Congress

Democrats hammer CFPB head for being soft on lenders

Democrats grilled Director Kathy Kraninger and GOP lawmakers for supporting recent agency changes

Kathy Kraninger, director of the Consumer Financial Protection Bureau, is seen before testifying at a House Financial Services Committee hearing in the Rayburn Building on March 7. (Tom Williams/CQ Roll Call)

House Democrats sharply criticized on Thursday the head of America’s consumer finance watchdog for decisions Republicans say are entirely under her purview.

In the first Consumer Financial Protection Bureau oversight hearing, Financial Services Democrats repeatedly hammered Director Kathy Kraninger and GOP lawmakers for supporting recent changes at the agency.

“Congressional Republicans have done everything they can to stymie the bureau’s work, and the Trump administration has undertaken a sustained effort to destroy the agency,” Committee Chairwoman Maxine Waters of California said. “I’m deeply concerned about the damage they have done.”

Democrats on the committee have identified CFPB as a top oversight target. The agency, a brainchild of presidential candidate Sen. Elizabeth Warren of Massachusetts, was created as part of the Dodd-Frank Act in response to the 2008 financial crisis.

Under its first director, Obama-appointee Richard Cordray, the agency took energetic action to crack down on abusive practices by financial institutions, clawing back more than $12 billion in profits that were returned to nearly 30 million customers. The agency also levied $600 million in fines.

But CFPB’s rulemaking and enforcement pace has slowed considerably since President Donald Trump appointed now White House Acting Chief of Staff Mick Mulvaney acting director in November 2017, who ran the bureau until Kraninger took over last year.

The agency averaged 41 public enforcement actions a year between 2014 and 2017. In 2018, that figure dropped to 11 — the same number of actions CFPB took in 2012, its first year of enforcement. Since Kraninger took over in December 2018, CFPB has made five enforcement actions.

CFPB’s backers saw the agency as a bulwark against the kind of deceptive lending that helped precipitate the 2008 financial crisis and led to millions of home foreclosures. But the agency’s opponents viewed it as an unaccountable, heavy-handed regulator unduly burdening financial firms and reducing consumer choices.

“Our fears were driven by the concern that Congress was creating one of the most powerful and unaccountable bureaucracies ever,” ranking member Patrick T. McHenry said. “Unfortunately we, were right.”

The North Carolina Republican used his time during the hearing to argue that Democrats were hoisted by their own petard when they created CFPB with a strong, independent director with a broad purview to organize the agency and funding through the Fed.

After Waters hammered Kraninger for Mulvaney’s decisions to reorganize the bureau’s offices and take fewer enforcement actions, McHenry noted that these were all powers given to the CFPB director by Dodd-Frank. He repeated calls to subject CFPB to the congressional appropriations process and replace the single, Senate-confirmed director with a panel of commissioners.

Waters was particularly critical of Kraninger’s predecessor, whom she asked to testify before the committee. “I’m disappointed Mr. Mulvaney declined,” Waters said. “So, I’m expecting our new director, Director Kraninger, to answer for him.”

Over the course of his 13-month tenure as acting director, Mulvaney suspended rule implementations, pulled back enforcement, added political appointees and published less consumer complaint data. On Wednesday, Waters introduced a bill to reverse many of those actions.

Since taking over for Mulvaney, Kraninger has stoked liberals’ ire at least twice. She asked Congress to provide CFPB the explicit authority to preemptively inspect lenders for compliance with the Military Lending Act, a power CFPB assumed to have under Cordray.

Kraninger also suspended the implementation of a finalized rule on payday lending, which would have required lenders to determine that their customers could repay a loan before making it. Payday lenders said the rule would have put them out of business; rule supporters said that business is a predatory one, trapping consumers in a cycle of rolled over loans with hidden fees.

Rep. Nydia M. Velázquez, a New York Democrat, asked Kraninger whether the White House had attempted to influence her or whether she had spoken to the president since becoming CFPB director. “No, definitely not,” Kraninger said.

In addition to questioning Kraninger, the Financial Services Committee will hear a second panel of experts on Thursday afternoon on how the CFPB functions.

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