‘Preventing harm to consumers’ top aim of bureau, director says; House Dem report says agency fails to seek consumer relief

Preventing harm to consumers is the top priority of the federal consumer financial protection agency, its director told a House committee Wednesday – which the agency does through education, providing “clear rules of the road” to regulated entities, enforcement and supervision to ensure compliance, and support of “dynamic and competitive markets that provide for consumer choice.”

But Democrats on the committee issued a report before that testimony, criticizing the lack of bureau action in seeking  relief for consumers.

In her semiannual report to Congress – Wednesday’s report was to the House, Thursday she reports to the Senate – Consumer Financial Protection Bureau (CFPB) Director Kathleen (“Kathy”) Kraninger touched on actions the agency took in the first half of fiscal year 2019 – and actions the agency will be taking in the second half. Many of those actions were outlined in the bureau’s written semiannual report issued last week.

However, she focused on some key actions – including last week’s final revised rules regarding Home Mortgage Disclosure Act (HMDA) disclosures, required under last year’s regulatory relief legislation (the Economic Growth, Regulatory Relief and Consumer Protection Act, EGRRCPA, S.2155). She called those revisions “needed relief” for smaller lenders.

She also told the committee that, where the bureau cannot “prevent harm” to consumers, it uses its enforcement tools to hold bad actors accountable. “Every case is managed by bureau attorneys seeking justice in the public interest,” she said. She added that, in FY 2019, the bureau announced 22 public enforcement actions and settled six previously filed lawsuits. She highlighted, for example, the bureau’s action in June against Freedom Mortgage Corp. (one of the 10 largest HMDA reporters nationwide, according to the bureau) of a $1.75 million fine reached through a settlement. The agency had found that Freedom reported inaccurate race, ethnicity, and sex information and that much of Freedom’s loan officers’ recording of this incorrect information was intentional.

Prior to the hearing, however, committee Chairwoman Maxine Waters (D-Calif.) released a report from Democrats on the committee (a “majority” report) outlining what the report said were actions by the bureau “undermining” the agency’s “previously robust policing of misconduct in the financial sector.”

The report stated that in February committee Democrats opened an investigation to examine what the report asserted was failure by the agency “to seek consumer relief in certain cases.”

According to the report:

  • A political appointee at the agency overruled recommendations of career enforcement attorneys and non-partisan senior management officials’ to require Enova International, Inc. (an online lender that extends unsecured payday and installment loans, and lines of credit) to refund “millions of dollars it had illegally taken from consumers’ accounts.” In January, the bureau announced the settlement with Enova International, Inc., based in Chicago, Ill., which required Enova to pay a $3.2 million civil money penalty related to illegal debiting of consumers accounts and other violations. No refund to consumers was mentioned by the agency.
  • Bureau leadership played a key role in preventing consumers harmed by Sterling Jewelers, Inc.’s “unlawful conduct from receiving restitution, despite staff recommendations that Sterling should pay redress to consumers.” Also in January, the bureau said the company – an Ohio-based jewelry retailer, which includes among its name brands prominent stores across the nation – agreed to a $10 million civil money penalty to federal authorities and a $1 million penalty to New York state for opening credit-card accounts without customer consent and other actions. No mention was made of restitution.

The Democrats’ report also asserted that the bureau, under leadership appointed by Republican President Donald Trump, has seen enforcement decreased dramatically and that Congress should “take action to reverse the politicization of the Consumer Bureau.” The committee Democrats also recommended that the committee should consider ways to strengthen the provisions in the Consumer Financial Protection Act of 2010 (CFPA), which they said authorizes the agency to investigate potential violations of federal consumer financial law and seek relief for consumers through enforcement actions.

Written Testimony of Kathleen L. Kraninger, Director, Consumer Financial Protection Bureau Before the House Committee on Financial Services

House FSC Democrats’ report: Settling for Nothing: How Kraninger’s CFPB Leaves Consumers High and Dry