CFPB’s New Director Mick Mulvaney Testifies Before Congress

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On April 11, 2018. the House Committee on Financial Services held a hearing (https://financialservices.house.gov/calendar/) entitled, “The Semi-Annual Report of the Bureau of Consumer Financial Protection.” This hearing was of particular interest to lawmakers and stakeholders because it is the first hearing featuring the CFPB’s new acting director, Mick Mulvaney, who has promised to take a different tack than that of Richard Cordray, the Bureau’s first and former director.

The early moments of the hearing made the clear the contentious nature of the CFPB, with Committee Chairman Jeb Hensarling (R-TX) applauding Mulvaney’s tendency to “act lawfully” and criticizing the CFPB for its “lack of oversight.”

Ranking member Maxime Waters’ (D-CA) statement acknowledged the current controversy over Mulvaney’s tenure (Cordray’s former deputy, Leandra English, is currently embroiled in a legal battle over the organization’s leadership). Other Democratic members on the committee made similar statements the controversy. Waters described Mulvaney as “carrying out this president’s agenda at the Consumer Bureau” and criticized him, saying “he has taken a series of actions that weaken the agency’s ability to carry out its important mission and benefit the predatory actors that the agency is designed to police.” Waters criticized a perceived lack of enforcement actions against payday lenders. The Bureau is currently re-examining their rule on small-dollar and short-term loans, that was passed under Cordray’s tenure.

The chair of the Financial Institutions and Consumer Credit subcommittee, Rep. Blaine Luetkemeyer (R-MO) argued that the past enforcement actions of the CFPB had a “chilling effect on many financial services companies across the nation.” Luetkemeyer applauded the committee’s increased oversight of the Bureau and the “greater public input into rules” and complimented Mulvaney as a “great leader.”

Rep. Dan Kildee (D-MI) criticized a perceived “lack of enforcement actions” while highlighting the importance of the “independence” of the Bureau.

Mulvaney opened his statement by expressing his concerns about the “lack of accountability” of the CFPB. Mulvaney noted the fact that he does not technically have to answer questions or testify in front of Congress due to the Bureau’s structure (it receives funding through the Federal Reserve, and the President can only fire the director for cause), highlighting it as what he sees as an example of the CFPB’s unaccountability.

Chairman Hensarling began his questioning by highlighting the large regulatory reach of the CFPB. He asked if Mulvaney could theoretically “…exempt all banks, located in Dallas TX, from the jurisdiction of CFPB enforcement?” Mulvaney responded that yes, if he so chose that is an action the CFPB could take. Hensarling then asked, “Who determines the budget of the CFPB?” Mulvaney responds, “I do,” and highlights the fact that the Federal Reserve Board does not review the budget asked for by the CFPB (up to a certain cap set by law). Hensarling also argued that lower-level courts, as well as state agencies, could cover the CFPB’s duties, a sentiment Mulvaney agreed with.

Representative Waters (R-CA) opened her questioning by alleging that Mulvaney has a lack of “legitimacy” in his position, due to the contentious nature of his appointment and the ongoing litigation. Waters asked Mulvaney “Do you support the mission of the Bureau?” and recited a series of critical quotes about the CFPB that Mulvaney has made in the past, as well as his co-sponsorship of a bill to shut down the Bureau entirely. Mulvaney states “We have not burnt the place down,” stating that he has not stopped the CFPB from engaging in its mission. Waters accused Mulvaney of “gutting” the Office of Fair Lending and equal opportunity.” Mulvaney responded “we haven’t” arguing that all he has done while at the CFPB is change the bureaucracy within the office.

Rep. Luetkemeyer asked Mulvaney, “what are your goals for enforcement?” Mulvaney responds that he does not believe the CFPB has a role in enforcement, and rather should educate businesses about the law. Luetkemeyer also asked Mulvaney’s rationale behind putting the small dollar lending rule on hold. Mulvaney responded by saying that all he has done is “follow the administrative procedures to state their notice to revisit the rule.” Mulvaney then stated that “it is possible that I may come to different conclusions than my predecessor.”

Rep. Carolyn Maloney (D-NY) asks Mulvaney, “how many new enforcement actions the CFPB has taken under your leadership” to which Mulvaney responded “none.” Maloney then accused Mulvaney of failing to protect consumers from financial misconduct, comparing his actions to “taking the cop off the beat.”

Rep. Bill Huizenga (R-MI) asked Mulvaney, “how many actions did the previous director of the CFPB take in his first six months in office?” Mulvaney noted Cordray took “zero” such actions. Mulvaney clarified further that the CFPB has been pursuing “bad actors” and will continue to do so. Huizenga raised a concern that the past director of the Bureau “made up violations” to try and curb legal actions that “he didn’t like.” Mulvaney agreed with that sentiment.

Rep. Sean Duffy (R-WI) stated his belief that the frustration on the Democratic side of the aisle stems from a lack of control on their part over Mulvaney’s appointment. Duffy argued that this is why the structure of the CFPB should be changed. Duffy pointed out that if the CFPB reduced the number of economists they employ from 20 to 10, that would save about $2 million. Mulvaney pointed out how difficult it is to reduce the number of employees at a federal agency and noted that only ten employees have left during his tenure. Duffy asked if there are any requests from the Inspector General that the Bureau had not complied with and Mulvaney responded “yes” but does did go into specifics.

The complete videocast, of the hearing, along with the CFPB’s formal semi-annual report, can be seen here.

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