Earlier this week, Consumer Financial Protection Bureau (CFPB) Acting Director Mick Mulvaney articulated his vision for the direction of the CFPB under new leadership. This was voiced in a Wall Street Journal op-ed, which was adapted from a January 24 memo to CFPB staff.
Mulvaney notes that when he arrived at the CFPB in November, he told employees “that despite what they might have heard, [he] had no intention of shutting down the bureau. As members of the executive branch, we are charged with faithfully executing the law. The law mandates that we enforce consumer-protection laws, and we will continue to do so under [his] watch.” Yet he also signaled at that time that things would be different as a result of the leadership transition. “[W]e will review everything we do, from investigations to lawsuits and everything in between,” he noted.
Mulvaney made clear that the CFPB’s entire governing approach is going to be different. As a critique of his predecessor, Richard Cordray, Mulvaney stated that “[i]t’s fair to say that the bureau’s previous governing philosophy was to “push the envelope” aggressively,
under the assumption that we were the good guys and the financial-service industry was the bad guys,” he stated. “We are government employees, and we work for the people. That means everyone: those who use credit cards and those who provide the credit; those who take out loans and those who make them; those who buy cars and those who sell them. All of those people are part of what makes this country great, and all of them deserve to be treated fairly by their government,” he stated.
With respect to enforcement, Mulvaney emphasized that the CFPB remains committed to vigorous enforcement of the law when necessary, but such actions need to function as a last resort. “There will absolutely be times when circumstances require us to take dramatic action to protect consumers. At those 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 that we do only reluctantly, and only when all other attempts at resolution have failed,” he stated. “When it comes to enforcement, we will focus on quantifiable and unavoidable harm to the consumer. If we find that it exists, you can count on us to pursue the appropriate remedies vigorously. If it doesn’t, we won’t go looking for excuses to bring lawsuits.”
Regarding regulation, Mulvaney emphasized that those the CFPB regulates should know what the rules are before being charged with breaking them. In his view, this means “more formal rule making and less regulation by enforcement.”
He also indicated that the CFPB’s future actions will be driven by data, and the agenda should be prioritized based on, for example, the amount and type of consumer complaints that the CFPB receives. “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,” he noted. While be agreed that quantitative analysis should drive the CFPB’s decisions, he believes that it should not be to the exclusion of measurable costs and benefits to consumers and covered persons. According to Mulvaney, “[t]here will be a lot more math in our future.”
“I intend to exercise our statutory authority to enforce the laws of this nation. I intend to execute the statutory mandate of the bureau to protect consumers. But we will no longer go beyond that mandate. If Congress wants us to do more than it set forth in the Dodd-Frank Act, it can change the law. The CFPB has a new mission: We will exercise, with humility and prudence, the almost unparalleled power Congress has bestowed on us to enforce the law faithfully in furtherance of our mandate. But we go no further. The days of aggressively ‘pushing the envelope’ are over,” stated Mulvaney.
So what does this mean for fintech? With a reduced focus on enforcement, the CFPB’s new governing approach could create opportunities for more conversations with the regulator concerning financial innovation and efforts to accommodate new technologies in the consumer finance space. Companies and entrepreneurs may feel more inclined to seek counsel and guidance from the CFPB, without as much fear of facing enforcement proceedings. The new rulemaking approach should also create synergies for the CFPB staff to focus on efforts to modernize or synchronize certain regulations and regulatory approaches with financial innovation.
Stay tuned for additional developments!