Is the Consumer Financial Protection Bureau (CFPB) leaving the enforcement business? In yet another reorganization, Acting Director Mick Mulvaney has moved to dismantle the CFPB’s student lending unit. The action, if it becomes final, removes a thorn in the side of lenders in this space, as the unit has helped recover hundreds of millions of dollars in enforcement actions.
What happened
In an email delivered to bureau staff on May 9, Acting Director Mick Mulvaney announced that he is effectively dismantling the CFPB’s Office for Students and Young Consumers, removing all functions except consumer education. What remains of the unit will be shifted to the benign Office of Financial Education, which (like student lending) is currently an office within the Consumer Education & Engagement division of the CFPB. Does this mean that Assistant Director Seth Frotman will have little to do except draft web content and educational pamphlets? Hard to say. That said, the move must still be negotiated with the CFPB’s union, so the move will not have immediate effect.
In the short history of the CFPB, the student lending office has been extraordinarily active. While the bureau has targeted multiple for-profit colleges, readers will particularly remember the $530 million judgment the CFPB obtained against the defunct for-profit Corinthian Colleges, which allegedly steered consumers into student loans with hefty interest rates while allegedly charging those same consumers Ivy League tuition rates. More recently, the CFPB has gone after Navient (formerly Sallie Mae) for allegedly misapplying student loan payments and other allegedly improper conduct, as we have previously reported.
In that same email to staff, Mulvaney also notified staffers of his intent to name more political appointees to senior positions, creating an office of cost-benefit analysis that will apparently examine the costs of regulation versus the benefits to consumers. The move is a strange one in that the CFPB already includes a robust Research, Markets & Regulation division under Associate Director David Silberman. How the two units will interact, if at all, is left unexplained.
Why it matters
Defying the odds, Mulvaney has used a rather short window (his acting director role expires next month) to decimate the CFPB’s most aggressive operations. Much like his announced reorganization of the fair lending unit in February 2018, Mulvaney has moved quickly to rein in what he views as a hyperaggressive, unduly powerful bureau that previously reported to no one. That said, a distracted President Trump has yet to name a permanent replacement, and Mulvaney’s political moves are plainly designed to create a supervisory structure that will prevent the CFPB from running amok in the event of a temporary power void.