Mulvaney as CFPB head? Five things to know
November 26, 2017 8:00 PM
Andrew Harrer/Bloomberg
If Office of Management and Budget Director Mick Mulvaney is allowed to serve as interim head of the Consumer Financial Protection Bureau, he will be a sea change from former head Richard Cordray.
Mulvaney, a former congressman from South Carolina, was appointed by the Trump administration as interim director on Nov. 24. His appointment was challenged in court late Sunday, in part because he's been a fierce critic of the bureau in the past when he served in Congress and on the Financial Services Committee.
The CFPB is “a sad, sick joke,” he said at one point, a comment that was specifically cited in CFPB Deputy Director Leandra English's lawsuit against Mulvaney's appointment.
Mulvaney has also called the CFPB “one of the most offensive concepts I think, in a representative government,” and claimed, “We have created … the very worst kind of government entity.”
The former lawmaker was particularly critical of the CFPB's small-dollar loan rule, which was finalized last month and will effectively upend the lucrative payday lending business if it is implemented. Mulvaney has also staked out a number of other positions about the CFPB's structure and activities.
As a result, it appears likely that Mulvaney, if he legally takes the job, could begin to radically reshape the agency as the administration searches for a permanent successor. He also would hold a position on the Financial Stability Oversight Council and a board seat at the Federal Deposit Insurance Corp., potentially having an impact on the agenda of those two organizations.
Moreover, Mulvaney also has taken stances on another key financial issue, reforming the government-sponsored enterprises. It's not clear how much of a role a CFPB director could have in that debate, but some of the agency's rules, namely its "Qualified Mortgage" regulation, would be affected by changes to Fannie Mae and Freddie Mac.
Following are five areas where Mulvaney has detailed his views:
Mulvaney, a former congressman from South Carolina, was appointed by the Trump administration as interim director on Nov. 24. His appointment was challenged in court late Sunday, in part because he's been a fierce critic of the bureau in the past when he served in Congress and on the Financial Services Committee.
The CFPB is “a sad, sick joke,” he said at one point, a comment that was specifically cited in CFPB Deputy Director Leandra English's lawsuit against Mulvaney's appointment.
Mulvaney has also called the CFPB “one of the most offensive concepts I think, in a representative government,” and claimed, “We have created … the very worst kind of government entity.”
The former lawmaker was particularly critical of the CFPB's small-dollar loan rule, which was finalized last month and will effectively upend the lucrative payday lending business if it is implemented. Mulvaney has also staked out a number of other positions about the CFPB's structure and activities.
As a result, it appears likely that Mulvaney, if he legally takes the job, could begin to radically reshape the agency as the administration searches for a permanent successor. He also would hold a position on the Financial Stability Oversight Council and a board seat at the Federal Deposit Insurance Corp., potentially having an impact on the agenda of those two organizations.
Moreover, Mulvaney also has taken stances on another key financial issue, reforming the government-sponsored enterprises. It's not clear how much of a role a CFPB director could have in that debate, but some of the agency's rules, namely its "Qualified Mortgage" regulation, would be affected by changes to Fannie Mae and Freddie Mac.
Following are five areas where Mulvaney has detailed his views:
Mulvaney supports, and received donations from, payday lenders
The former South Carolina Congressman has been critical of the CFPB’s recently finalized rule to rein in small-dollar lending. He has also received significant financial support from that industry while he was in Congress.
Advance America, a Spartanburg, S.C., payday lender, contributed $4,000 to Mulvaney for Congress in 2016. The Ohio-based lender Checksmart contributed the maximum $5,000, as did the Community Financial Services Association of America and Financial Service Centers of America, which both represent payday lenders.
While sparring with CFPB Director Richard Cordray in 2015, Mulvaney criticized the bureau for overreaching and eliminating a product that some people can manage when caught in a cash crunch.
“Some people can use these facilities without getting caught in a debt trap,” Mulvaney said. “Mr. Cordray, that when you make a facility, a tool, something unavailable entirely that you're making the consumer's decision for them as to that facility.”
His comments suggest Mulvaney could seek to delay or ease the payday lending rule before it is fully implemented.
Advance America, a Spartanburg, S.C., payday lender, contributed $4,000 to Mulvaney for Congress in 2016. The Ohio-based lender Checksmart contributed the maximum $5,000, as did the Community Financial Services Association of America and Financial Service Centers of America, which both represent payday lenders.
While sparring with CFPB Director Richard Cordray in 2015, Mulvaney criticized the bureau for overreaching and eliminating a product that some people can manage when caught in a cash crunch.
“Some people can use these facilities without getting caught in a debt trap,” Mulvaney said. “Mr. Cordray, that when you make a facility, a tool, something unavailable entirely that you're making the consumer's decision for them as to that facility.”
His comments suggest Mulvaney could seek to delay or ease the payday lending rule before it is fully implemented.
Mulvaney supports a five-person CFPB commission
When Mulvaney was still a congressman in 2014, he voted for a bill that would restructure the CFPB to a five-member board. Under that bill, the vice chairman of supervision at the Federal Reserve Board (a position now held by Randal Quarles) would serve as one of the commissioners, with the other four appointed by the president.
The bill would also have subjected the CFPB to congressional appropriations.
Both ideas have long been priorities of Republicans, but the GOP has largely dropped the commission demand since President Trump was elected. While some industry groups continue to push for the idea, Republicans are keen to have their own director in place who could roll back regulations already put in place by CFPB Director Richard Cordray.
The bill would also have subjected the CFPB to congressional appropriations.
Both ideas have long been priorities of Republicans, but the GOP has largely dropped the commission demand since President Trump was elected. While some industry groups continue to push for the idea, Republicans are keen to have their own director in place who could roll back regulations already put in place by CFPB Director Richard Cordray.
Andrew Harrer/Bloomberg
Mulvaney criticized the CFPB for not catching the Wells Fargo fake-accounts scandal
During a 2016 hearing with then Wells Fargo CEO John Stumpf, Mulvaney noted that the bank's phony-accounts scandal took place “since CFPB and Dodd-Frank.”
Mulvaney's comments echoed criticism by other Republicans that the CFPB was at asleep at the switch and should have caught problems at the bank far sooner.
“It happened after we supposedly fixed all of this with regulation. And maybe I would suggest this — you can't fully regulate bad actors,” Mulvaney said. “You're never going to be able to fully regulate bad actors, and I hope we look at this with a certain level-headedness as we move forward."
Mulvaney's comments echoed criticism by other Republicans that the CFPB was at asleep at the switch and should have caught problems at the bank far sooner.
“It happened after we supposedly fixed all of this with regulation. And maybe I would suggest this — you can't fully regulate bad actors,” Mulvaney said. “You're never going to be able to fully regulate bad actors, and I hope we look at this with a certain level-headedness as we move forward."
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Mulvaney is a critic of the CFPB’s consumer complaint portal
A 2016 bill sponsored by Mulvaney would have forced the CFPB to verify disputes on its consumer complaint database.
The bureau and consumer groups opposed the measure.
“Such a requirement would make it impossible for the database to achieve its purpose,” said a 2016letter signed by 24 consumer groups.
“No complaint system, public or private, can efficiently and effectively verify every complaint,” the letter said. “The bill would only serve to destroy the efficacy of the complaint process and diminish the CFPB.”
But Mulvaney would not need legislation to make changes to the complaint portal if he becomes agency head. Unlike other CFPB rules, many of which were required by the Dodd-Frank Act, the complaint portal is an agency-initiated directive. If he wanted to, Mulvaney could immediately suspend publication of new complaints or even take the portal down entirely.
Such an aggressive move would please bankers who have long argued that it allows the publication of baseless accusations, but could provoke a public backlash by making the agency look less responsive to consumers' needs.
The bureau and consumer groups opposed the measure.
“Such a requirement would make it impossible for the database to achieve its purpose,” said a 2016
“No complaint system, public or private, can efficiently and effectively verify every complaint,” the letter said. “The bill would only serve to destroy the efficacy of the complaint process and diminish the CFPB.”
But Mulvaney would not need legislation to make changes to the complaint portal if he becomes agency head. Unlike other CFPB rules, many of which were required by the Dodd-Frank Act, the complaint portal is an agency-initiated directive. If he wanted to, Mulvaney could immediately suspend publication of new complaints or even take the portal down entirely.
Such an aggressive move would please bankers who have long argued that it allows the publication of baseless accusations, but could provoke a public backlash by making the agency look less responsive to consumers' needs.
Chris Greenberg/Bloomberg News
Mulvaney wants to recapitalize Fannie Mae and Freddie Mac
Mulvaney sponsored legislation in 2016 that would have ended the “Third Amendment Sweep” that directs Fannie Mae and Freddie Mac to send all of their profits to the Treasury.
The bill would have allowed the government-sponsored enterprises to rebuild their capital, allowing them to absorb future losses and potentially operate as stand-alone companies.
While GSE reform is beyond the CFPB’s jurisdiction, as the acting head of the agency he will have a seat the Financial Stability Oversight Council, which deliberates over major financial initiatives.
But Mulvaney's views likely do not jell with the official position of the Trump administration. Senior Treasury officials have not formally embraced any plan, but have indicated they back a Senate effort that would either eliminate or radically reshape Fannie and Freddie, with an explicit government guarantee for the mortgage market.
Clarification: This slideshow has been updated to clarify the Trump administration's likely support for the Senate's GSE plan.
The bill would have allowed the government-sponsored enterprises to rebuild their capital, allowing them to absorb future losses and potentially operate as stand-alone companies.
While GSE reform is beyond the CFPB’s jurisdiction, as the acting head of the agency he will have a seat the Financial Stability Oversight Council, which deliberates over major financial initiatives.
But Mulvaney's views likely do not jell with the official position of the Trump administration. Senior Treasury officials have not formally embraced any plan, but have indicated they back a Senate effort that would either eliminate or radically reshape Fannie and Freddie, with an explicit government guarantee for the mortgage market.
Clarification: This slideshow has been updated to clarify the Trump administration's likely support for the Senate's GSE plan.
