Washington's New Consumer Cop Is Gutting His Own Agency. Here's Why You Should Care

For years, one federal agency has been working to make things better for consumers—particularly when it comes to their banks, credit cards, loans and other financial relationships.

But with a new acting director at the helm, the Consumer Financial Protection Bureau is undergoing a shakeup, rolling back what had been aggressive approach to industry oversight. And while some financial services companies may be breathing a sigh of relief, consumers are poised to be on the losing end of the equation.

The change stems from the arrival of Mick Mulvaney, whom President Trump named to head the CFPB in November, following the resignation of Richard Cordray, who had led the independent agency since its inception 2011. Consumer advocates protested the appointment, pointing to Mulvaney’s previous comments calling the CFPB a "sick, sad joke," for instance, as well as his history of campaign contributions from payday lenders—a group that, as a whole, had previously landed in the CFPB's sights.

"Naming Mick Mulvaney—someone who’s adamantly anti-consumer—rewards financial predators and fails to put consumers first," Mike Calhoun, president of the Center for Responsible Lending, said at the time.

And Mulvaney’s actions thus far have done nothing to disprove the skeptics. Since landing in his new role, Mulvaney has made several moves that dismantle key Cordray initiatives and overhaul the objectives of the agency. Here are a few of the most significant moves Mulvaney has made since taking the new job.

He revised the CFPB mission statement to undermine its primary focus.

Mulvaney has made it clear that he will be operating the CFPB in a very different manner than his predecessor. One of his earliest moves was to fundamentally change the agency's stated mission.

Prior to Mulvaney’s tenure, the mission statement read:

The Consumer Financial Protection Bureau is a 21st century agency that helps consumer finance markets work by making rules more effective, by consistently and fairly enforcing those rules, and by empowering consumers to take more control over their economic lives.

Yet starting with the Dec. 21 press release on the prepaid card rule, careful readers could note a few changes (in bold below):

The Consumer Financial Protection Bureau is a 21st century agency that helps consumer finance markets work by regularly identifying and addressing outdated, unnecessary, or unduly burdensome regulations; by making rules more effective; by consistently enforcing federal consumer financial law; and by empowering consumers to take more control over their economic lives.

"So apparently, one of the CFPB’s primary functions now is to deregulate the consumer finance industry," says Stephanie Robinson, a partner in Mayer Brown’s consumer financial services group.

Consumer advocates say Mulvaney aims to be the industry’s champion, rather than consumers. "As long as Mulvaney sits in the director's chair he will let the worst of Wall Street have their way with the American people," Allied Progress said in a statement.

For his part, Mulvaney says the shift is motivated by "humility and prudence." "The CFPB has a new mission: We will exercise ... the almost unparalleled power Congress has bestowed on us to enforce the law faithfully in furtherance of our mandate," Mulvaney wrote in an op-ed published in the Wall Street Journal last week. "But we go no further."

He put a hold on new enforcement actions ...

When Mulvaney took office after Thanksgiving, he declared a 30-day freeze so he could review all ongoing investigations and rule-making initiatives so he could get up to speed. That's not sot unusual. Yet more than two months have passed, and the CFPB still has not announced any new enforcement actions. (A year ago, during the first quarter of 2017, the CFPB took action in 16 different cases.)

Some areas look likely to escape CFPB oversight entirely. Predatory and discriminatory lending practices are about to get a pass after Mulvaney stripped the enforcement powers this week from the Office of Fair Lending and Equal Opportunity. "This is a big deal," says Ori Lev, a former CFPB official who is also a lawyer and partner at Mayer Brown.

The CFPB has put the brakes on other investigations too. Last month, Mulvaney directed CFPB staff to close a four-year investigation into a lender, World Acceptance, saying Tuesday saying the CFPB enforcement staff had decided not to recommend an enforcement action regarding the company’s marketing and lending practices. (The Washington Post reported World Acceptance gave thousands in campaign donations to Mulvaney while he served as South Carolina’s congressman.)

… And unwound other initiatives that were already in progress.

In other areas, the CFPB has actually reversed course under Mulvaney. It moved in January, for instance, to dismiss a lawsuit it had previously brought against four online payday lenders associated with an American Indian tribe.

And the CFPB has pulled back two major rules that were set to roll out over the coming year—a time frame intended to give financial companies time to update their own policies to match the new federal standards.

In the more controversial of the two, the CFPB announced a plan to reopen the rulemaking process for the so-called "payday rule." That rule would have imposed multiple restrictions on abusive lenders, requiring them, for example, to verify that borrowers can actually afford to pay back high-cost advances like payday loans and those that use cars as collateral.

Under Mulvaney, the CFPB also moved to modify the 2016 prepaid card rule, which aimed to increase disclosures to consumers and limit overdraft fees for these cards. Implementation now moves back a year, to April 2019, and the rule includes a few industry-approved changes, such as a limit on card issuers' responsibility to consumers.

He cut his own agency's funding.

Unlike many government agencies, the CFPB does not have its budget set by Congress. But because it was set up as an independent agency, drawing its budget from the Federal Reserve, it needs to submit quarterly funding requests to the Fed.

Mulvaney, however, isn't requesting any funding this quarter. Instead, the acting director opted to draw down the $177.1 million reserve, noting that the agency’s expenses for the quarter were estimated to be $145 million. "As the director of the OMB, it shouldn’t be too shocking that Mulvaney is going to manage the CFPB’s budget carefully," says Robinson—"but it is certainly unusual not to make a request for funding."