Kathleen Kraninger, only the second Senate-confirmed director of the Consumer Financial Protection Bureau (CFPB) in its almost eight-year existence, recently gave her first public remarks. The priorities Director Kraninger laid out will materially impact the CFPB’s direction and mission until the end of her term in December 2023. Director Kraninger, appointed by President Donald Trump, succeeds the first CFPB director, Richard Cordray, who was appointed by President Barack Obama.
In stark contrast to Mr. Cordray, Director Kraninger demonstrated a clear shift away from enforcement as a primary mechanism for protecting consumers. She noted that the CFPB “will focus on preventing consumer harm by maximizing informed consumer choice, and prohibiting acts or practices which undermine the ability of consumers to choose the products and services that are best for them.” In addition to educating consumers, the director expressed (1) a preference for a slower rulemaking process, with input from industry participants, that articulates “clear rules of the road for regulated entities that promote competition, increase transparency, and preserve fair markets for financial products and services,” and (2) the “hope that [the CFPB’s] emphasis on prevention will mean that [it needs its] enforcement tool less often.”
In a possible allusion to the way the CFPB previously operated, the director commented, “Because rules are general standards, they are not best articulated on a case-by-case basis through enforcement actions.” Instead, the CFPB’s new approach is that “purposeful enforcement is about utilizing robust resources most effectively to focus on the right cases to reinforce clear rules of the road and prevent harm by making sure bad actors know they will be held to account.”
In addition to a shift in priorities, Director Kraninger also indicated a shift in tone of the CFPB’s relationship with regulated entities. Industry participants are likely welcome the director’s stance that “[i]t is incumbent upon [the CFPB] to ensure that [it does] not impose unmanageable burdens” on financial institutions. She went on to say, “I take seriously our responsibility under the law to reduce unwarranted regulatory burden and to consider the impact of rulemaking on regulated entities and consumers. The CFPB must acknowledge that the costs imposed on regulated entities absolutely affects access to, and the availability of, credit to consumers.”
Although Director Kraninger had not previously outlined her views on the CFPB’s mission and priorities in public, with these remarks she has strongly stated a move away from what some refer to as “rulemaking by enforcement” and a move toward working collaboratively with the industry. Given the regulatory priorities and attitudes of the current administration, her views should not come as a surprise to informed observers. Her vision is, however, important in clarifying the future activities and direction of the CFPB. At a more practical level, future enforcement actions are unlikely to include cases that do not demonstrate clear wrongdoing, and, with a focus on educating consumers, the CFPB is likely to view its role as helping consumers to help themselves.