Mulvaney’s Proposals to Reshape CFPB May Neuter It

By Evan Weinberger

Acting Director Mick Mulvaney’s legislative plan to bring more accountability to the Consumer Financial Protection Bureau would cripple the agency if it were ever to become law, a former official and other observers said.

Mulvaney, in the CFPB’s semiannual report to Congress, said Congress should craft legislation that would put the bureau’s funding in Congress’s hands; make the director accountable to the president; and create an independent inspector general for the agency. In addition, Mulvaney, who also heads the White House Office of Management and Budget, said Congress should put together a law that would allow the CFPB to craft any “major” regulations if lawmakers request it.

Although those proposals are dead on arrival in Congress, Mulvaney said they would give lawmakers and the president more control over the independent CFPB. But the net effect of those four proposals, particularly the requirement that Congress direct the CFPB to make any “major” rule, would have the effect of paralyzing the CFPB’s rulemaking, said Quyen Truong, a partner at Stroock & Stroock & Lavan LLP and a former top CFPB attorney.

“A requirement for legislative approval of all bureau rules would pretty much prevent the bureau from doing any rulemaking,” Truong said.

CFPB Reports to Congress

The CFPB is required to submit a report to Congress every six months highlighting agency rulemaking, enforcement, and other activities. The report submitted April 2 is the first since President Donald Trump appointed Mulvaney in late November, after former CFPB Director Richard Cordray’s resignation.

Mulvaney’s semiannual report and those submitted by Cordray are largely similar, with the CFPB highlighting a list of actions it’s taken and those that it plans to carry out. In Mulvaney’s case, the CFPB is planning to move forward with a debt collection rule.

They differed in one major respect, however: the introduction to Mulvaney’s report called on Congress to rein in the CFPB.

“By structuring the Bureau the way it has, Congress established an agency primed to ignore due process and abandon the rule of law in favor of bureaucratic fiat and administrative absolutism,” Mulvaney’s introductory letter to Congress said.

To accomplish his goal, Mulvaney proposed four legislative remedies that House Republicans have been pushing essentially since the CFPB was created in the 2010 Dodd-Frank Act. Mulvaney was an influential Republican on the House Financial Services Committee prior to his selection as OMB director.

“This is the [Jeb] Hensarling view of the world,” Joseph Lynyak, a partner at Dorsey & Whitney LLP told Bloomberg Law, referring to the Republican House Financial Services Committee Chairman who has led the charge to neuter the CFPB in the lower house of Congress.

Straight From the House

Versions of Mulvaney’s four proposals have all been included in various bills passed out of the Republican-controlled House.

Three of them — giving the president the power to fire the CFPB director; putting the CFPB on the congressional appropriations process rather than allowing it to have independent funding through the Federal Reserve; and creating a separate CFPB inspector general rather than the current setup where the Fed’s inspector general has authority to oversee the CFPB — are included in the Financial CHOICE Act.

That bill, which is Hensarling’s broadside against Dodd-Frank, passed out of the House in June 2017 along party lines, 233-186.

Consumer advocates largely greeted Mulvaney’s proposal to have a separate CFPB inspector general with a shrug. They also said the funding and executive accountability proposals would make it harder for the CFPB to operate.

“I think all of these changes would have deleterious effects on the bureau’s ability to do its job,” Joe Valenti, the director of consumer finance at the Center for American Progress, said in a telephone interview.

Mulvaney’s suggestion to have Congress authorize any new CFPB rulemaking is taken from the Regulations from the Executive in Need of Scrutiny, or REINS, Act, which passed out of the House 237-187 in January 2017. A Senate version of the REINS Act was introduced upon the House vote, but it stalled when Democrats vowed to oppose it.

The acting CFPB director did not vote on the REINS Act as he was awaiting Senate confirmation for his role as OMB director.

Forcing the CFPB to wait for Congress before entering into any major rulemaking may stifle new rules. For one, the definition of “major” could be made so broad that no rules could come out, said Jeff Sovern, a professor at St. John’s University School of Law.

“Because congressional approval would be subject to a filibuster, banks could block the bureau’s proposed rules even when anti-consumer Republicans are in the minority — which means the bureau might never get a major rule through again,” he said.

Even if there were no such legislative block on new CFPB rules, congressional gridlock and other pressing priorities getting in line ahead of a consumer financial protection measure would make any action unlikely, Truong said.

Congress already effectively has a veto on any regulation put forward by the CFPB or any other federal agency through the Congressional Review Act. That 1996 law allows simple majorities in Congress to overturn any regulation within 60 legislative days of its promulgation, and has been used to overturn 15 rules, including the CFPB’s arbitration rule, Lynyak noted.

Requiring Congress to approve any CFPB regulations before they’re written is “probably unconstitutional,” with Congress overstepping its bounds under the separation of powers between government branches.

Slim Prospects, for Now

At this point, however, none of Mulvaney’s proposals is likely to see the light of day in Congress.

The only vehicle available at this point is S. 2155, a bipartisan Senate bill that is awaiting a vote in the House. Centrist Democrats who supported that bill have already said they have no intention of accepting any additions to it.

“Any of these things would be a poison pill if it were raised, particularly the appropriations,” Lynyak said.

That might not be the case in the future, though.

“Over the next few years, it is possible that some Democrats might find it acceptable to require the bureau to go through the appropriations process or to create an independent inspector general,” Truong said.

To contact the reporter on this story: Evan Weinberger in New York at

To contact the editor responsible for this story: Michael Ferullo at

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