In an email to staff leaked to ProPublica, Acting CFPB Director Mick Mulvaney questioned the “previous governing philosophy” of the bureau, and he signaled a major shift in enforcement methodologies and priorities by suggesting the days of “regulation by enforcement” were coming to an end.

What happened

On Jan. 23, 2018, ProPublica published what it claims to be a leaked email from Consumer Financial Protection Bureau (CFPB) Acting Director Mick Mulvaney to CFPB staff. In the email, Mulvaney assures staff that he has no intention of “shutting down the Bureau,” but that the CFPB would no longer, in former Director Richard Cordray’s words, “push the envelope.” Mulvaney then goes on to explain:

So, what does all of this mean, in terms of how we will operate at the Bureau? Simply put, we will be reviewing everything that we do, from investigations to lawsuits and everything in between. When it comes to enforcement, we will be focusing on quantifiable and unavoidable harm to the consumer. If we find that it exists, you can count on us to vigorously pursue the appropriate remedies. If it doesn’t, we won’t go looking for excuses to bring lawsuits. On regulation, it seems that the people we regulate should have the right to know what the rules are before being charged with breaking them. This means more formal rulemaking on which financial institutions can rely, and less regulation by enforcement. And we will be prioritizing. In 2016, almost a third of the complaints into this office related to debt collection. Only 0.9% related to prepaid cards and 2% to payday lending. Data like that should, and will, guide our actions.

And Mulvaney emphasizes in his email that there will be times when the CFPB still needs to be aggressive, but only as a last resort: “Let me be clear: there will absolutely be times when circumstances dictate that we take dramatic action to protect consumers. And at those appropriate times, I expect us to be vigorous in our enforcement of the law. But bringing the full weight of the federal government down on the necks of the people we serve should be something we do only reluctantly, and when all our attempts at resolution have failed. It should be the most final of last resorts.”

Of course, the Leandra English litigation continues, so there remains the small possibility that a court could replace Mulvaney until President Trump nominates, and the Senate confirms, a formal successor. The D.C. Circuit has just agreed to grant expedited review of English’s appeal of an adverse lower court decision in this regard.

What it means

Mulvaney’s measured comments reflect a sea change in the CFPB leadership’s attitude toward regulated entities. His pointed reference to these entities as “the people we serve” reflects a significant shift of the pendulum in favor of more balanced treatment of lenders and consumers. This change has already been reflected in the recent decision of the CFPB to drop enforcement actions commenced on short notice against various short-term lenders, and to redirect CFPB energies to those areas where consumers have the greatest complaints. This shift could result in bureau resources largely being redirected to areas such as debt collection, which, as Mulvaney emphasizes, make up fully one-third of all consumer complaints.