It’s official: It’s BCFP no more! When Kathy Kraninger recently took over as director of the Consumer Financial Protection Bureau (CFPB or Bureau), her first significant act was to drop efforts to change the Bureau’s abbreviated name to BCFP. But, in much more meaningful ways, will she be just like the acting director she succeeds? And while speculation rages about that direction, the Bureau proposes a new “no-action letter” policy and wraps up the year with more enforcement actions.
What happened
Kraninger—Back in June, President Trump nominated Kathy Kraninger to become the next director of the CFPB, making headlines with his selection of a relatively unknown candidate. Following multiple delays, the Senate Banking Committee approved Kraninger by a vote of 13 to 12. She was confirmed by the full Senate in a similarly close vote of 50 to 49, along party lines.
Armed with a five-year term of office, Kraninger spent her first morning in meetings with various key members of the staff. Later, she sat down for a press conference, where she said she has yet to decide which, if any, policies of Acting Director Mick Mulvaney (her old boss at OMB) she plans to change or continue.
“I am here to be the director of this Bureau, and I will be fully accountable for the decisions that I make going forward, and they will be mine,” she said.
One easy call for the new director: Kraninger officially halted Mulvaney’s efforts to change the name and abbreviation of the CFPB to Bureau of Consumer Financial Protection and BCFP, particularly in light of a recent report finding that the change would cost the industry $300 million and the Bureau itself $9 million to $19 million. “I care more about what the agency does than what it is called,” she told reporters.
No-action letters—Will non-enforcement become the new normal? As Kraninger takes the helm, the CFPB also announced that it is seeking public comment on a new proposed policy concerning so-called no-action letters. Under the current policy, promulgated in February 2016, industry has largely declined to seek such letters, issuing just one letter since inception. No-action letters are not binding but consist of staff-level recommendations not to proceed with particular enforcement actions.
The current Bureau leadership believes that the lack of requests for no-action letters reflects a lack of “sufficient incentives to seek No-Action Letters from Bureau staff.” As a result, the CFPB is seeking public comment, including on “[bringing] certain aspects of the Bureau’s policy more into alignment with no-action letter programs offered by other federal regulators.” Under such programs, the letters “would constitute an agency general statement of policy and a rule of agency organization, procedure or practice exempt from the notice and comment rulemaking requirements under the Administrative Procedure Act, pursuant to 5 U.S.C. 553(b).”
Enforcement—The Bureau reached a settlement with an Illinois-based federal savings association that allegedly ran afoul of the Fair Credit Reporting Act (FCRA) and the Consumer Financial Protection Act (CFPA) by obtaining consumer reports without a permissible purpose. The bank, a subsidiary of a major insurance company, also furnished to credit reporting agencies (CRAs) consumer credit information it knew or had cause to believe was inaccurate and failed to promptly correct or update the information provided to CRAs, the CFPB said.
The bank offers consumers various deposit and credit products, primarily credit cards and vehicle loans. When a consumer applies for either product, the bank obtains a consumer report; the bank also furnishes credit information about consumers to CRAs.
But, in addition to obtaining consumer reports for these permissible purposes, the bank obtained reports of consumers who were neither seeking any extension of credit nor involved in any form of credit transactions, account review or account collection, the Bureau said. In some instances, employees of the bank initiated vehicle loan applications for consumers for the sole purpose of soliciting them, triggering a credit inquiry.
The CFPB also alleged other violations of the FCRA, such as when the bank furnished inaccurate information to CRAs (providing account information for the wrong consumer, reporting current accounts as delinquent, and reporting inaccurate payment histories and past-due amounts, even though the correct information was in the bank’s records) and then took “multiple months” to correct the incomplete or inaccurate information.
Although the bank neither admitted to nor denied the Bureau’s findings, it entered into a consent order prohibiting future violations and requiring the bank to implement and maintain reasonable written policies and procedures with regard to the FCRA.
If true, these are not insignificant violations, and the bank escaped the enforcement action with surprisingly light punishment, including no civil monetary penalty and no consumer restitution.
The second case involved a nonbank mortgage company the CFPB asserted engaged in deceptive practices by misleading veterans about its Interest Rate Reduction Refinancing Loan (IRRRL). Loan officers were trained to use allegedly flawed comparisons of the consumer’s mortgage and the IRRRL during in-home presentations, the Bureau said.
The company allegedly misrepresented the future cost savings of the refinance by inflating the future amount of principal owed under the existing mortgage, underestimating the future amount of the refinanced mortgage’s monthly payments by overstating the loan’s term, and overestimating the total monthly benefit of the loan after the first month.
The stipulated final judgment and order requires the company to pay $268,869 in consumer redress and a civil monetary penalty of $260,000. The company must also establish a comprehensive compliance plan and halt all future deceptive practices.
To read the CFPB’s consent order, click here.
To read the CFPB’s stipulated final judgment and order, click here.
Why it matters
Make no mistake: Kathy Kraninger might be just the second coming of Mark Mulvaney. But more likely, she will eventually generate her own, somewhat more independent, path, starting with nixing the much-criticized attempt to force the BCFP name on the Bureau. Both consumer groups and industry will be keeping a close eye on how her leadership changes the CFPB, and the lower house of Congress may play a more significant role as well.
The two enforcement efforts mark the end of Mulvaney’s time, a period noteworthy for its limited enforcement activity, with fewer than a dozen reported matters. In addition to the marked drop-off in enforcement, civil penalties and other monetary orders were significantly reduced. Watch for the next public enforcement action, which may signal how Kraninger envisions the CFPB under her tenure.