The future direction of the Consumer Financial Protection Bureau (CFPB/BCFP) is in question after Kathleen Kraninger was confirmed as the new director of the powerful independent agency in a straight party-line vote on Thursday by the United States Senate, 50 to 49.
Every Democrat senator and the two independent senators who caucus with the Democrats voted against Kathleen Kraninger’s confirmation. All fifty Republican senators present voted in favor of her confirmation.
Sen. Thom Tillis (R-NC) was not present for the vote but indicated his strong support for Kraninger’s confirmation in an August op-ed at USA Today.
Kraninger becomes the second director of the agency many conservatives have argued is unconstitutional and will serve a five-year term. The first director, Richard Cordray, a far-left Democrat and protege of Sen. Elizabeth Warren (D-MA) was confirmed in 2013 and resigned in November 2017 to run for governor of Ohio. He was defeated last month by Republican Mike DeWine. Since November 2017, Kraninger’s boss at the Office of Management and Budget, Mick Mulvaney, has served as acting director of the CFPB.
Kraninger’s lack of experience in the consumer finance industry, combined with the agency’s lack of accountability to Congress and the director’s almost unfettered powers raises questions about the direction she will take the agency now that she is in charge of it.
Rep. Maxine Waters (D-CA) will likely be named the chairman of the House Financial Services Committee, the House committee to which the CFPB director publicly reports, when the 116th Session of Congress convenes in January. The committee is currently chaired by Rep. Jeb Hensarling (R-TX).
Since the Dodd-Frank Act established that the agency’s funding comes on a fairly automatic basis through the Federal Reserve Board, Congress has little purse string control over it. Nonetheless, public testimony before the House Financial Services Committee by the director of the CFPB is required and can be used by the committee chairman to frame the public discussion of the agency’s actions.
As the Credit Union Journal reported, Waters “is expected to waste no time aggressively scrutinizing the agency … Observers expect her to use the committee’s subpoena powers to investigate how decisions were made by Mulvaney, including an 80% drop in enforcement actions in 2018, to just nine, from 47 a year earlier.”
Lacking a strong background in consumer finance, the question that will be answered over the next several months is whether Kraninger will follow Mulvaney’s policies of rolling back the regulatory overreaches of former director Richard Cordray, or if she will soften that approach in response to the expected public onslaught from Rep. Waters and resistance from the embedded bureaucracy within the agency.
Republicans, conservatives, and financial industry trade groups largely praised Kraninger’s appointment, while Democrats and liberal groups panned it.
During his one-year tenure as acting director of the CFPB, Mulvaney has reversed many of the more egregious regulations imposed under Cordray’s regime and has also changed the official name of the agency to the Bureau of Consumer Financial Protection (BCFP) because that is how the enabling legislation, the Dodd-Frank Act of 2010, refers to the agency.
“The Competitive Enterprise Institute congratulates Kathleen Kraninger on her confirmation as new director of the Bureau of Consumer Financial Protection and commends Mick Mulvaney’s service as Acting Director of the BCFP, formerly known as the CFPB,” Jon Berlau, Senior Fellow at the Competitive Enterprise Institute, said in a statement released late Thursday.
“In the year that Mulvaney headed the BCFP, he made it responsive to consumers rather than to the bureaucrats and busybodies who thought they knew best and wanted to dictate consumers’ financial choices. Under his tenure, the BCFP both punished wrongdoers and ensured there was due process for regulated companies. This was in sharp contrast to Mulvaney’s predecessor, Richard Cordray, under whose tenure the bureau arbitrarily and retroactively applied regulatory punishments against certain financial firms without due process,” Berlau continued, adding:
We believe Kraninger will continue the Bureau’s new direction of being tough but fair and promoting consumer choice. Her statements during the confirmation hearing indicated she values a thorough and fact-driven rulemaking process and wants to help bring down the cost of consumer credit by expanding choice and competition.
We also hope Congress will take Kraninger up on her offer to make the BCFP more accountable by making its budget subject to congressional appropriations and its director subject to presidential removal. Government entities must be answerable to the American people, no matter what political party controls the executive and legislative branches of government.
“We are pleased by the Senate’s decision to confirm Kathy Kraninger as the Director of the BCFP,” Financial Services Center of America (FiSCA) Executive Director Ed D’Alessio said.
According to its website, “FiSCA is a national trade association representing the Financial Service Center (FSC) industry. FiSCA members offer a wide array of necessary financial products and services to tens of millions of Americans.”
“Director Kraninger is an outstanding choice to lead the BCFP and to reverse many of the harmful regulations and policies the bureau implemented under former director Richard Cordray,” D’Alessio continued, adding:
We congratulate Director Kraninger on her confirmation and urge her to take immediate action against lingering Cordray-era regulations, such as the Small-Dollar Loan Rule. This particular regulation has had an immediate and irreparable impact on businesses and consumers across the country and we urge that it be addressed quickly. We are optimistic that Incoming Director Kraninger will follow through on the Bureau’s recent announcement that it will issue proposed changes, including an extension of the compliance date, to the Small-Dollar Loan Rule by January of 2019. By completing the work commenced by Acting Director Mulvaney in this area, the Bureau can once again ensure that consumers have access to much-needed credit products offered through regulated businesses.
Now is when the real work begins, and we are eager to begin the process with Director Kraninger as we develop financial products and services that closely meet the needs of consumers, and as we continue providing our customers the best possible service for years to come.
“Kathy Kraninger has no consumer protection or financial regulation experience. We expect her to simply follow Mick Mulvaney’s playbook. While the CFPB’s current leadership has abandoned its mission, we’re grateful that several states are taking action to make sure companies don’t take advantage of consumers,” Ethan Lutz, a consumer fellow at U.S. PIRG, a far left consumer advocacy group, said in a statement released by the organization.
Sen. Warren, the “intellectual godmother” of the agency and political ally of its first director, Richard Cordray, blasted Kraninger’s confirmation.
“Kathy Kraninger has no interest in fighting for American families & zero experience standing up for consumers,” she tweeted minutes after Thursday’s confirmation vote:
Kraninger may be on the side of cheating companies – but I won’t stop fighting for working families. pic.twitter.com/cAgLIFxJJp
— Elizabeth Warren (@SenWarren) December 6, 2018
In September, “The State National Bank of Big Spring, Texas, the Competitive Enterprise Institute (CEI), and the 60 Plus Association … petitioned the United States Supreme Court to hear a lawsuit challenging the constitutionality of the Consumer Financial Protection Bureau,” as the CEI reported on its website:
The lawsuit argues the Dodd–Frank Wall Street Reform and Consumer Protection Act hands the CFPB an unprecedented combination of expansive, unchecked, and unaccountable executive authority that uniquely threatens the liberty of American businesses and consumers.
Specifically, the petition points to the fact that the Bureau is led by a single director that the president cannot remove from office for policy reasons, that Congress has no control over the Bureau’s funding, and that the Bureau lacks even the internal checks and balances of a multi-member commission. The petition warns that if the CFPB stands as-is, it will become a blueprint for creating future regulatory agencies.
The Supreme Court has not yet said if it will take the case, State National Bank of Big Spring v. Mnuchin. You can read the petition here.