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What’s Next for the CFPB?

  • by Keith Monson
  • Nov 27, 2017

You’ve probably heard by now that Richard Cordray has stepped down as director of the Consumer Financial Protection Bureau (CFPB), ending his term eight months early. I’ve received a few inquiries from financial institutions wondering how Cordray’s early departure will affect them, so I wanted to take an opportunity to answer some of those questions:

First, who’s going to replace Cordray?

Here is where things get interesting. In a letter sent to CFPB staff on Nov. 24, Cordray named the agency’s chief of staff, Leandra English, as deputy director. Hours later, President Trump named Mick Mulvaney, director of the Office of Management and Budget (OMB), as acting director of the bureau.

On Nov. 26, lawyers for English filed a lawsuit attempting to halt the appointment of Mulvaney. However, Mary McLeod, general counsel for the CFPB, issued a memo on Nov. 25 confirming that President Trump has the authority under the Federal Vacancies Reform Act (FVRA) to designate Mulvaney as acting director of the CFPB, and advised all bureau personnel to proceed accordingly.

Stay tuned, folks.

Will the new director immediately impact regulation?

If Mulvaney ends up at the helm of the bureau, it is my opinion that he will shift the CFPB into a more banker-friendly agency, but that evolution will take some time. Repealing rules that take a long time to write, ratify and pass does not happen overnight.

In fact, I think it could be 12 months before we see a regulatory change that is significant to financial institutions. The first change we could see is simplified Basel III capital rules and related regulation from the Dodd-Frank Act (DFA), the comprehensive set of reform measures intended to strengthen the regulation, supervision and risk mitigation of the banking sector.

What will the CFPB do until a new director is officially in place?

The CFPB has two basic functions: writing rules and enforcing rules. And if they can’t write rules until a new director is officially in place, it’s very likely the CFPB will ramp up efforts in regard to enforcement actions and examinations. Remember, in addition to banks, the CFPB also has jurisdiction over mortgage companies, credit unions, securities firms, payday lenders and more.

Recent news supports this theory. On Monday, Nov. 20, the CFPB settled a $1.1 million enforcement action with Xerox Business Services for allegedly misreporting borrower payment history to credit reporting agencies. The next day, the CFPB ordered Citibank to pay $3.75 million in redress to consumers and a $2.75 million civil money penalty for student loan servicing failures.

Let’s continue the conversation …

For more insight into the latest regulatory updates from Washington, as well as an executive summary of FinCEN’s final rule and discussion of beneficial ownership requirements, join me for CSI’s Quarterly Compliance Update webinar on Thursday, Nov. 30.

Keith Monson serves as CSI’s chief risk officer. In this role, Monson maintains an enterprisewide compliance framework for risk assessment and reporting, as well as other key components of CSI’s corporate compliance program. With nearly 25 years of banking experience, he has a wide range of expertise in the compliance arena, having served as chief compliance officer for both large and small financial institutions.