Consumer Law & Policy Blog

Read NY's suit against the Trump Foundation, Trump, Ivanka Trump, Trump Jr., and Eric Trump

You know that New York has sued Trump's Foundation, and Trump and his kids individually, alleging that the Foundation 

was little more than a checkbook for payments to not-for-profits from Mr. Trump or the Trump Organization. This resulted in multiple violations of state and federal law because payments were made using Foundation money regardless of the purpose of the payment. Mr. Trump used charitable assets to pay off the legal obligations of entities he controlled, to promote Trump hotels, to purchase personal items, and to support his presidential election campaign. (quoting paragraph 2 of the N.Y. AG's petition)

But you may not have read the actual petition filed in court. It's here and worth a read.

Another article on the prospect of Kraninger as new CFPB head

Following up on Jeff's post from yesterday, Ben White and Katy O'Donnell at Politico write that Mulvaney OMB associate said to be likely pick to head consumer bureau. Here is an excerpt:

President Donald Trump is likely to pick Kathy Kraninger, who works under Mick Mulvaney at the White House budget office, as the next director of the Consumer Financial Protection Bureau, a person familiar with the decision said Friday. The selection of Kraninger, an associate director at the Office of Management and Budget, would be a surprise since she had not been widely discussed as a replacement for Mulvaney. ... An announcement is expected next week. In her OMB position, Kraninger is responsible for developing the budgets of several agencies, including the Department of Housing and Urban Development. Congress has repeatedly ignored the Trump administration’s requests to slash HUD’s funding, boosting its appropriations instead. Kraninger has held positions with both the House and Senate Appropriations Committees. But she doesn’t have a background in financial policy, which could be a sticking point in her confirmation.

 

Now Bloomberg says Kathy Kraninger is the leading choice to be the next CFPB director

by Jeff Sovern

Here.  Four anonymous sources say she is Trump's leading choice. Will we hear a different name tomorrow?  Excerpt:

Kraninger, an associate director at OMB, previously worked for the Department of Homeland Security and the Senate Appropriations Committee.

* * *  

The potential selection of Kraninger, which could be announced next week, is likely to raise concerns among Democrats, especially because of the lack of financial policy expertise in her background.

* * * 

 Kraninger is a 2007 graduate of Georgetown University Law Center, according to her LinkedIn profile. As part of her work at OMB, she has worked with Treasury Department Counselor Craig Phillips on Trump’s review of the U.S. Postal Service, the Washington Post reported last month.

I can't think of any other candidates whose names have surfaced who have no background in consumer financial issues.  Looks like either the various conflicting news reports are simply wrong (a.k.a. fake news) or the chaos in the Trump White House is extending to this choice.  

House Appropriations Committee Votes to Subject CFPB to Annual Appropriations

by Jeff Sovern

The Hill has a report here. I don't think that can pass the Senate unless the Senate abolishes the filibuster rule or nine Democratic senators go along with it, so it seems unlikely to pass unless Democrats make a deal to do something they see as more important--which hasn't happened in the years the Republicans have been trying to get this through and so seems unlikely to happen this year.

Issa says he's not discussing taking over the CFPB with the White House

by Jeff Sovern

Bloomberg said Issa was a contender just two days ago but The Hill reports Issa claims the matter is not under current discussion. If the press reports are accurate, it's striking that the White House seems to be shifting so quickly on selecting someone it has known it would need to nominate since November, and really, since January of 2017 

McWatters now said to be out and Zywicki front-runner for CFPB

by Jeff Sovern

So says C. Ryan Barber in the National Law Journal.  Things shift quickly in the Trump White House. The report is attributed to two unnamed sources.  Zywicki would be a formidable candidate. He is smart, a prolific writer, and served as Director of the Office of Policy Planning at the Federal Trade Commission. His downside--and it's a huge one--is his ideological straitjacket. It was on display in his February op-ed in the WSJ, The CFPB Could Be a Force for Good. That's an encouraging title--at least he's not calling the Bureau a sad sick joke--but here's an excerpt:

During Richard Cordray’s tenure as director of the Consumer Financial Protection Bureau, the CFPB pummeled American consumers and the economy while doing little to promote financial stability. The pain was especially acute for low- and middle-income consumers who lost access to credit cards, faced higher bank fees and reduced access to free checking, and found it harder and costlier to obtain mortgages, especially as first-time homebuyers. * * *

* * * 

American families know better than bureaucrats what financial products best meet their needs. One justification for the CFPB’s broad scope of authority was to enable it to oversee the entire consumer-credit ecosystem and break down the traditional regulatory silos that focus on who issues financial products instead of how consumers use them. The CFPB should concentrate its efforts on empowering families instead of banning products or using trendy behavioral-economics theories to “nudge consumers toward decisions central planners favor. * * * 

Mr. Cordray’s CFPB viewed consumers as too dumb, irrational or vulnerable to make their own decisions about whether to enter into a contract with an arbitration clause, take out a payday loan, or bargain with a car dealer over an auto loan. * * * 

Because Zywicki has written so much, if he is the nominee, we can expect opponents to go through his writings carefully looking for matters to question him about during confirmation hearings. Some of his writings can be expected to be controversial, and I am among the people who have offered a critique.

Top bank regulator unaware of discrimination

Politico reports that Joseph Otting, the head of the Office of the Comptroller of the Currency, a federal agency is responsible for enforcing fair lending laws, refused to say directly that discrimination exists, during questioning at a House Financial Services hearing on Wednesday. Among the laws that the OCC oversees is the Community Reinvestment Act, which encourages banks to lend to low- and moderate-income borrowers. Otting wants to to reform that law.

The article is here.

CFPB announces second enforcement action under Mulvaney

by Jeff Sovern

Here, against Security Group, Inc. As expected, the case involves debt collection problems but the Bureau also found FCRA issues. Here's an interesting thing about the case: remember how Mulvaney suggested that enforcement actions ought to be based on the numbers of complaints received? Well, I ran the three names in the CFPB's announcement--Security Group Inc., Security Finance Corporation of Spartanburg and Professional Financial Services Corp.--through the complaint database and didn't come up with a single hit. It's possible that the Bureau received complaints about them that the consumers didn't agree to make public or that the Bureau received complaints about the company under another name, but it seems unlikely that the Bureau received many such complaints.  In any event, the Bureau seems not to be limiting enforcement actions to companies with a large presence in the complaint database.  It is encouraging that the Bureau has brought a case against a company besides Wells Fargo. But this still leaves Mulvaney bringing cases at a rate that is less than one for every ten cases brought under Cordray.

 

President expected to name CFPB director next week; McWatters said to be front-runner but Issa also possible

So says Bloomberg.

Where are the defenders of Mulvaney's decision to fire the CAB members? Anyone? Bueller?

by Jeff Sovern

It feels as if there has been a steady stream of op-eds attacking Mulvaney's decision to fire the CFPB's Consumer Advisory Board members. We've posted links here and here and I commented here.  A couple more links appear below. But usually someone outside the Bureau defends Mulvaney's acts.  Where are they this time (you can post links in the comments)? 

As for the new op-eds, they are both by industry folks. One is authored by lawyer, Joane Needleman of Clark HIll who formerly served on the CAB has an op-ed here. I'm pasting in an excerpt, but because I don't want to quote too much, I left out some parts worth reading and so recommend clicking on the link to read the whole piece. In particular, I'm not sure Ms. Needleman's tone comes through in the words below.

At my last CAB meeting in June of 2017, retiring members were asked to say a few words about their experiences. I thanked the Bureau staff who were an incredible team of dedicated public servants that had the daunting task of “schlepping” board members from one meeting to the next and coordinating travel schedules and logistics; all with a smile and with impeccable precision. I thanked Director Cordray and complimented him on his leadership of the Bureau. Despite our well-documented differences, he did his job very well.  * * * 

I was disappointed to learn this week that Acting Director Mulvaney has “fired” not only the current CAB but the current Advisory Boards for Community Banks and Credit Unions. As the Acting Director and under the current structure of the Bureau, terminating these board members seems to be within his authority, but it was not the right thing to do. The Bureau’s press release, issued shortly after members were informed that they were relieved of their services, suggested that the Acting Director wanted to “transform the way the Bureau engages.” I support that decision but a lack of engagement was certainly not a characteristic of the current and past CAB members and certainly not a basis to terminate them. If anything CAB members looked forward to and always desired an open dialogue with the Bureau. 

In the past 6 months, many CAB members had disagreements with certain Bureau activities much like I did during my tenure, but I was never asked to leave. Advisory boards cannot and should not be a rubber stamp; if they were, they would serve no purpose. Could the activities of the CAB and their engagement with the Bureau have been improved? Of course. But start with the existing group that understands how to make the process better. * * *

Problems do not get solved by one-sided viewpoints. The fear of compromise serves only to further divide us. I wish my CAB colleagues well and hope that we can one day again meet in the middle. 

The other piece is by Arjan Schütte, founder and a managing partner of Core Innovation Capital, and appears in The American Banker. Here's an excerpt:

I was fired from the Consumer Financial Protection Board’s Consumer Advisory Board last week, along with all of its other members. Why? Because the acting head of the bureau, Mick Mulvaney, appears intent on running the consumer protection bureau into the ground while claiming a lack of “global perspective” and wanting a “fresh start.”

Never mind that this board has been the most diverse it has ever been — split about evenly between consumer advocates and business people (with some academics thrown in for good measurement). If Mr. Mulvaney was concerned the board was only wild-eyed consumer protection activists, he didn’t appear to notice executives from industry giants Citi, Discover, FICO, Mastercard and PNC. Or if he really cared about private sector innovation, as he claims, he missed the presence of fintech legend Max Levchin, TrueAccord’s Ohad Samet, NerdWallet’s Tim Chen, Oportun’s Raul Vazquez (both of the latter being Core portfolio companies, for disclosure) and myself.

* * *

Yes, our financial regulatory system is a messy patchwork of state and federal agencies. Yes, the industry is spending way too much on compliance, shuffling way too much paperwork. Yes, I think the CFPB overused its stick relative to its carrots in the past. * * *

* * * 

[E]very rule in place today is a response to incredible harm done to hardworking Americans by greedy, unscrupulous, short-sighted and sometimes outright criminal actors in finance.  * * *

* * * I believe financial products are sufficiently complex and materially impactful on people’s lives and livelihoods that having a consumer watchdog is entirely warranted — even if it is a pain the ass, a cost to the system, and a drag on innovation. The stakes are just too damn high, for each household and for our country.

[W]hat is perhaps to me the most annoying: Even a conservative, limited-regulation leadership can express itself in smart governance and shifting priorities; it does not need to resort to spreading organizational cancer.

[HT: Kathleen Engel]