CFPB’s Mulvaney, Democrats Prepare for Battle in Congress

By Evan Weinberger

The financial services industry and consumer groups are hoping to get some more clarity about acting Consumer Financial Protection Bureau Director Mick Mulvaney’s plans for the agency when he testifies before Congress this week.

What they are likely to get is a continuation of the food fights that were seen when Mulvaney’s predecessor appeared before Congress. What will be different is that Democrats will be throwing the food at Mulvaney rather than the Republicans, who barely hid their scorn for former CFPB Director Richard Cordray, said Alan Kaplinsky, the co-leader of Ballard Spahr LLP’s Consumer Financial Services Group.

“I have no doubt that Democrats in the House and Senate, particularly Sen. Elizabeth Warren (D-Mass.), will rake him over the coals,” Kaplinsky said in an email to Bloomberg Law.

First Visit as CFPB Chief

Mulvaney, a former Republican congressman who pilloried Cordray during the former director’s appearances on Capitol Hill, is set to appear before the House Financial Services Committee on April 11 and the Senate Banking Committee on April 12 as part of the acting CFPB director’s semiannual appearances before lawmakers.

The appearances will mark the first time that Mulvaney will have the chance to lay out his priorities for the CFPB before lawmakers of both parties. Up to this point, Mulvaney has weighed in through leaked memos, op-eds, policy statements, and appearances before interest groups.

But for the most part, those statements have focused on high-level questions about the power vested in the CFPB and its director by the 2010 Dodd-Frank Act — and in Mulvaney’s view, that was far too much power — as well as bringing more “humility” to the bureau.

Those kinds of statements don’t answer important questions about the CFPB’s rulemaking and enforcement priorities, and its day-to-day supervisory focus, Melanie Brody, a partner in the Consumer Financial Services Group at Mayer Brown LLP, told Bloomberg Law.

Although it is clear that the CFPB under Mulvaney will relieve banks, payday lenders, and other players in the consumer financial services space of some concerns about enforcement, what those changes will mean in practice remains unclear, Brody said in a telephone interview.

“If you don’t know what you’re being relieved of, it’s not especially helpful,” she said.

Details Wanted on Policy Shift

Mulvaney has made some statements about his priorities, saying the CFPB will be guided by consumer complaints under his watch. Mulvaney, who was appointed the CFPB’s acting director Nov. 24 and whose term under the Federal Vacancies Reform Act extends until late June, has also said that he will be looking at debt collection as a potential area for regulatory changes.

The acting CFPB director also wants to revisit last fall’s payday lending rule — the last substantive regulation completed by Cordray — if Congress fails to nullify it using the Congressional Review Act.

Mulvaney has also directed the CFPB to take a second look at a 2015 rule that expanded reporting requirements for lenders under a key mortgage data law, the Home Mortgage Disclosure Act.

Consumer advocates and Democrats want answers on a perceived drop in enforcement actions under Mulvaney. To date, the CFPB has not yet taken a major action during Mulvaney’s tenure and has dropped several payday loan-related cases after developing a reputation as a fearsome enforcer under Cordray.

There have also been changes in CFPB fair lending enforcement and data collection policies that need answers, said Jeff Sovern, a professor at St. John’s University Law School.

“This is an opportunity to learn more about what is happening at the bureau and for the members of the committee to fulfill their oversight function and I hope that is what happens,” Sovern said in an email.

Rightful Director?

Even without the policy changes wrought by Mulvaney’s appointment, the choice of the Office of Management and Budget director to lead the CFPB generated controversy.

While Mulvaney appears before the Senate Banking Committee, the U.S. Court of Appeals for the D.C. Circuit will hear oral arguments in a case challenging his appointment, filed by Leandra English, the CFPB’s deputy director. Cordray promoted English, formerly the CFPB’s chief of staff, to lead the agency just hours before he left and Mulvaney was appointed.

English argues that a proper reading of Dodd-Frank means she should be the acting director. That legal fight has led to questions about whether Democrats on the two congressional committees should even show up when Mulvaney testifies.

At this point, it appears they will.

And that’s the right move, said Christine Hines, the legislative director at the National Association of Consumer Advocates.

“They should establish his disdain for the agency and make that connection between his disdain for the agency and whether he’s qualified to run it,” Hines said in a telephone interview.

Warren Letters

Warren and other Democratic lawmakers have sent several letters over the past few months asking for information regarding Mulvaney’s actions as acting CFPB director. Mulvaney has typically responded with a mix of disdain for the questions and jeering that the Democrats now questioning his actions made the position of CFPB director too powerful.

The latest of those responses came April 5, with Mulvaney saying in his letter to Warren that he looks “forward to addressing these issues, and my legislative recommendations for the bureau, when I testify before the committee.”

That letter should give an indication of the tone of Mulvaney’s two upcoming appearances before the committees.

“I don’t think this will amount to much more than political posturing on steroids,” Kaplinsky said.

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