Jonathan McKernan, the nominee to lead the Consumer Financial Protection Bureau, told the Senate Banking Committee Thursday that he would uphold the law and the bureau's statutory mandates.
The CFPB, he said in an opening statement, needs to be held accountable to elected officials and to focus on "real risks to consumers" while avoiding politicized actions that harm both consumers and businesses.
During Thursday's two-hour hearing, the CFPB's acting Director Russell Vought dismissed lawsuits against Capital One, the Pennsylvania Higher Education Assistance Agency, Rocket Homes and Vanderbilt Mortgage and Finance.
Sen. Elizabeth Warren, D-Mass., the ranking member of the committee, repeatedly asked during tense exchanges whether McKernan would stand up to President Donald Trump and his advisor Elon Musk, who have both said the CFPB needs to be gutted. Vought, whose main job in the Trump administration is heading the Office of Management and Budget, has been working closely with Musk's Department of Government Efficiency, now renamed the U.S. DOGE Service, to cut the federal workforce to pay for continuing Trump's 2017 tax cuts
"Mr. McKernan, literally, while you've been sitting here, and you've been talking, the CFPB has dropped lawsuits," Warren said. "This is designed to embarrass you and show exactly who is in charge of this agency right now: Elon Musk and his little band of hackers. I appreciate all of your happy talk about following the law, but I think we all know what's going on, and that is Elon Musk is determined to shut down this agency, even though he has no legal authority to do that."
McKernan didn't respond. Throughout the hearing he kept his answers short and refrained from saying anything about President Trump or Musk. Instead, he repeatedly insisted that he would uphold the law and fulfill the bureau's statutory mandates faithfully. He also refused to comment about concerns about whether Musk had gained access to confidential supervisory information.
"If confirmed, I will fully execute the law … and perform each of its other statutorily-assigned functions," McKernan said in his opening statement, and repeated at several points during the two-hour hearing. "The CFPB will do this by centering its regulation on real risk to consumers and by focusing its enforcement on bad actors."
His comments suggest that McKernan will allow further downsizing of the CFPB and narrow its focus in a way that may be similar to former CFPB Director Kathy Kraninger, who brought a large number of enforcement actions during the first Trump administration but reduced fines and penalties against financial entities.
Senate Banking Committee Chairman Tim Scott, R-S.C., asked McKernan about his commitment to maintaining the CFPB's core functions, including consumer complaint hotlines and offices for service members and older Americans. McKernan agreed to and also said he would enforce the Military Lending Act and maintain the Office of Servicemember Affairs.
The most heated exchanges came from Warren, and Sen. Mark Warner, D-Va., who asked McKernan if he would stand up to Vought and Musk, who have both made disparaging comments about federal civil servants that Warner said were meant to demoralize them.
"I am hugely afraid of OMB Director Vought's attempt to, frankly, terrorize and traumatize the federal workforce," Warner said. "You're going to have to stand up to this. Are you going to be able to stand up to Vought?"
To which McKernan replied: "I think my record speaks to my willingness to assert my point of view."
Warner then got into a heated exchange by asking McKernan if he would explicitly acknowledge that the CFPB's return of roughly $20 billion back to consumers "was good or bad."
But McKernan refused to agree. "I don't think we should evaluate the success of the CFPB based on dollar numbers or enforcement count," he said.
Warner then raised his voice and repeated the question: "Let me just give you a little bit of coaching here. Is giving $20 billion back in rebates to American consumers, good or bad?"
McKernan would not agree. "It is very important that we have customer redress as part of the remedies," he responded. "You've got to make customers whole when they're harmed."
To which Warner responded: "Just say, 'yes.' Restitution is good."
Even the mild-mannered Sen. Tina Smith, D-Minn., said she was bothered by the exchange.
"It also bothers me that you couldn't say straight up that returning $21 billion in money stolen from American consumers, you couldn't just say that that was a good thing," Smith said. "Do you think that requiring $80 million in illegal overdraft fees to be refunded to service members and veterans was a rogue action or a partisan action that was something the CFPB accomplished?"
"Senator, I'm not sure which action you're pointing to," he said.
Smith then asked him whether he agreed that the CFPB had required Wells Fargo to refund consumers for harm incurred during the mortgage crisis or for allegations that it illegally repossessed vehicles from consumers.
"Is that a rogue action or partisan action?" Smith asked. "Do you think if there was illegal conduct there then the enforcement action is supported?"
To which McKernan said: "I just don't know the facts of that."
Smith said: "So you can't say that you trust that the CFPB had the correct finding there, on that particular case?"
"I've not looked at both sides," he said.
Sen. Jack Reed, D-R.I., asked McKernan if he planned to enforce the Military Lending Act, and said that many servicemembers have been exploited by financial firms. Reed said that Vought has canceled the lease on the CFPB headquarters in Washington and that the bureau's employees, who are currently on administrative leave, "don't have any place to work."
"They've cancelled contracts for expert witnesses that are in ongoing litigation," Reed said. "They've dismissed cases against predatory lenders, including some cases involving the Military Lending Act. They essentially tried to lay off the staff. Indeed, President Trump said that the CFPB was set up to destroy people."
Reed, in a low voice, concluded: "You do not appear to have much presidential support or OMB support, and I have this sinking feeling that you're departing Liverpool on the Titanic."
Sen. Catherine Cortez Masto, D-Nev., asked what McKernan plans to do to protect the security of the CFPB's data, some of which has been erased from the agency's web site.
"I would really like to take a close look at how much information the CFPB still has on its server," McKernan replied. "There's been a lot of focus on this issue. I think we need to be focused on both the external and internal risk. We also should be thinking about the risks that China or another adversary gets hold of that information."
Cortez Masto also asked if McKernan believed that the CFPB should continue to regulate payment platforms.
"Do you believe that one company with a payment platform should be allowed to access confidential information from the CFPB of its competitors?" she asked.
"If I'm confirmed to the CFPB, I will execute on its responsibility to monitor risks under all the consumer financial laws, both in the banking system and outside, and that would include payment platforms," McKernan replied.
Sen. Raphael Warnock, D-Ga., asked McKernan whether it was efficient for the CFPB's employees to be put on administrative leave while continuing to be paid.
"With the CFPB effectively eliminated, how on earth do you plan to lead a shell agency that has been completely gutted?" Warnock asked.
"I'm not aware of the situation," McKernan responded.
"You're not aware of this stop-work order that was issued by the current director?" Warnock asked.
"I'm aware of it," McKernan said. "I'm not aware of the exceptions. I will point to just what the administration has said … that we are going to have a CFPB that is streamlined and efficient. My job is to follow the law."
