All Things FinReg


In an op-ed published in Tuesday’s Wall Street Journal publicly reprising an email he sent yesterday to the staff of the Consumer Financial Protection Bureau (CFPB), Acting Director Mick Mulvaney set a clear new course, tone, and direction for the bureau.

Saying that his predecessor, Richard Cordray had directed his staff to “push the envelope,” Mulvaney, who has previously stated that “elections have consequences,” remarked, “[t]hat is going to be different. We are government employees, and we work for the people. That means everyone: those who use credit cards and those who provide the credit…”

Recognizing an imbalance between government prosecutors and targets, Mulvaney noted that when the CFPB loses a case, it moves on, but he rhetorically asks, “Where do those we charged go to get their time, their money and their good names back? If a company closes its doors under the weight of a multiyear Civil Investigative Demand, we still have jobs at the CFPB. But what about the workers who are laid off as a result?”

In clear and unequivocal terms, Mulvaney has charted a new course forward for the CFPB. He says that, “when it comes to enforcement, we will focus on quantifiable and unavoidable harm to the consumer…. On regulation … [t]his means more formal rule making and less regulation by enforcement. (emphasis added)” He also specified that priorities will be data-driven, noting that in 2016, almost one third of complaints related to debt collection, while only 0.9% related to prepaid cards and 2% to high-interest short-term (payday) lending.

Nonetheless, Mulvaney makes it clear that where there is clear evidence of fraud and consumer harm, the bureau will pursue those violations.

Mulvaney’s remarks are much more than a mere policy statement of an “acting” caretaker. Rather, they are a full-throated reflection of long-stated views of the current administration and regulated entities that the CFPB’s approach to enforcement, particularly its reliance on its core, but ill-defined “unfair, deceptive, and abusive acts and practices (UDAAP)” authority, needs to change.

The new direction represents an opportunity for, among other things, financial institutions to fix consumer-related problems without fear of massive investigations and punishing penalties that bear no relation to actual consumer harm. It may also represent an opportunity to advocate to the CFPB that it define the meaning of the operative UDAAP terms: “unfair, deceptive, and abusive” through regulations and then present the financial services industry an opportunity to participate in that rule-making process.

This new course also signals a major upcoming change in the size and structure of the bureau’s operations. Because the CFPB director has unitary authority to set the agency’s budget and spending—and it is notable that Mulvaney recently requested no additional funds for the CFPB for the upcoming fiscal quarter—all of this can be accomplished without the approval of Congress which itself created the CFPB to act independently of ordinary constraints and oversight. Now, the CFPB’s unique organizational goose has met its gander.