Kraninger quits diminished CFPB but ready for Biden rise
Kathy Kraninger’s two years at the top of the CFPB saw an easing of enforcement and regulations, but she left the groundwork in place for the consumer watchdog agency to revert to its old form.
The Consumer Financial Protection Bureau, headed by former director Richard Cordray, was seen as a robust regulator that aimed to push the boundaries of oversight of participants in financial markets. In contrast, Kraninger saw the office become a much quieter regulator, said Christine Hines, legislative director of the National Association of Consumer Advocates.
“During her tenure, it was more about making life a little easier for the financial industry and financial institutions,” she said.
Kraninger, a Trump-appointed person who had no previous experience in financial market surveillance when she became director in December 2018, announced on Wednesday that she was leaving the office immediately. On January 18, President Joe Biden (D) chose Rohit Chopra, Commissioner of the Federal Trade Commission and former CFPB student loans ombudsman, to be the next CFPB director.
Kraninger arrived at the Bureau of Management and Budget office, where she oversaw the budgets of executive agencies and previously helped set up the Department of Homeland Security.
The CFPB rolled back payday loan regulations, limited its oversight of student loan managers, and saw a significant drop in execution penalties during Kraninger’s tenure.
But Kraninger also lifted the CFPB hiring freeze, improved the office’s consumer-compliant database and left more than 100 investigations open to Chopra, according to documents obtained by Bloomberg Law.
“On the eve of a new administration, the CFPB remains fully armed and operational for the next director,” said Jonathan Pompan, partner at Venable LLP.
On the sidelines
A Biden CFPB is expected to be much more aggressive in monitoring banks and financial firms to comply with Covid-19 consumer assistance provisions.
“During the current downturn, she really let a bunch of industry players off the hook,” said Ashley Harrington, federal director of advocacy at the Center for Responsible Lending, of Kraninger’s tenure.
The CARES Act, the first Covid relief plan enacted last March, included provisions requiring lenders to grant forbearance to mortgage borrowers and students facing economic hardship. The law also prohibits negative credit reports due to Covid-19.
The office issued guidelines for the industry after the law passed in April said banks and others would not be subject to enforcement action for violations of the CARES Act, as long as they did. “good faith” efforts to fix the problems.
Another area where Kraninger pulled the reins of the CFPB was oversight of the student loan industry.
The Dodd-Frank Act of 2010 gave the CFPB oversight power over student loan services, but Education Secretary Betsy DeVos in 2017 prevented the office from monitoring. According to Seth Frotman, the former CFPB student loans ombudsman, the CFPB could have been more authoritative and overseeing loan services without the approval of the Department of Education.
“For years the office has been completely on the sidelines,” said Frotman, now executive director of the Student Borrower Protection Center.
The financial services industry didn’t get everything it wanted from Kraninger, said Alan Kaplinsky, senior legal counsel at Ballard Spahr LLP and former head of the firm’s Consumer Financial Services group.
“It turned out to be a quick study,” said Alan Kaplinsky, senior counsel at Ballard Spahr LLP and former head of the company’s consumer financial services group. “As her tenure progressed, it became clear to the industry that it was not going to be child’s play in terms of its attitude towards compliance.”
Kraninger oversaw the cancellation of the 2017 CFPB Payday Loan Rule, the last major regulation completed under Cordray’s leadership.
Kraninger’s CFPB removed requirements – the centerpiece of the old rule – that payday lenders determine whether borrowers can repay their loans, but maintained restrictions on how payday lenders can access accounts consumer banking. Consumers give payday lenders the right to access their bank accounts when they take out short-term, high-cost loans.
The payday loan industry, which had hoped to escape the rule altogether, continuation of litigation against Kraninger’s CFPB in an attempt to remove restrictions on access to bank accounts.
The CFPB saw its execution figures are falling under Kraninger versus Cordray.
In Cordray’s five years of operation, the CFPB has returned more than $ 12 billion to consumers. During Kraninger’s just over two years as a director, the CFPB recouped more than $ 1.5 billion in consumer redress.
While many of Kraninger’s enforcement actions targeted small-scale scams, the CFPB has clashed with some major players, such as Fifth Third Bank and Citizens Bank, as well as Midland Funding, one of the world’s largest debt collection firms. from the country.
“It seemed like every time I turned around there was another consent order or another legal action,” Kaplinsky said.
Ready to go
Some CFPB functions that consumer advocates feared would be cut under Kraninger have been left in place.
One example is the CFPB consumer complaints database, which many advocates feared would no longer be accessible to the public. Despite industry calls to make the online complaints portal private, Kraninger has increased the amount of information available to the public and made it easier to find.
Kraninger also lifted the hiring freeze put in place by former interim manager Mick Mulvaney, although the agency remains understaffed, Harrington said.
Consumer advocates are pushing for those named by Biden, including Chopra, to quickly return the agency to its more aggressive roots. Chopra is seen as an ally of Senator Elizabeth Warren (D-Mass.), The architect of the CFPB, and is expected to set an aggressive tone in the office.
“A vital part of the Biden-Harris campaign was tackling the pandemic, promoting racial fairness. So we expect the next director to do these things. And that means protecting people’s finances during this pandemic, ”Harrington said.