Enforcement of the Law, Quantitative Impact Analysis & Other Gems

Last week CFPB Acting Director Mick Mulvaney had a busy speaking calendar in Washington, D.C. and we all should be listening. He addressed the Credit Union National Association (CUNA)’s Government Affairs Conference on Tuesday, February 27th and the National Association of Attorneys General (NAAG) Winter Meeting on Wednesday, February 28th. While there were differences in the two presentations because of the respective audiences, Mulvaney’s strategic themes were clear. You can watch the CUNA speech here and the NAAG speech here.

1. CFPB will reflect the current administration. Not surprisingly, the CFPB will be run differently under the Trump administration than it had been under the Obama administration. Whatever one’s politics, the Acting Director made abundantly clear that a new sheriff is in town. Mulvaney highlighted the time he has been spending with CFPB staff to share his priorities and to re-align departments and to focus activities under the new strategic constructs. He assured both CFPB staff and the two audiences that despite the strategy shift, he is not anticipating employee layoffs.

2. CFPB enforcement activity will enforce the law. A bit circular? Maybe. Nonsensical in light of past CFPB activity? No. Mulvaney emphasized that institutions should “know what the rules are” before being sued for allegedly failing to comply. In other words, the CFPB should not be challenging company activities which leaders did not reasonably understand violated applicable law. And related, CFPB should not push the envelope. Mulvaney rejected the notion that enforcement suits should be “creative” or that the CFPB should regulate by enforcement. Mulvaney will leave legislative tasks to the Congress. Waxing literary at CUNA, Mulvaney quoted Alexis de Tocqueville’s Democracy in America: “When justice is more certain and more mild, is at the same time more efficacious.” Mulvaney acknowledged the great power the CFPB has and opined that power should be wielded humbly and judiciously.

3. CFPB will quantitatively assess regulatory impacts. Mulvaney spoke to leveraging cost-benefit analysis at the Bureau. He will require quantitative benefits and burdens to be assessed before changes are made to regulatory requirements. He intends rule making with substantial accountability and transparency, including input from consumer groups, Attorneys General, and industry. Mulvaney hopes the CFPB will “hear” (not just listen) when engaging in these analyses, acknowledging previous criticism that the Bureau may have been “checking in the box” in that regard.

4. Education is a priority. At NAAG, Mulvaney listed this as top priority for the Bureau. One AG commented during Q&A that education is too challenging and often ineffective, suggesting essentially that enforcement is more powerful. Mulvaney countered that the CFPB has to do both as mandated by statute. He elaborated education is a critical part of the founding mission of the Bureau. And successful education protects consumers and will reduce the volume and magnitude of potential harm. Although Mulvaney never addressed this point, it strikes me that active industry engagement in developing and promoting education tools (either collaboratively with CFPB or through the company’s own proprietary tools) will be noticed. Such “good citizen” conduct may be beneficial to mitigate the risk of consumer harm and/or future CFPB enforcement action. Doing so likely will propel your business and retain customers as well.

5. CFPB will prioritize efforts & marshal its resources. Mulvaney addressed the Complaint Database in his NAAG speech. He focused on assessing how to marshal CFPB resources to impact the most common and substantial issues facing consumers. In other words to attack the greatest harms. He contrasted volumes of two consumer issues, indicating 33% of Database complaints involve debt collection issues while only 2% involve pay day lending. Mulvaney wants to focus the Bureau on issues involving the most consumer risk and harm. In Q&A, several AGs expressed concern about this approach, and it may signal them to take up issues which CFPB is not.

6. Mulvaney appreciates the importance of financial services. The cherry on top. At CUNA, Mulvaney thanked the attendees for facilitating consumer finance lending. He noted the “value” of what lenders do for our communities and our nation. Mulvaney views his role as protecting borrowers and lenders. He wants to be sure the burden and risk of regulation does not deprive consumers of financial services that that are valuable. Within that framework, however, Mulvaney clearly stated that his job is to “go after bad actors” and to protect consumers.

One final tidbit, Mulvaney acknowledged to AGs that he was a former plaintiffs’ lawyer and that he appreciates the challenges of the litigation environment. He also assured the AG’s that the Bureau would collaborate with them when it made sense. But importantly Mulvaney also might allow the AGs to go it alone if the Bureau did not find merit a theory the AGs advance. All in all, an interesting couple of days full of sound bites from the Acting Director how he will drive the CFPB and what industry should expect. Stay tuned.