As she prepares to give her semi-annual testimony to Congress this week—on Wednesday to the House Financial Services Committee and on Thursday to the Senate Banking Committee—Consumer Financial Protection Bureau (CFPB) Director Kathy Kraninger has much to be proud of. Since the Senate confirmed her in December 2018, Kraninger has worked diligently to make the CFPB more transparent, more accountable, and ultimately more consumer-friendly.
Specifically, Kraninger has put forth a new mission for the CFPB, which was created by the Dodd-Frank so-called “financial reform” law of 2010. She announced that when it comes to rulemaking, the CFPB will execute the law as written. When it comes to enforcement, the CFPB will seek to reinforce, instead of replace, market processes. Putting this new mission into action, Kraninger has worked to implement programs and policies that are centered on removing or easing regulatory barriers in the consumer financial marketplace.
To that end, last week the CFPB announced the creation of a new taskforce to “examine ways to harmonize and modernize federal consumer financial laws.” The Taskforce on Federal Consumer Financial Law intends to make recommendations on improving and strengthening consumer financial laws and regulations by “identifying gaps in knowledge that should be addressed through research, ways to improve consumer understanding of markets and products, and potential conflicts or inconsistencies in existing regulations and guidance.” In a similar vein, the CFPB recently created the American Consumer Financial Innovation Network (ACFIN) to foster financial innovation by facilitating coordination among federal and state regulators.
Beyond that, just last month the bureau issued three new policies to encourage compliance and safe harbor protection: a new No-Action Letter (NAL) policy, a Compliance Assistance Sandbox (CAS) policy, and the Trial Disclosure Program (TDP) policy. These policies are changes CEI has advocated for, as they’ll act as a regulatory “sandbox” that allows fintech and startup firms to create and innovate without facing undue regulatory burdens so long as they aren’t knowingly violating existing rules.
Last month also marked the closing of the comment period on the CFPB’s proposed updates to debt collection rules. We have commended the bureau for recognizing the importance of debt collection firms in consumer credit markets, and that the 40-year old regulations governing debt collection need to be modernized to accommodate new forms of communication. Comments that we wrote praising the rule and suggesting areas of improvement can be found here.
In addition to these internal changes and new regulations, Kraninger has also increased engagement with stakeholders from across the policy spectrum by hosting a symposia series on various issues facing consumer finance. In his closing remarks at the most recent symposium that focused on behavioral economics, Deputy Director Brian Johnson touched on the new mentality taken by the bureau when weighing regulation: “we should tread very carefully where proposed policies would restrict or change the nature of a private relationship or contract.”
While all this reflects a significant departure from how the bureau previously operated, there remains much work to be done. Despite evidence that under Kraninger’s predecessor, the Obama appointee Richard Cordray, the CFPB cherry picked evidence in its case against student loan servicer Navient, the CFPB continues to pursue this deeply flawed enforcement action. The case, which alleges Navient steered student loan borrowers into forbearance, is based on complaints shown to be inaccurate by the CFPB’s own highly flawed consumer complaint database.
While more steps must be taken, the efforts taken by Kraninger stand in stark contrast to the actions of Cordray, whose leadership of the bureau cost American taxpayers over $3 billion in regulations and over 24 million hours of paperwork.
Our praise of Kraninger’s tenure does not change one iota our position that abolishing the CFPB would be good for consumers, and that the CFPB’s structure is unconstitutional. We believe that if it is to exist, the CFPB must be made constitutionally accountable by:
- Making the bureau subject to appropriations from Congress
- Making the director subject to at-will removal by the president
To her credit, Kraninger has expressed support for the Department of Justice brief which asked the Supreme Court to find Dodd-Frank’s provision restricting presidential removal of the CFPB director to be unconstitutional.
So as long as the CFPB must exist, we encourage Kraninger to keep up the good work.