Covid-19 response to drive Biden’s CFPB in early days
President-elect Joe Biden has said that the main focus of his administration in his early days will be to fight the Covid-19 pandemic, and that should also be true at the Consumer Financial Protection Bureau.
A Biden CFPB is expected to be much more aggressive in monitoring banks and financial firms to comply with mortgage and student loan forbearance, credit reports, and other protections included in the law. help in the event of a pandemic.
This could give the new CFPB leadership coverage from Republican and industry criticism, at least in its early months, said Michael Gordon, partner at Bradley Arent Boult Cummings LLP.
“People are hurting and efforts to help consumers weather this downturn will be difficult for critics of the agency to challenge,” said Gordon, a former senior CFPB lawyer.
Consumer advocates berated the CFPB under the leadership of Kathleen Kraninger for failing to take a more aggressive stance in enforcing the consumer protection provisions included in the CARES Act. The law requires lenders to grant forbearance to mortgage borrowers and students facing economic hardship, and it also prohibits negative credit reports due to Covid-19.
The office issued industry guidance after the law was passed in April that banks and others would not be subject to enforcement action for violations of the CARES Act as long as they made an effort. of “good faith” compliance.
a April White Paper former CFPB director Richard Cordray, a Democrat, and two other former senior officials in the office called for tighter oversight and enforcement of the CARES Act provisions. The white paper could provide an outline for the next CFPB director.
Cordray would be considered for a return to work. He declined to comment for this story.
Even if CFPB does not follow Cordray’s plan, Covid-19 is likely to be a driving force in the new team’s early days, said Allison Schoenthal, head of Hogan Lovells’ consumer credit litigation group LLP.
“It’s just too important a question not to focus on her,” she said.
No more small ball
Beyond Covid-19, CFPB is likely to reconsider recently completed collection rules and can reinstate payday loan underwriting standards that the Trump administration rescinded. Bank overdraft programs are also subject to re-examination under a Biden-led CFPB, as well as potential oversight of large non-bank installment lenders.
The most significant changes are expected on the front of the application. Biden’s office will likely target a wider range of financial companies and the amount of penalties will increase dramatically, said Lucy Morris, former deputy director of enforcement at CFPB.
“Many cases under Kraninger and [former acting Director Mick] Mulvaney, what little there was, tended to be smaller stocks, smaller dollars, ”Morris, now a partner of Hudson Cook LLP, told Bloomberg Law.
The CFPB under the Trump administration has targeted some major banks, but more Office enforcement actions were directed against smaller payday lenders, debt collectors and other companies. In many cases, the bureau has suspended penalties due to a company’s inability to pay.
The CFPB under Cordray collected $ 12 billion in fines and remedies for consumers in its six years of work through November 2017. This included hundreds of millions of dollars in fines against big banks like Wells. Fargo & Co., JPMorgan Chase & Co., Discover, Bank of America Corp. and the mobile phone company Sprint.
Bloomberg law analysis showed that the CFPB collected a $ 860 million in sanctions and remedies between December 2018, when Kraninger took over as director, and July 2020. The CFPB has filed 19 other enforcement actions since, for a total of approximately $ 481 million in sanctions and remedies for consumers . Most of this money came from two colonies.
There will likely be a resurgence of interest in fair lending issues under the Biden administration, said Mike Calhoun, president of the Center for Responsible Lending. He noted that the CFPB has only filed one fair loan case since Kraninger’s tenure began in December 2018.
A choice of Biden to lead the CFPB is also likely to have a drastic change in the internal structure of the office, reversing the changes put in place by the two directors of Trump’s CFPB.
Mulvaney removed the CFPB’s equitable lending unit from the office’s monitoring, enforcement and equitable lending unit, placing it within and under the control of the principal’s office. Look for a CFPB director appointed by Biden to reverse this change, Gordon said.
“It is not difficult to achieve organizationally, but symbolically it gives the administration a victory and it gives a fair place at the table,” he said.
A more recent organization reshuffle under Kraninger caused the CFPB’s Enforcement Division to lose its ability to initiate investigations independently. This change is also unlikely to survive the new management, Gordon added.
The Trump administration under Mulvaney also added a number of political appointees to the office structure. It is not yet clear whether a Biden administration would fill these positions or cut them altogether.
The CFPB under Kraninger and Mulvaney spent well below what it was allowed under the office’s independent budgetary authority. The CFPB is funded by the Federal Reserve and its transfers for each year are capped.
The CFPB has budgeted $ 580.1 million for fiscal 2020 and $ 595.2 million for fiscal 2021, well below the transfer cap of $ 695.9 million for fiscal year 2020 and $ 717.5 million for fiscal 2021.
This leaves the Biden administration with plenty of room to bolster its enforcement and oversight ranks, Gordon said.
“They left $ 100 million on the table, and I expect the new team to use the available funds a lot more, including to increase staff,” he said.
Biden’s transition team announced its CFPB landing team on Tuesday. It is led by Leandra English, the former deputy director of CFPB who Cordray appointed interim director upon his departure.
English ultimately lost that position to Mulvaney in a legal battle that went to the United States Court of Appeals for the DC Circuit. English, now in the New York Department of Financial Services, works as a volunteer.
The eight-member team also includes Manny Alvarez, the newly confirmed commissioner of the California Department of Financial Protection and Innovation, and Diane Thompson, former deputy deputy director of the CFPB’s regulatory office and fierce critic of the era. Trump. CFPB. Thompson is currently a member of the Open Society Foundation.