Tag Archive | "Consumer Financial Protection Bureau"

Senate Committee Narrowly Confirms Trump’s Pick to Head BCFP


WASHINGTON, D.C. — Kathy Kraninger, current associate director for general government at the Office of Management and Budget (OMB), was approved by the U.S. Senate Committee on Banking, Housing on Urban Affairs to lead the Bureau of Consumer Financial Protection (BCFP) by a narrow 13-12 vote.

Thursday’s vote sends President Donald Trump’s pick to head the bureau to the full Senate, which has yet to schedule a confirmation vote. If confirmed, Kraninger, who has been criticized for her lack of experience in consumer financial protection but lauded as a free-market ally in discussions about the BCFP-creating Dodd-Frank Act, would replace her boss at the OMB, Mick Mulvaney, as the bureau’s acting director.

“At her hearing, Ms. Kraninger reiterated her dedication to fulfilling the bureau’s congressional mandate, ensuring all consumers have access to markets for consumer financial products and services that are fair, transparent, and competitive,” said U.S. Sen. Mike Crapo (R-Idaho), who chairs the committee. “Given her depth and diversity of public service experience, I have the utmost confidence that she is well prepared to lead the bureau in enforcing federal consumer financial laws, protecting consumers’ sensitive personal financial information, expanding access to credit, and making the bureau more transparent and accountable.”

Kraninger, who previously worked for the Department of Transportation and was an early hire at the Department of Homeland Security, has never held public office or run a major government office or federal agency. She joined the Trump administration from the U.S. Senate Appropriations Subcommittee on Homeland Security and has served as an aide for several Senate panels.

In her role at the OMB, Kraninger helps draft budgets for seven cabinet departments and 30 government agencies totaling $250 million. That includes budgets for all financial regulators, including the CFPB.

In written testimony submitted at her July 29 nomination hearing, Kraninger emphasized that “the bureau should be fair and transparent, ensuring its actions empower consumers to make good choices and provide certainty for market participants” — goals that struck a positive chord with the financial services industry.

“The American Financial Services Association supports the Senate Banking Committee’s approval of the nomination of Kathy Kraninger as the next director of the Bureau of Consumer Financial Protection and is pleased to see her nomination pass the Banking Committee,” said Chris Stinebert, the association’s president and CEO, in a statement issued to F&I and Showroom shortly after today’s vote.

“We urge the full Senate to confirm her nomination,” he added.

Kraninger’s lack of experience, however, continued to draw criticism up until the vote, with detractors speculating that her nomination is simply a way to keep Mulvaney connected to an agency he’s worked to rein in since his appointment as acting director on Nov. 24, 2017 — the day Richard Cordray formally resigned as head of the bureau.

Kraninger has also faced questions about her role in other actions taken by the Trump administration, including its policy of separating children from their parents crossing the border and its response to the hurricanes that ravaged Puerto Rico. Also mentioned prior to the vote were reports that Mulvaney plans to suspend examinations of lenders for compliance with the Military Lending Act.

“We created the Consumer Protection Bureau to fight for average Americans, and stand up for the people we serve,” said Sen. Sherrod Brown (D-Ohio), ranking member of the Senate Banking Committee. “If there was any doubt at how important this agency is — and how damaging it can be in the wrong hands — we don’t have to look any further than Mr. Mulvaney’s outrageous actions last week, announcing that the Consumer Protection Bureau is no longer going after shady lenders that cheat our servicemembers.

“Ms. Kraninger has not spoken up and said she’ll defend our troops from payday lenders that prey on them, which speaks volumes,” he continued. “Instead we get, “I cannot identify any actions that Acting Director Mulvaney has taken with which I disagree.”

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CFPB Official Who Sued Trump Resigns, Drops Suit


WASHINGTON, D.C. — Leandra English, who former Consumer Financial Protection Bureau Director Richard Cordray’s picked to succeed him as acting director, is ending her court battle to unseat Mick Mulvaney as acting head of the bureau and her employment with the embattled regulator.

On Friday, English’s attorney, Deepak Gupta, posted a statement on Twitter that English is stepping down from her role as deputy director and that she plans to file court papers today to bring her litigation over the leadership of the CFPB to a close following President Trump’s nomination of Kathy Kraniger as permanent director of the agency.

“I will be stepping down from my position at the Consumer Financial Protection Bureau early next week, having made this decision in light of the recent nomination of a new director,” the statement, attributed to English, reads. “I want to thank all of the CFPB’s dedicated career civil servants for your important work on behalf of consumers. It has been an honor to work alongside you.”

On Monday, Mulvaney announced that Brian Johnson, who currently serves as the bureau’s principal policy director, will assume the bureau’s second leadership post as acting director. Prior to his appointment to the CFPB, Johnson served as senior counsel to Rep. Jeb Hensarling (R-Texas) at the House Financial Services Committee.

Mulvaney described Johnson as an “indispensable advisor,” noting that he was the first person he hired at the bureau. “Brian knows the bureau like the back of his hand. He approaches his role as a public servant with humility and unsurpassed dedication,” Mulvaney said in a statement released late Monday. “His steady character, work ethic, and commitment to free markets and consumer choice make him exactly what our country needs at this agency.”

When Cordray resigned on Nov. 24, 2017, he elevated English, his former chief of staff, to deputy director — a move that established her as acting director until the Senate confirms Trump’s permanent appointee.

Hours after Cordray’s announcement, Trump appointed Mulvaney as acting director, citing his authority under the Federal Vacancies Act (FVRA) of 1988. English filed suit two days later (Nov. 26) to block the appointment, arguing that she was the rightful acting director due to a successor statute in the CFPB-creating Dodd-Frank Act.

English’s attorneys also questioned whether allowing Mulvaney, who once characterized the bureau as a “sick joke,” to continue serving as a White House official would compromise the bureau’s independence. The argument was backed by the former lawmakers who championed the CFPB-creating Dodd-Frank Act.

“That was our intent, to strip this away from the politics of the moment, to give consumers the sense of confidence that there was one place here — when it came to their financial services — [where] there would be people watching out for them, regardless of political party or partisanship,” said former Sen. Chris Dodd during media call this past November.

On Nov. 29, three days after filing suit, English’s request for a restraining order to block Mulvaney’s appointment was denied by U.S. District Judge Timothy J. Kelly. English’s attorneys then filed an amended complaint on Dec. 6, 2017, requesting a preliminary injection to remove Mulvaney as acting head of the agency. That request was also denied by Kelly, a ruling set the stage for English’s appeal.

“The Court finds that English is not likely to succeed on the merits of her claims, nor is she likely to suffer irreparable harm absent the injunctive relief sought,” Judge Kelly wrote in his 46-page decision. “Moreover, the balance of the equities and the public interest also weigh against granting the relief. Therefore, English has not met the exacting standard to obtain a preliminary injunction.”

Kelly’s ruling set the stage for English’s appeal, on which a three-judge federal appeal panel in Washington, D.C., has yet to issue a ruling.

On June 19, Trump nominated Kraninger, a White House budget official who works under Mulvaney and served as an aide to several Republican senators, to serve as the next director of the bureau. The announcement came a week before Mulvaney’s interim term was set to end.

“I have never worked with a more qualified individual than Kathy. Her commitment to the law, to protecting consumers and to defending what works in our vibrant financial services sector, all while respecting hard-working taxpayers who pay their bills and play by the rules ensures that the bureau will be in good hands throughout her term,” Mulvaney said in a statement issued the same day Kraninger’s nomination was announced. “Vigorous independence, sharp-as-a-tack intelligence, and simple, old-fashioned, Midwestern humility make her the ultimate public servant. I know that my efforts to rein in the bureaucracy at the Bureau of Consumer Financial Protection to make it more accountable, effective and efficient will be continued under her able stewardship.”

Critics like Democratic Sen. Elizabeth Warren, however, have questioned Kraninger’s qualifications for the job because of her lack of experience in financial regulation or consumer protection.

email hidden; JavaScript is required Warren, who considered the architect of the CFPB, tweeted the day Kraninger’s appointment was announced. “That’s bad news for seniors, servicemembers, students — and anyone else who doesn’t want to get cheated. And it gets even worse.”

As for English’s Friday announcement, Warren said the following in a statement: “From the earliest days of the CFPB, Leandra has directed her passion and formidable skills to building a strong, professional agency that stands up for consumers. I’m grateful for her service and wish her the best in her future endeavors.

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CFPB: Longer-Term Loans Not Having Desired Effect for Borrowers, Finance Sources


WASHINGTON, D.C. — At F&I Think Tank 2017, held in Dallas on Sept. 14, F&I trainer Tony Dupaquier of The Academy revealed that the Consumer Financial Protection Bureau (CFPB) was actively monitoring the auto finance industry, performing audits to ensure finance sources are adhering to buying guidelines it’s helping to shape.

The revelation was based on interviews with representatives from four primary finance sources, two factory finance companies, and one secondary finance company. And according to those conversations, Dupaquier shared, what the regulator is concerned about is financial stress of the consumer.

On Tuesday, the CFPB released “Growth in Longer-Term Auto Loans,” and eight-page report that seemed to back the claims of Dupaquier’s anonymous sources. The bureau, however, noted that the report is part of a series of quarter reports of consumer credit trends using a “longitudinal, nationally-representative sample of approximately five million de-identified credit records from one of the three nationwide credit reporting agencies.”

The report centered on loan terms, noting that 42% of auto loans made in the last year carried a payback term of six or more years, compared to 26% in 2009. It also warned that six-year auto loans are riskier, cost more, are often used by consumers with lower credit scores to finance large amounts, and have higher rates of default.

“The move to longer-term auto loans is opening up more risk for consumers,” said CFPB Director Richard Cordray. “These loans are more expensive and can result in consumers continuing to owe even after they are no longer driving their car. Consumers should know before they owe and shop for the best deal based on costs incurred over the life of the loan.”

The report does concede that consumers are simply financing larger amounts, and are electing for longer terms to keep monthly payments affordable. The regulator, however, notes that the availability of longer-term loans may be the reason car buyers are financing more.

According to the bureau’s report, the average original loan amount for a five-year loan was $20,100, compared to $25,300 for a six-year loan. The average finance amount for loans with terms of seven years or more was $32,200. “To the extent that consumers are buying more expensive cars, making smaller down payments, or otherwise financing larger loan amounts, the increased use of these longer-term loans may be a result,” the report states.

The bureau notes in its report that the average amount financed in 2009 was $18,179. By 2016, the average increased by 16%. And because of longer-term loans, the average monthly payment increased only 7% over that same period. However, the report also shows that loans with terms of six years or more had a default rate that exceeded 8%, whereas shorter-term loans have had default rates closer to 4%.

“That means that six-year loans are about twice as likely as five year-loans to result in a default,” the report states, in part. “The greater adoption of these loans may potentially pose greater risks to both consumers and lenders.”

The reason, according to the bureau, is consumers with lower credit scores are typically the ones electing for longer-term loans. The report notes that the average credit score for borrowers who take out six-year loans is 674, which is 39 points below the average for borrowers who take out five-year loans.

“The higher default rates observed for six-year loans should not be interpreted as a causal relationship,” the bureau warns. “Borrowers who expect to struggle making the payments on a loan financed over five years may be more likely to opt for longer-term financing to ease their financial burden each month. Riskier borrowers may thus prefer longer-term loans, which is consistent with our [findings] that borrowers taking out six-year loans tend to have lower credit scores than borrowers with five-year loans.”

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President Trump Orders Review of Dodd-Frank


WASHINGTON, D.C. — President Donald Trump took his first step toward making good on his promise to dismantle the Dodd-Frank Wall Street Reform and Consumer Protection Act, signing on Friday an executive order directing the secretary of the Treasury to review the 2010 financial oversight law.

The order directs the Treasury secretary to consult with members of regulatory agencies and the Dodd-Frank-created Financial Stability Oversight Council and report back to the president within 120 days (and periodically thereafter). The report, and all subsequent reports, will identify any laws and regulations that inhibit federal regulation of the U.S. financial system.

“Today we’re signing core principles for regulating the United States financial system,” Trump said after signing the order. “It doesn’t get much bigger than this, right?”

The core principles his order lays out include regulations that “empower Americans to make independent financial decisions”; prevent taxpayer-funded bailouts; foster economic growth; enable American companies to be competitive in domestic and foreign markets; advance American interests in international financial regulatory negotiations; and “restore public accountability within federal financial regulatory framework.”

“The Dodd-Frank Act is a disastrous policy that’s hindering our markets, reducing the availability of credit, and crippling our economy’s ability to grow and create jobs,” said White House Press Secretary Sean Spicer during a press briefing. “Perhaps worst of all, despite all of its overreaching, Dodd-Frank did not address the causes of the financial crisis, something we all know must be done.”

Enacted in response to the Great Recession, the Dodd-Frank Act created new regulations along with several new government enforcement agencies, including the Consumer Financial Protection Bureau (CFPB). While Trump’s order isn’t expected to have an immediate impact, it does set the stage for Trump to fulfill his campaign promise to repeal and replace the act. The likely replacement bill is the Financial CHOICE Act of 2016, which was introduced last year by Rep. Jeb Hensarling (R-Texas). It stands for “Creating Hope and Opportunity for Investors, Consumers and Entrepreneurs.”

“I’m very pleased that President Trump signed this executive action, which closely mirrors provisions that are found in the Financial CHOICE Act to end Wall Street bailouts, end ‘too big to fail,’ and end top-down regulations that make it harder for our economy to grow and for hardworking Americans to achieve financial independence,” said Hensarling. “Dodd-Frank failed to keep its promises, but President Trump is following through on his promise to the American people to dismantle Dodd-Frank. Republicans are eager to work with the president to end and replace the Dodd-Frank mistake …”

Repealing Dodd-Frank, however, doesn’t necessarily mean the CFPB will be eliminated, as it exists independent of the law that created it. However, regulatory insiders say passage of the Financial CHOICE Act could weaken the bureau. A federal appellate court also ruled the bureau’s single-director structure unconstitutional this past October, giving the president the power to remove Director Richard Cordray at will. The CFPB is appealing that decision.

Asked during Friday’s  press briefing if the administration planned to keep Cordray, Spicer said he didn’t have an announcement on the bureau. “That’s an area that we need to work with Congress on,” he said.

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Senate Republicans Introduce CFPB-Restructuring Bill


WASHINGTON, D.C. — U.S. Senator Deb Fischer (R-Neb.) reintroduced on Jan. 11 legislation aimed at replacing the director of the Consumer Financial Protection Bureau with a five-member bipartisan board. The bill was introduced just as Congressional Democrats and state regulators pledged to defend the bureau against attacks from the Trump administration.

This is the third time Fischer has introduced a CFPB-restructuring bill; the Republican lawmaker having introduced similar legislation during each of the previous two congressional sessions. This time, Fischer introduced her bill — S. 105, or the Consumer Financial Protection Board Act — less than four months after a three- judge panel of the U.S. Court of Appeals ruled the bureau’s leadership structure unconstitutional and vacated its $109 million fine against mortgage lender PHH Corp.

“For years, the bad decisions made by a single director at the CFPB have kept families locked out of economic opportunity,” Fischer stated in her press release announcing the bill, which sits in the Senate Committee on Banking, Housing and Urban Affairs. “My bill would prevent this misconduct by divesting the authority from one director to a five-member bipartisan board. This much-needed structural adjustment would bring accountability to the bureau and give more Americans a chance to build their own businesses and provide for their families.”

Under S. 105, each board member would be appointed by the president and confirmed by the Senate. The president would also appoint one of the five members to serve as chairperson of the board, which would consist of no more than three members from the same political party. Each board member would serve staggered five-year terms.

If passed, the legislation, which lists Senators John Barrasso (R-Wyo.) and Ron Johnson (R-Wisc.) as cosponsors, would take effect once the Senate confirms three members.

Replacing the single CFPB director with a committee is also part of legislation Republicans in the House of Representatives introduced last September. That bill, also known as the Financial CHOICE Act of 2016, would also repeal and replace the Dodd-Frank Wall Street Reform Act, as well as repeal the CFPB’s March 2013 guidance on dealer participation.

Senators Charles Schumer (D-N.Y.), Sherrod Brown (D-Ohio), and Elizabeth Warren (D-Mass) threw their support behind CFPB Director Richard Cordray and his agency during a Jan. 17 press call. Rumors have circulated around Washington D.C., that President Donald Trump and his administration plan to fire the director and abandon the legal defense of the agency in its appeal of the federal appellate court’s October 2016 ruling. The Senate Democrats claim Cordray’s firing would go against Trump’s promise to keep Wall Street accountable.

Sen. Brown and Rep. Maxine Waters (D-Calif.) then filed on Jan. 23 a motion to intervene in the bureau’s appeal. Seventeen attorneys generals followed suit the same day.

The attorneys general from Connecticut, Delaware, Hawaii, Illinois, Iowa, Maine, Maryland, Massachusetts, Mississippi, New Mexico, New York, North Carolina, Oregon, Rhode Island, Vermont, Washington, and the District Columbia are seeking to defend the constitutionality of the bureau. They argue that the federal appellate court’s ruling, if permitted to stand, would undermine the power of state attorneys general to effectively protect consumers against abuse in the consumer finance industry, as well as “significantly lessen the ability of the CFPB to withstand political pressure and act effectively and independently of the president.”

The regulators also argue that it’s critical they intervene in the case because President Trump has expressed strong opposition to the Dodd-Frank reforms that created the CFPB. “The CFPB is the cop on the beat, protecting Main Street from Wall Street misconduct,” said Attorney General George Jepsen, who led the group of regulators in their filing of the motion. “It was structured by Congress to be a powerful and independent agency that would protect consumers from the abuses of Wall Street, banks, and other large financial institutions. That mission is still critical to consumers today. However, the Trump Administration has said it intends to weaken the CFPB.

“That calls into question whether the new administration will adequately defend the CFPB and the American public it protects.”

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Federal Appeals Court Rules CFPB Structure Unconstitutional


WASHINGTON, D.C. — On Tuesday, a federal appeals court ruled that the structure of the Consumer Financial Protection Bureau is unconstitutional. The appellant court’s main issue is the bureau’s single-director structure, which it found to possess “enormous power over American business, American consumers, and the overall U.S. economy.”

The U.S. Court of Appeals for the District of Columbia Circuit stopped short of calling for the CFPB to be shut down in its 2-1 ruling. Instead, it ruled that the president will now have the authority to remove the director of the CFPB at will. Currently, the CFPB director can only be removed by the president for cause.

“To remedy the constitutional flaw, we follow the Supreme Court’s precedents … and simply sever the statute’s unconstitutional for-cause provision from the remainder of the statute,” wrote Judge Brett Kavanaugh in court’s 110-page majority opinion. “With the for-cause provision severed, the President now will have the power to remove the director at will, and to supervise and direct the director. The CFPB therefore will continue to operate and to perform its many duties, but will do so as an executive agency akin to other executive agencies headed by a single person, such as the Department of Justice and the Department of the Treasury.”

The case came about after the bureau fined mortgage lender PHH Corp. for allegedly accepting kickbacks from mortgage insurers. The lender appealed the fine, which led to Tuesday’s decision. And as part of that ruling, the federal appeals court threw out the bureau’s $109 million fine against PHH Corp.

To read the full story, click here to read a report from The Washington Post.

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