The White House yesterday proposed a major restructuring of the Consumer Financial Protection Bureau (CFPB) that would significantly cut the watchdog agency’s budget and limit its enforcement power, the Washington Post reported. Under the proposal, included in President Trump’s 2019 budget plan, the CFPB would be funded through Congress rather than the Federal Reserve, giving lawmakers more influence over the agency’s priorities. The CFPB’s 2019 budget would also be capped at its 2015 level, $485 million, compared with a projected $630 million this year. The plan, which would take two years to implement, also calls for putting restrictions on the CFPB’s enforcement authority.
A revised strategic plan that the Consumer Financial Protection Bureau expects to release in the coming days says the agency, led by Acting Director Mick Mulvaney, intends to go “no further” than the requirements stipulated in the Dodd-Frank Act when it comes to regulating the financial industry, MorningConsult.com reported. Kirsten Sutton Mork, who’s chief of staff at the CFPB, wrote in an email sent to all agency employees that the CFPB plans to publish its updated strategic plan by Feb. 12. “If there is one way to summarize the strategic changes occurring at the Bureau, it is this: we have committed to fulfill the Bureau’s statutory responsibilities, but go no further,” she wrote. The new mission statement for fiscal years 2018-2022 borrows language from the 2010 Dodd-Frank language that established the agency, saying that the CFPB’s goal is “to regulate the offering and provision of consumer financial products or services under the Federal consumer financial laws and to educate and empower consumers to make better informed financial decisions,” according to the email.
Nine lenders have been warned by the U.S. that they will be kicked out of a top mortgage program within months unless they find ways to stop costly rapid refinances of veterans’ loans, Bloomberg News reported. The warnings stem from a probe by Ginnie Mae, a government-owned corporation that makes mortgages cheaper by protecting bond investors against homeowner defaults. Ginnie Mae guarantees about $2 trillion in bonds containing loans backed by agencies including the Department of Veterans Affairs. Some lenders have boosted their revenue through repeated, unneeded refinancing of veterans’ home loans, according to regulators. That process, called “churning,” lowers prices investors are willing to pay for bonds, effectively raising rates for veterans, first-time home buyers and others whose loans are included in Ginnie Mae-backed securities.
U.S. Treasury Secretary Steven Mnuchin said yesterday that he wants to know how the Consumer Financial Protection Bureau is handling a probe into a hack of credit bureau Equifax Inc. after a report that the agency’s chief has pulled back from investigating the matter, Reuters reported. Equifax disclosed in September that hackers had stolen personal data it had collected on some 143 million Americans. On Monday, Reuters reported that the acting chief of the Consumer Financial Protection Bureau (CFPB), Mick Mulvaney, had put the brakes on the agency’s Equifax investigation. “I haven’t spoken to Director Mulvaney about it but I will,” Mnuchin told the House of Representatives Financial Services Committee. “It is something I am going to discuss with him.” The CFPB said yesterday that it was examining the Equifax breach but declined to give details.
A federal appeals court yesterday upheld the lawfulness of the single-director power structure of the Consumer Financial Protection Bureau, the Obama-era agency undergoing a dramatic shift in focus as Trump-appointed officials take over leadership slots, the National Law Journal reported. The U.S. Court of Appeals for the D.C. Circuit, sitting as a full court, said that the president can only remove the director of the agency for cause, not at will. The mortgage company PHH Corp. had argued the leadership scheme lacked accountability. “Applying binding Supreme Court precedent, we see no constitutional defect in the statute preventing the president from firing the CFPB director without cause. We thus uphold Congress’s choice,” Judge Nina Pillard wrote for the court. “Congress’s decision to provide the CFPB Director a degree of insulation reflects its permissible judgment that civil regulation of consumer financial protection should be kept one step removed from political winds and presidential will. We have no warrant here to invalidate such a time-tested course.” PHH still has a chance to challenge anew the $109 million penalty the agency imposed for alleged misconduct.
The Consumer Financial Protection Bureau this week slightly increased the civil penalty a loan marketing company must pay to resolve accusations that it scammed former National Football League players and 9/11 first responders, rebuffing its push for more favorable settlement terms from the Trump-appointed leadership at the agency, the National Law Journal. The company, New Jersey-based Top Notch Funding, agreed in September to pay $70,000 in penalties and to be permanently prohibited from offering loans or advances to consumers awaiting payments from settlements or victim-compensation funds. The CFPB had accused Top Notch of lying about the costs of loans it was offering to consumers, including former NFL players who were awaiting payments from the landmark concussion settlement and first responders entitled to payments from a victim-compensation fund created by Congress.
White House budget chief Mick Mulvaney, the Trump-appointed interim director of the Consumer Financial Protection Bureau, advocated in a staff-wide memo yesterday to pull back on the agency’s aggressive enforcement approach, declaring an end to the days of “pushing the envelope,” the National Law Journal reported. Saying that he owed staff a clear explanation of how the agency would change under new leadership, Mulvaney told the staff he has no intention of shutting down an agency he harshly criticized as a Republican member of Congress. Mulvaney called for a more restrained enforcement approach, saying that the agency would no longer — in the words of former CFPB Director Richard Cordray — be involved in “pushing the envelope.”
A bankruptcy judge who slammed Bank of America Corp. for its treatment of a California couple over a foreclosure declined a request to tear up the scathing opinion, saying that it was important "to name and to shame" the company in order to shed light on practices that affect consumers, Bloomberg News reported. Bankruptcy Judge Christopher Klein blasted Bank of America in a ruling in March for its "heartless" conduct against the couple, Erik and Renee Sundquist, and awarded more than $45 million in damages. The bank agreed to pay the Sundquists several million dollars more than the $6 million they won at trial if Judge Klein’s opinion was expunged. “This was a naked effort to coerce this court to erase the record,” Klein wrote in a Thursday opinion. “No chance. No dice.” Although the judge agreed to vacate the damages, he said "trials have consequences" and the litigation is no longer a two-party dispute. Nonprofit consumer advocacy groups and law schools that had intervened in the case on behalf of the public had a "potent point" when they noted that the bank "has shown no remorse, made no apology and promised no reform of the corporate culture practices illustrated by this case," Judge Klein said. Read more.
A federal judge in Philadelphia yesterday rejected Wells Fargo & Co.’s bid to dismiss that city’s lawsuit accusing the largest U.S. mortgage lender of predatory lending targeting black and Hispanic borrowers, Reuters reported. U.S. District Judge Anita Brody said Philadelphia may pursue claims that the bank’s alleged “reverse redlining” violated the federal Fair Housing Act, though she had “serious concerns” about whether claims of economic harm could survive. The lawsuit is one of several against big lenders by major U.S. cities claiming that mortgage lending discrimination causes more defaults by minority borrowers, lower property tax revenue, and higher costs to combat crime and blight. Philadelphia accused Wells Fargo of having since 2004 steered minority borrowers into higher-cost, higher-risk loans than white borrowers, even if they qualified for safer loans.
The Consumer Financial Protection Bureau will "reconsider" its rule regulating the payday lending industry, the agency said yesterday, raising the prospect that the Trump administration will scale back or reverse the regulations put into place by former director and Obama appointee Richard Cordray, the Washington Examiner reported. "The bureau intends to engage in a rulemaking process so that the bureau may reconsider the payday rule," the agency, now run on an acting basis by Trump appointee Mick Mulvaney, said in a brief statement, noting that the rule's effective date of implementation was yesterday. Under Cordray, the agency finalized the rule in October. Cordray left the bureau in November and has launched a campaign for the Ohio governorship as a Democrat. Read more.
In related news, the fight over leadership of the Consumer Financial Protection Bureau is far from over as the case again heads to court, Housing Wire reported. Last week, a federal judge ruled that President Trump has the authority to name the acting director of the CFPB. This was the second ruling in two months, both leaving CFPB Acting Director Mick Mulvaney in leadership. Back in November, U.S. District Judge Timothy Kelly, who was appointed by Trump, ruled in favor of the Trump administration. While Trump has won every battle over the position in the courts so far, English continues to fight back. Just two days after a judge once again sided with Mulvaney, English filed an appeal to the U.S. Court of Appeals for the District of Columbia Circuit. She also requested an expedited review of her case. Read more.
