Less than two months on the job as Consumer Financial Protection Bureau director, Rohit Chopra may have quietly exorcised a ghost left over from the Trump administration that threatened to haunt him for a long time.
The CFPB this week settled a lawsuit brought by a group of consumer advocates that alleged former CFPB Director Kathy Kraninger, a Trump appointee, violated the Federal Advisory Committee Act when she created a task force of outside experts. The act says federal advisory committees must be essential, in the public interest, fairly balanced and structured to avoid inappropriate influence.
The settlement puts to bed a potential legal headache for the Biden-era CFPB, but more importantly for Chopra it could neutralize the policy recommendations the task force issued in January and make it easier for him to advance a more pro-consumer agenda.
The five-member task force backed civil money penalty standards that critics said were weaker than the current ones, a self-regulatory fair lending program, a compliance examination process that focuses more on major violations and
The recommendations were nonbinding and many were unlikely to be adopted by a Democratic administration. But its opponents could cite the recommendations as authoritative work of the CFPB, or a future Republican administration could seek to enact them.
For example, lawmakers at a Senate Banking Committee hearing this summer cited the task force’s report to oppose
"This report had the imprimatur of an agency that is dedicated to protecting consumers and that imprimatur needed to be removed,” said Ira Rheingold, executive director of the National Association of Consumer Advocates, a nonprofit group of attorneys that joined in the lawsuit last year.
“This is not a CFPB document, this is not the CFPB position, and this is not a legally created report,” Rheingold said. “And moving forward, if state legislatures or federal legislators are going to cite this report as simply following the CFPB’s or the task force’s recommendations, we’re saying it’s not authorized by the CFPB and it’s not a statement coming out of the agency.”
The lawsuit argued that Kraninger was biased in picking the task force’s five members including its chair Todd Zywicki, a law professor at George Mason University’s Antonin Scalia Law School, who had been
Zywicki called the two reports it issued “thorough, well-supported and balanced.”
“The members of the task force had no role in creating the charter for the task force," he said. "We had no role in choosing the members of the task force. We had no role in defending the lawsuit and never met with the lawyers at the CFPB."
The U.S. District Court for the District of Massachusetts refused to dismiss the suit in February. The CFPB stated in the settlement that “continuing this litigation would be costly to all parties involved and the decision by the district court would be subject to appeal by the losing parties with the final outcome uncertain.”
Kathleen Engel, a law professor at Suffolk University and a former member of the CFPB’s consumer advisory committee, said the settlement "reflects the CFPB’s recognition that they don't want to be caught up in a trial that they're sure to lose.” Engel was one of the original plaintiffs.
The
The task force’s
Advocates said the disclaimers are necessary because they do not want the report cited as an official document of the CFPB.
“We did not want this report to be used by senators and representatives to promote anti-consumer positions,” said Ed Mierzwinski, senior director at U.S. PIRG, the federation of state Public Interest Research Groups. “We made it clear that if they did use this report that it was very obvious that it had a stamp of disapproval.”
When the task force’s report was first released in January, before the changeover in administrations, Zywicki said its 102 recommendations were meant to inform lawmakers and policymakers.
“It was always our belief that the report was going to stand on its own two feet,” Zywicki said. ”Whether or not it is considered to be a formal official government document doesn't change my pride in my assessment of the quality of the work that we did, or the inclusiveness of the input that we got with respect to it.”
Under the settlement, the CFPB has agreed to start releasing all task force records beginning in January, post the documents to the task force’s webpage and issue a press release notifying the public of the settlement.
The task force was modeled on the National Commission on Consumer Finance created after the passage in 1968 of the Consumer Credit Protection Act to conduct original research and provide recommendations to Congress on the regulation of consumer credit. The CCPA also established the Truth in Lending Act, a seminal consumer finance law that requires disclosures about the costs of credit and was designed to protect consumers from unfair lending practices.
The task force’s members included J. Howard Beales III, a former professor at George Washington University and former director of the Federal Trade Commission’s bureau of consumer protection; Thomas Durkin, a retired senior economist at the Federal Reserve Board; William MacLeod, a partner at Kelley Drye & Warren; and Jean Noonan, a partner at Hudson Cook and former associate director at the FTC bureau of consumer protection's credit practice.
Advocates said the creation of the task force was part of a concerted effort by Kraninger and former acting CFPB Director Mick Mulvaney, who also headed the Office of Management and Budget in the Trump administration, to roll back consumer finance law. Mulvaney irked consumer advocates early in his tenure by firing all 25 members of the agency's Consumer Advisory Board, saying he wanted to bring in more diverse views.
“This was all part of a larger theme under Mick Mulvaney and Kathy Kraninger to systematically try to silence the voices of people who believe in the mission of the agency,” said Engel, a former member of the consumer board.
