The CFPBs Wild Year, and What to Expect for the Year Ahead

The Consumer Financial Protection Bureau (CFPB) was established under President Obama to enforce consumer protections and regulate lenders and investment entities who may cause harm to both customers and society at large. But 2018 may have been a turning point for the organization, which experienced not one but two new directors, a brief and odd flirtation with a name change, and a challenge to its very constitutionality by Consumer Legal Funder, RD Legal.

As reported in Manatt, 2018 was not necessarily a great year for the CFPB. Acting director Mick Mulvaney took over the organization in late 2017 after Obama appointee Richard Cordray stepped down from his post. Mulvaney had long-criticized the broad overreach enacted by Cordray’s CFPB, and his first major act as director was to place all enforcement actions on hold while they underwent an internal review.

Mulvaney also requested zero dollars from the Trump Administration for the bureau’s activities budget. Certainly no one can question Mulvaney’s commitment to scaling back operations!

One of Mulvaney’s odder moments as acting director was his flirtation with a name change, from CFPB to BCFP (say that five times fast). BCFP stands for Bureau of Consumer Financial Protection, which of course is very different from the Consumer Financial Protection Bureau. The name change was ultimately scrapped, but many accused Mulvaney of creating an unnecessary distraction for the organization, in order to avoid doing any real regulating (which he is clearly opposed to).

The most notable incident involving the CFPB in 2018 – at least as far as LFJ is concerned – came amidst the CPFBs joint claim with the New York Attorney General’s Office (NYAG) against Consumer Legal Funder, RD Legal. The CFPB and NYAG accused RD Legal of defrauding 9/11 victims and ex-NFL players by using predatory lending tactics. For its part, RD Legal counters that its financing should be classified as an investment, not a loan (this is an ongoing debate in the Consumer Legal Funding world).

However, quite interestingly, RD Legal filed a motion for dismissal based on the argument that the CFPB is by nature unconstitutional, given that the agency is led by a single director with the power to be fired by the President of the United States. That creates an inherent conflict, according to RD’s motion. Federal Judge Loretta Preska agreed, echoing an earlier ruling by a three-judge panel (one of those judges was the soon-to-be-elected Supreme Court Justice Brett Kavanaugh). Judge Preska dropped the CFPB from the suit, and eventually did the same with the NYAG. The CFPB is currently appealing Judge Preska’s decision.

So it goes without saying that a lot hangs in the balance in terms of the CFPBs very constitutionality, and its ability to bring cases against alleged offenders.

Eventually, Kathy Kraninger was appointed as Mulvanye’s successor to the CFPB. That sets up some expectations for the year ahead. While Kraninger did work under Mulvaney at the Office of Management and Budget, she isn’t expected to be as steadfast in her opposition to the organization she now runs. That said, she’s not expected to be anywhere near the aggressive attack dog that former director Cordray has been characterized as (by both his supporters and detractors). It is expected that  Kraninger will carve out a middle path between the two.

That is assuming, of course, that the very constitutionality of the CFPB is upheld, and the organization continues to function.

However, it’s also worth noting that with the Democrats taking over the House of Representatives, Rep. Maxine Waters is the odds-on-favorite to lead the House Financial Services Committee. With a presidential election looming in 2020, expect some back-and-forth (to put it lightly) between Rep. Waters and director Kraninger.

To sum it all up, 2018 was a year of fireworks for the CFPB. Don’t expect as much headline entertainment in 2019, but a few big bangs wouldn’t surprise us.

The Consumer Financial Protection Bureau (CFPB) was established under President Obama to enforce consumer protections and regulate lenders and investment entities who may cause harm to both customers and society at large. But 2018 may have been a turning point for the organization, which experienced not one but two new directors, a brief and odd flirtation with a name change, and a challenge to its very constitutionality by Consumer Legal Funder, RD Legal.

As reported in Manatt, 2018 was not necessarily a great year for the CFPB. Acting director Mick Mulvaney took over the organization in late 2017 after Obama appointee Richard Cordray stepped down from his post. Mulvaney had long-criticized the broad overreach enacted by Cordray’s CFPB, and his first major act as director was to place all enforcement actions on hold while they underwent an internal review.

Mulvaney also requested zero dollars from the Trump Administration for the bureau’s activities budget. Certainly no one can question Mulvaney’s commitment to scaling back operations!

One of Mulvaney’s odder moments as acting director was his flirtation with a name change, from CFPB to BCFP (say that five times fast). BCFP stands for Bureau of Consumer Financial Protection, which of course is very different from the Consumer Financial Protection Bureau. The name change was ultimately scrapped, but many accused Mulvaney of creating an unnecessary distraction for the organization, in order to avoid doing any real regulating (which he is clearly opposed to).

The most notable incident involving the CFPB in 2018 – at least as far as LFJ is concerned – came amidst the CPFBs joint claim with the New York Attorney General’s Office (NYAG) against Consumer Legal Funder, RD Legal. The CFPB and NYAG accused RD Legal of defrauding 9/11 victims and ex-NFL players by using predatory lending tactics. For its part, RD Legal counters that its financing should be classified as an investment, not a loan (this is an ongoing debate in the Consumer Legal Funding world).

However, quite interestingly, RD Legal filed a motion for dismissal based on the argument that the CFPB is by nature unconstitutional, given that the agency is led by a single director with the power to be fired by the President of the United States. That creates an inherent conflict, according to RD’s motion. Federal Judge Loretta Preska agreed, echoing an earlier ruling by a three-judge panel (one of those judges was the soon-to-be-elected Supreme Court Justice Brett Kavanaugh). Judge Preska dropped the CFPB from the suit, and eventually did the same with the NYAG. The CFPB is currently appealing Judge Preska’s decision.

So it goes without saying that a lot hangs in the balance in terms of the CFPBs very constitutionality, and its ability to bring cases against alleged offenders.

Eventually, Kathy Kraninger was appointed as Mulvanye’s successor to the CFPB. That sets up some expectations for the year ahead. While Kraninger did work under Mulvaney at the Office of Management and Budget, she isn’t expected to be as steadfast in her opposition to the organization she now runs. That said, she’s not expected to be anywhere near the aggressive attack dog that former director Cordray has been characterized as (by both his supporters and detractors). It is expected that  Kraninger will carve out a middle path between the two.

That is assuming, of course, that the very constitutionality of the CFPB is upheld, and the organization continues to function.

However, it’s also worth noting that with the Democrats taking over the House of Representatives, Rep. Maxine Waters is the odds-on-favorite to lead the House Financial Services Committee. With a presidential election looming in 2020, expect some back-and-forth (to put it lightly) between Rep. Waters and director Kraninger.

To sum it all up, 2018 was a year of fireworks for the CFPB. Don’t expect as much headline entertainment in 2019, but a few big bangs wouldn’t surprise us.