is responsible for enforcing the Equal Credit Opportunity Act. The Office of Fair Lending and Equal Opportunity at the CFPB helps ensure that all Americans have fair, equitable, and nondiscriminatory access to credit, and we will use every tool at our disposal to protect American consumers. […] in our examination and enforcement work, we will combat unlawful, discriminatory practices—including those that have an illegal disparate impact on protected borrowers. We will look not only at mortgage lending, but also at other types of credit including student loans, loans for cars, and credit cards. […] Access to credit is critical to a successful financial future. At the CFPB, we are committed to fighting unlawful, discriminatory practices and creating a fair marketplace for all consumers.” [Patrice Ficklin, “Fair Notice on Fair Lending,” Consumer Financial Protection Bureau, 09/18/12]
  • The Office Of Fair Lending And Equal Opportunity Has Oversight And Enforcement Authority Over Fair Lending Compliance And Education. The office is tasked with “providing oversight and providing oversight and enforcement of Federal laws intended to ensure the fair, equitable, and nondiscriminatory access to credit for both individuals and communities that are enforced by the Bureau […] coordinating fair lending efforts of the Bureau with other Federal agencies and State regulators, as appropriate, to promote consistent, efficient, and effective enforcement of Federal fair lending laws; […] working with private industry, fair lending, civil rights, consumer and community advocates on the promotion of fair lending compliance and education.” [12 U.S.C. § 5493(c)(2)(A-C)]

The Office Of Fair Lending Has Returned Millions Of Dollars To Consumers Harmed By Discriminatory Practices.

Prior to Mulvaney’s Tenure, The Office of Fair Lending Obtained Millions Of Dollars In Settlements For Minority Consumers Discriminated Against During The Lending Process. “The Office of Fair Lending and Equal Opportunity (OFLEO)… quickly discovered that the housing crisis had not soured finance’s taste for fleecing racial minorities. Its investigators found that GE Capital was excluding 133,400 borrowers from debt relief because of their ethnicity — and won a $201 million settlement for the consumers the firm had exploited. They caught National City Bank charging higher mortgage interest rates to black and Latino borrowers, and Hudson City Savings Bank denying African-American communities access to credit — and hit the former with a $35 million fine, and forced the latter to provide $25 million in loan subsidies to its victims. OFLEO discovered rampant discrimination in auto-loan financing and won some $143.9 million in penalties from the predators.” [Eric Levitz, “The Trump Administration Just Made Life Easier for Racist Lenders,” New York Magazine, 02/01/18]

The Office Of Fair Lending And Equal Opportunity Under Mick Mulvaney Claims To Have Prioritized Mortgage Lending, Redlining and Home Mortgage Disclosure Act Issues.

In Its Fair Lending Report Issued In December 2018, The CFPB Stated It Would Prioritize Redlining, Mortgage Lending, Redlining and Home Mortgage Disclosure Act Issues.In the first Fair Lending Report released under Mick Mulvaney, the Bureau said “Mortgage lending remained a priority for the Bureau’s fair lending supervisory and enforcement activity, focusing on redlining, underwriting, pricing, steering, servicing and HMDA data integrity. The Bureau announced a significant HMDA enforcement action in 2017, reinforcing the importance of the legal requirement that covered mortgage lenders must report accurate data about mortgage transactions. HMDA data is a critical component of the effective enforcement of fair lending laws.” [“Fair Lending Report of the Bureau of Consumer Financial Protection,” Consumer Financial Protection Bureau, 12/18]

  • The Office Of Fair Lending And Equal Opportunity Reports To Congress Annually, As Mandated By Dodd-Frank. The Office of Fair Lending and Equal Opportunity is charged with “providing annual reports to Congress on the efforts of the Bureau to fulfill its fair lending mandate.” [12 U.S.C. § 5493(c)(2)(D)]

But The Political Appointee Mick Mulvaney Put In Charge Of Fighting Unfair, Discriminatory Lending Claimed That Using The N-Word Wasn’t Racist And That Most Hate Crimes Are Hoaxes.

Eric Blankenstein Is The Political Appointee Mick Mulvaney Put In Charge Of The CFPB’s Fair Lending Division. 

Eric Blankenstein Is The Policy Associate Director For The Supervision, Enforcement And Fair Lending Division At The CFPB. Bureau Structure,” Consumer Financial Protection Bureau, accessed 07/20/18]

  • Blankenstein Was Brought In By Mick Mulvaney As A Political Appointee. “Like a baseball manager who brings aboard his own coaching staff, Mulvaney has stocked the agency with a critical mass of political appointees, making good on his December promise to pair political staffers with senior career officials at the agency… a who’s who of political appointees answering to Mulvaney [includes]… Eric Blankenstein, policy director for supervision, enforcement and fair lending.” [Kate Berry, “Meet Mulvaney’s ‘politicos’: Six senior staff remaking the CFPB,” American Banker, 05/07/18]

Eric Blankenstein Wrote A Blog Post Claiming That Using The N-Word Wasn’t “Inherently Racist” And Calling Most Hate Crimes “Hoaxes.” 

In 2004, Eric Blankenstein, Policy Director For The CFPB’s Office Of Fair Lending And Equal Opportunity, Wrote A Blog Post Questioning The Legitimacy Of Hate Crime While Arguing That Those That Use The N-Word Aren’t “Inherently Racist.” “A senior Trump appointee responsible for enforcing laws against financial discrimination once questioned in blog posts written under a pen name if using the n-word was inherently racist and claimed that the great majority of hate crimes were hoaxes.”  [Robert O’Harrow, Shawn Boburg, and Renae Merle, “Trump anti-discrimination official once called most hate crimes hoaxes,” The Washington Post, 09/26/18] 

  • Assistant Director Of Fair Lending & Equal Opportunity Patrice Ficklin Said She Was “Struck By How They Reminded [Her] Of Debates [They] Had With Eric On Supervisory And Enforcement Matters.” “Earlier in the week, Blankenstein asked Ficklin, his subordinate, to write a supportive note about him for The Post’s initial story. In her email Friday, Ficklin said she had not read Blankenstein’s blog when she did so. ‘After the article appeared, I began to read his posts and was struck by how they reminded me of debates we’ve had with Eric on supervisory and enforcement matters,’ she wrote. [Robert O’Harrow, Shawn Boburg, and Renae Merle, “Trump anti-discrimination official faces rebellion at agency over racially tinged blog posts,” The Washington Post, 09/28/18]

Fair Lending Enforcement Is Under Threat At The Trump CFPB

Kathy Kraninger Won’t Commit To Using Policies Vital To Stopping Discriminatory Lending Practices

Kathy Kraninger Claims To Be Committed To Fighting Against Discriminatory Lending Practices But Would Not Commit To The Use Of Disparate Impact Theory To Fight Illegal Discrimination—One Of The CFPB’s Most Powerful Enforcement Tools.

Kathy Kraninger Agreed That Discriminatory Lending Is An Issue Worth Fighting In The US Consumer Market. When Kathy Kraninger was asked, “Do you agree this is a continuing problem that we have to face in this country, fighting discrimination in lending?” She responded, “Yes, Senator, I do. I think it’s incredibly unfortunate. Discrimination should have no place in society, much less the markets, but it — it certainly exists.” [“Consumer Financial Protection Bureau and Export-Import Bank Confirmations,” C-SPAN, 07/19/18] 

  • But Kraninger Would Not Commit To The Use Of Disparate Impact Theory In Conducting The Bureau’s Work If Confirmed As Director. Kathy Kraninger was asked, “In your opinion, can the CFPB enforce [Equal Credit Opportunity Act] claims under theory of disparate impact?”She responded, “It is abhorrent that discrimination exists in society and in the markets. I am committed to enforcing the law with respect to discrimination. With respect to court cases and enforcement actions, as you are well aware, the arguments about disparate impact are very complicated. It is a challenging are, legally speaking, in part because the Supreme Court has ever addressed whether disparate impact is cognizable under the Equal Credit Opportunity Act. I can commit to you, that should I be confirmed in this position I will have a detailed conversation with the relevant staff on this topic, to better understand the positions the Bureau has taken in the past on this issue, and the status of any litigation on the issue. I will then use that information to take appropriate actions to ensure that the Bureau is promoting fair lending within the applicable legal requirements.” [“Questions for Ms. Kathleen Laura Kraninger, Director-Designate, Bureau of Consumer Financial Protection, on behalf of Ranking Member Brown, Senator Jack Reed, Senator Robert Menendez, Senator Elizabeth Warren, Senator Brian Schatz, Senator Chris Van Hollen” US Senate Committee on Banking, Housing, and Urban Affairs, 07/19/18]
  • Disparate Impact Is One Of The CFPB’s “Most Powerful Enforcement Tools” Because “The Vast Majority Of CFPB Fair Lending Cases Involve Bringing Claims Based On The Disparate Impact Theory.” According to Christopher Peterson, “a professor at the University of Utah Law School and a former top CFPB official,” this change would take away on the CFPB’s “most powerful enforcement tools” because “the vast majority of CFPB fair lending cases involve bringing claims based on the disparate impact theory.” [Evan Weinberger, “CFPB to Review Use of Disparate Impact in Fair Lending Cases,” Bloomberg BNA, 05/21/18] 

Kathy Kraninger Refused To State If She Would Reverse Mulvaney’s Widely-Panned Decision To Dissolve The Bureau’s Office Of Fair Lending. 

Kraninger Would Not State If She Would Reverse Mick Mulvaney’s Decision To Reorganize The CFPB’s Office Of Fair Lending.When Kathy Kraninger was asked, “If confirmed, will you reverse Mr. Mulvaney’s reorganization of the Office of Fair Lending and Equal Opportunity and restore its enforcement powers, as required by statute?” She responded, “As I discussed in my testimony, enforcing the fair lending laws is a critical responsibility of the Bureau, regardless of organizational structure. I can commit to approaching the organizational structure with an open mind. It would be inappropriate and premature to make any staffing or organization decisions prior to confirmation and the opportunity to meet with staff.” [“Questions for Ms. Kathleen Laura Kraninger, Director-Designate, Bureau of Consumer Financial Protection, on behalf of Ranking Member Brown, Senator Jack Reed, Senator Robert Menendez, Senator Elizabeth Warren, Senator Brian Schatz, Senator Chris Van Hollen” US Senate Committee on Banking, Housing, and Urban Affairs, 07/19/18]

Mick Mulvaney Has Already Gutted The CFPB’s Fair Lending Office

Mick Mulvaney Stripped The CFPB’s Office Of Fair Lending And Equal Opportunity Of Enforcement Powers To Fight Lending Discrimination.

Mick Mulvaney Stripped The CFPB’s Office Of Fair Lending And Equal Opportunity Of Enforcement Powers, Which Consumer Advocates Argued Will Weaken Or Even Dismantle The Office Responsible For Lending Discrimination Issues. In February 2018, Mick Mulvaney and the Trump administration “stripped enforcement powers” from the CFPB’s Office of Fair Lending and Equal Opportunity. The office was “responsible for pursuing discrimination cases” and had “previously used its powers to force payouts in several prominent cases, including settlements from lenders it alleged had systematically charged minorities higher interest rates than they had for whites.” Consumer advocates argued that “separating the fair-lending office from its enforcement power weakens its power to pursue cases.” [Renae Merle, “Trump administration strips consumer watchdog office of enforcement powers in lending discrimination cases,” The Washington Post, 02/01/18]

  • According to the Brookings Institution, “Converting the Office of Fair Lending to one of internal policy advocacy will in effect dismantle it, creating a significant step backward for those whose goal is eliminating racial discrimination in lending.” [Makada Henry-Nickie, “On fair lending, Mulvaney’s actions at CFPB speak louder than his words,” Brookings Institution, 04/12/18]

Mick Mulvaney Proposed That The CFPB Review Enforcement Of Fair Lending Law Under The Equal Credit Opportunity Act.

In May 2018, Mick Mulvaney Proposed That The CFPB Review Enforcement Of Fair Lending Law Under The Equal Credit Opportunity Act, Including Reviewing Its Use Of Disparate Impact Theory In Fair Lending Cases. Mulvaney released a statement that said the “Consumer Financial Protection Bureau may revamp the way it reviews compliance with the Equal Credit Opportunity Act in a move that could cut back enforcement under the fair lending law.” The potential change was included in a statement issued by “the bureau and its acting director, Mick Mulvaney,” in response to “President Donald Trump’s signing of a measure repealing the bureau’s indirect auto lending guidance.” [Evan Weinberger, “CFPB to Review Use of Disparate Impact in Fair Lending Cases,” Bloomberg BNA, 05/21/18]

  • Disparate Impact Is One Of The CFPB’s “Most Powerful Enforcement Tools” Because “The Vast Majority Of CFPB Fair Lending Cases Involve Bringing Claims Based On The Disparate Impact Theory.” According to Christopher Peterson, “a professor at the University of Utah Law School and a former top CFPB official,” this change would take away on the CFPB’s “most powerful enforcement tools” because “the vast majority of CFPB fair lending cases involve bringing claims based on the disparate impact theory.” [Evan Weinberger, “CFPB to Review Use of Disparate Impact in Fair Lending Cases,” Bloomberg BNA, 05/21/18]

Kathy Kraninger Will Carry On Mick Mulvaney’s Legacy At The CFPB

Kathy Kraninger Supports Mick Mulvaney’s Actions As Acting CFPB Director.

During Her Confirmation Process, Kathy Kraninger Said That Mick Mulvaney Was Doing A Good Job At The CFPB And “Couldn’t Point To Any Actions He’d Taken With Which She Disagreed.”“Kraninger, 43, has been a deputy of Mulvaney at the White House Office of Management and Budget. She told senators at her confirmation hearing this summer that Mulvaney was doing a good job at the CFPB, and in written responses to questions later that she couldn’t point to any actions he’d taken with which she disagreed.” [Jim Puzzanghera, “Senate confirms new consumer financial protection chief: Kathy Kraninger, protege of industry-friendly Mick Mulvaney,” Los Angeles Times, 12/06/18

Rhetoric Vs. Reality: Education Does Not Equal Enforcement

Mick Mulvaney’s Decision To Reorganize The Office Of Fair Lending Will Cripple The Bureau’s Ability To Supervise And Enforce The Lending Market.

RHETORIC: The Functions Of The Office Of Fair Lending Will Be Unaffected By Mick Mulvaney’s Reorganization Of Its Structure.

Acting Director Mick Mulvaney Stated The Office Of Fair Lending And Equal Opportunity Will “Continue To Focus On Advocacy, Coordination, And Education, While Its Current Supervision And Enforcement Functions Will Remain In SEFL.” “‘The Fair Lending Office will continue to focus on advocacy, coordination, and education, while its current supervision and enforcement functions will remain in SEFL,’ Mulvaney wrote in a memo sent to staff on Tuesday, referring to the Office of Supervision, Enforcement and Fair Lending. ‘I do not expect that staff will experience changes in employment status, but it is possible that some may experience changes in jobs and duties.’” [Kate Berry, “CFPB’s Mulvaney strips his fair-lending office of enforcement powers,” American Banker, 02/01/18] 

  • CFPB Chief Communications Officer, John Czwartacki, Stated This Decision Allows The Bureau To “Gain Efficiency And Consistency Without Sacrificing Effectiveness.”“‘The fact is, it never made sense to have two separate and duplicative supervision and enforcement functions within the same agency — one for all cases except fair lending, and the other only for fair-lending cases,’ said John Czwartacki, a senior adviser to Mulvaney. ‘By announcing our intent to combine these efforts under one roof, we gain efficiency and consistency without sacrificing effectiveness. And by elevating the Office of Fair Lending to the Director’s Office, we have enhanced its ability to focus on its other important responsibilities.’” [Kate Berry, “CFPB’s Mulvaney strips his fair-lending office of enforcement powers,” American Banker, 02/01/18] 

REALITY: Resources For Supervision And Enforcement Will Be Spread Thinner, Making It Less Effective. 

The Reorganization Plan Signals A Lessened Focus On Enforcement With The Office Of Supervision And Enforcement Now Being Spread Over A Larger Area.” ‘In some ways, having separate supervision and enforcement staff in the Office of Fair Lending is duplicative, because there was already staff in the Offices of Supervision and Enforcement,’ said Richard Horn of Richard Horn Legal, a former CFPB senior counsel and special adviser. ‘But if the current staff handling supervision and enforcement in the Office of Fair Lending are moved with the office to handle only education, this could signal that there will be less of a focus on fair-lending examinations and enforcement under Mulvaney. Also, resources in SEFL will now be spread over a larger area, and this could signal a slowdown in enforcement activity generally.’” [Kate Berry, “CFPB’s Mulvaney strips his fair-lending office of enforcement powers,” American Banker, 02/01/18]

  • Senator Elizabeth Warren Believes The Decisions Was Made To Put The Office Under Mulvaney’s Control In An Effort To Lessen Its Impact. “‘Mulvaney is putting the Office of Fair Lending under his control so that he can weaken it — leaving neighborhoods and consumers across the country more vulnerable to bias,’ Warren said in an emailed statement. ‘For years, Mick Mulvaney opposed CFPB’s efforts to fight discrimination in the consumer financial marketplace even as the agency returned $400 million from discriminatory financial institutions to American families who had been overcharged or denied credit.’” [Kate Berry, “CFPB’s Mulvaney strips his fair-lending office of enforcement powers,” American Banker, 02/01/18]
  • Lisa Donner, Executive Director Of Americans For Financial Reform, Stated Mulvaney’s Decision “Threaten[s] Effective Enforcement Of Civil Rights Laws, And Increase[s] The Likelihood That People Will Continue To Face Discriminatory Access And Pricing As They Navigate Their Economic Lives.” “‘Fair Lending is a fundamentally important part of the work of the Consumer Financial Protection Bureau, and of a financial system that works for families and communities. The Office of Fair Lending and Equal Opportunity needs the authority, the resources, and the connections to key levers of change to do its job,’ said Lisa Donner, executive director, Americans for Financial Reform. ‘These changes, by an improperly appointed acting director, threaten effective enforcement of civil rights laws, and increase the likelihood that people will continue to face discriminatory access and pricing as they navigate their economic lives.’” [Ben Lane, “Did Mick Mulvaney just drastically change how the CFPB enforces fair lending laws?,” Housing Wire, 02/02/18]

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