On Thursday, the Senate Committee on Banking, Housing, and Urban Affairs voted to approve President Trump’s nomination of Kathy Kraninger to become director of the Consumer Financial Protection Bureau. If confirmed by the full Senate, she will inherit an agency that now, finally, cares less about political motives and more about consumer choice, all thanks to the efforts of Acting Director Mick Mulvaney.
Conceived under Dodd–Frank, by design, the bureau was isolated from congressional oversight and accountability, giving Beltway bureaucrats the power to act on their own with impunity. Under the leadership of its first director, Obama-appointed Richard Cordray, the bureau failed to live up to its original intentions and became a menace to the very consumers it was intended to protect.
Lawmakers structured the bureau’s budget to be funded by the Federal Reserve and to be headed by a single director who could only be removed by the president in rare cases. This structure was in stark contrast to that of similar financial regulators like the Securities and Exchange Commission or the Commodity Futures Trading Commission who have five-person bipartisan boards, and are funded through appropriations from Congress, creating taxpayer oversight.
Cordray and his team of overzealous regulators imposed red tape that ranged from decreased access to prepaid credit cards to diminishing the ability of cash-strapped consumers to get small-dollar loans. Unaccountable rulemaking went so far as an attempt to regulate the auto dealer industry, which Dodd-Frank explicitly prohibited the CFPB from doing. Yet, the bureau sought to find an end-run around Congress to score political points. The infant bureau quickly became the fastest rulemaking body in the federal government, passing regulations 3.5 times faster than any other agency, implementing more than two dozen rules with compliance costs amounting to $3.1 billion.
Mulvaney has taken a series of steps to turn the CFPB into what he calls a “gold-standard” regulator, similar to the SEC and CFTC.
Since the CFPB doesn’t have to file proposed rules to Office of Information and Regulatory Affairs within the White House’s Office of Management and Budget for economic analysis, like other agencies do, Mulvaney has fashioned a cost-benefit office. The office is tasked with reviewing the economic impact of CFPB rulemaking and enforcement. This will help the agency carry out its duties under the law, ensuring it punishes bad actors without generating excessive legal burdens.
After taking the helm of the bureau, Mulvaney was shocked by its bloated budget. Seeing $145 million previously spent on travel and lush office renovations, he’s asked staff to reduce their budget by 20 percent to help curb waste. While Mulvaney hopes the agency will fall under congressional appropriations in the near future, he knows this is a step in the right direction.
Turning the bureau into more of a facilitator than a hindrance, Mulvaney has also created a regulatory sandbox at the CFPB that will help financial technology companies to create technological advances without fear of undue regulatory weight. Allowing innovators to work with agency officials by creating safe-harbor protections, consumers can get faster access to new services like online bill payments and peer-to-peer crowdsourcing.
To help facilitate all these changes, Mulvaney has brought over some of the brightest and hardest working congressional staff. Recently, he’s hired Brian Johnson, former senior counsel to House Financial Services Committee, and Kirsten Sutton, former staff director to the committee.
Once Mulvaney returns back to the Office of Management and Budget permanently, which is expected before the end of the year, Kraninger can expect a more accountable agency that works on behalf of consumers instead of regulating for headlines.
Matthew Adams is a federal affairs associate at Americans for Tax Reform.
