Mick Mulvaney, Acting Director of the Consumer Financial Protection Bureau, testified today before the House Financial Services Committee. Rather than highlight the prepared remarks, the following are statements, questions and responses from many of the Committee members and the Acting Director, which I think provide a detailed picture of the hearing, and Mulvaney's approach to his job.
In his opening statement Chairman Rep. Jeb Hensarling remarked that former Director Richard Cordray acted unlawfully while Acting Director Mick Mulvaney is acting lawfully, and expressed appreciation that he is requesting assistance from Congress to reform the CFPB.
Numerous Democrats, including ranking Democrat Rep. Maxine Waters went on record to say that their presence at the hearing should not be taken as an acceptance of Mulvaney as the lawful Acting Director, but rather a response to the need to engage in an oversight capacity.
Rep. Waters also noted that Mulvaney has stopped implementation of a sensible payday rule, has ceased investigation into World Acceptance Corporation, and has initiated zero enforcement actions since he took over leadership of the Bureau.
Mr. Mulvaney noted that as a former member of the Committee, he feels that listening to people read their written testimony is a waste of time so he will not do so, and instead looks forward to answering questions.
Rep. Hensarling proceeded to say that among his concerns about the CFPB is that it is meant to protect consumer rights to a competitive transparent market, yet the Director alone could declare any group exempt from CFPB jurisdiction, such as all banks that start with a “C” – an example of total lack of checks and balances. Mulvaney agreed. Another concern is the funding mechanism. He asked,
Who determines the budget of the CFPB? Mulvaney answered, “I do.”
How do you get your money? Mulvaney answered, “I send a letter to the Federal Reserve Board and they send a check.”
I assume you have to pay payroll – 60% of the budget. You alone have the right to spend the $280M balance? If you chose, could you buy naming rights to a ballpark? Mulvaney answered, “Yes, we already do spend $40M in “advertising” (he used air quotes) so yes.”
Could you spend $250M to ensure that every man woman and child has a CFPB t-shirt? Mulvaney answered, “Yes.”
Rep. Waters then told Mulvaney she is concerned about his actions related to removing power from the Office of Fair Lending and Equal Opportunity. Why have you taken these actions? The Acting Director responded, “I separated the functions of supervision & enforcement and education – I actually elevated education by moving it to the Office of the Director.”
Rep. Luetkemeyer shared his concern that former Director Cordray engaged in regulation by enforcement, and asked what changes Mulvaney would like to see in that area. He responded that “financial service providers should be allowed to know what the law is before they are accused of breaking it.”
Luetkemeyer proceeded to ask Mulvaney how he plans to accomplish the goal of ensuring all consumers have access to markets for consumer financial products and services.
Mulvaney replied that he has been surprised by the amount of qualitative cost-benefit analysis that has been done, and declared “We are going to do a better job of quantitative analysis of the impact on markets of services not being available.”
Luetkemeyer also asked about the status of the Small Dollar Rule. The Acting Director replied that they haven’t stopped the Small Dollar Rule; they have merely given notice that we intend to revisit it, which is exactly what the APA requires.
Rep. Carolyn Maloney (D-NY) called attention to the fact that zero enforcement actions have been initiated since the beginning of Mulvaney’s tenure. She challenged, “Are you saying that every financial service provider has suddenly snapped into compliance?” Mulvaney responded that “nothing could be further from the truth. We are actively litigating 25 cases and have only dismissed one case.”
He began to explain that there are three workstream buckets. He got to the first, investigations, when Maloney cut him off. She then said that under Cordray, $12B had been returned to consumers. She asked Mulvaney how much he has returned. The answer was $92.6M. She asked whether he initiated that or whether it was in the pipeline when he arrived. He said he approved it. Maloney cut him off as he tried to continue.
Rep. Huizenga (R-MI) said, “The last guy filibustered and tried to run out the clock, so we appreciate you being here and actually answering questions. How many enforcement actions were taken during Director Cordray’s first 6 months?” Mulvaney responded, “Zero.” He continued,
“We are still going after bad actors. We always know there will be bad actors, but our concerns about the last Director were that they would make up violations – and these CIDs would go out demanding information about activities that were perfectly legal but they just didn’t like, then they would fine people to try to curb everyone else’s actions through those fines and those threats.”
Rep. Nydia Velazquez (D-NY), like other Democrats, expressed concerned about Mulvaney’s dual role at OMB and CFPB. She said, “I’d like a yes or no answer to the following:”
Have you ever conducted work for CFPB in the Oval office? Mulvaney: “No.”
Have you ever conducted work for OMB at the office of CFPB? Mulvaney: “I may have taken a call.”
Do you receive two paychecks? Mulvaney: “No.”
Do you have separate emails? Mulvaney: “Yes.”
Have you conducted business through one email for the other? Mulvaney: “No.”
Have you ever charged a CFPB/OMB expense to the other’s account? Mulvaney: “No.”
Do you have an executive assistant at either place to do work for the other? Mulvaney: “No… which greatly frustrates both of them.” Velazquez responded, “That’s why you shouldn’t be there.”
She then moved on to say, “The CFPB exists to prevent Americans from losing hard-earned dollars to abusive lending. What lessons have you learned from the financial crisis and how do you apply those at the CFPB?” Mulvaney: “The Crisis was system failure of major proportion. There were a variety of things that happened at the same time. Was abusive lending in the housing market part of it? Absolutely. Can we do a better job of enforcing the laws? Absolutely? Do I look forward to doing that at the Bureau? Absolutely.” Velazquez concluded by saying, “That’s very encouraging. Let’s wait for the numbers to show that.”
Rep. Sean Duffy (R-WI) noted the agitation coming from the other side of the aisle. He said, “I understand it. Democrats don’t have much power or control over the CFPB, and neither do we. So if you are in power, you applaud the Director and if you are not there is a lot of frustration. I would argue that government policy supported making loans to people who couldn’t afford them. And by the way we haven’t changed those policies.”
Rep. Brad Sherman (D-CA) shared, “We in Congress don’t like your dual role. We assume President Trump is in the process of identifying a full time successor who will be a handmaiden to the financial services industry. I’d say what consumers and businesses want is not a lurch to the left and then a lurch to the right but steady guidance. What will you do to ensure more guidance is released and regulations are published?”
Mulvaney responded, “What we’ve done is to focus more on formal rulemaking; it’s harder, but it’s the right way to regulate. There was agreement about the appropriate use of guidance – in the case where there is a rule, and maybe you always meant to say such and such in the rule but didn’t, so a guidance document could clarify.”
Rep. Gregory Meeks (D-NY) noted that in his career, Mr. Mulvaney has never supported consumers and is not doing so now. The Acting Director replied, “I could stop all 100 of the enforcement actions on the books but I have not. We are still enforcing the law. We are doing it differently than others might do it but that’s a result of the fact that elections have consequences. But we are still enforcing the law.
Rep. Keith Rothfus (R-PA) raised an issue that the ARM industry will appreciate: Under UDAAP, it is unclear what “Abusive” is, and asked Mulvaney what he means by his former comments that it is important for market participants to have a clear understanding of the rules.
Mulvaney responded: “Yes, thank you. Help me with a definition of “abusive.” For the lawyers in the room, the statute is full of subjective terms like “materially” and “unreasonably.” A definition could provide clarity for everyone and would provide certainty and due process.” It was also noted that there is a long case history defining what “unfair” or “deceptive” mean.
Concerned about public reporting of consumer complaint information. Data could be misleading and misused. I do share your concerns about data security, and about the privacy of that data. And the unverified nature of the data, so we are taking a look at that.
Rep. Bruce Poliquin (R-ME) cut to the chase, “What’s the one thing you would ask us to do to fix the mess you’ve inherited?” Mulvaney: “Put me on appropriations.”
Rep. Bobby Scott (D-VA) asked about the Catalyst group which is meant to support the development of regulations for fintech initiatives, and what Mulvaney’s plans are in this area, since it was not covered in the semi-annual Report. Mulvaney suggested it is quite important to him, and referenced that he was the co-founder of the Congressional blockchain caucus. He noted that it’s a balancing act to allow new industries to develop without the burden of regulation while still protecting consumers.
Rep. Randy Hultgren (R-IL) gave Mulvaney the chance to explain the three Enforcement buckets that he didn’t have the opportunity to outline in response to Rep. Maloney.
- Sue or settle
He reinforced that under his leadership, he has not stopped enforcement; it’s just that nothing has moved out of “sue or settle” into “litigation.”
Rep. Mia Love (R-UT) highlighted the political nature of the CFPB due to its funding and (lack of) oversight structure. She said there should be a “down the middle” approach, like the other financial regulators, otherwise you don’t have the same credibility. You either love us or hate us is the wrong approach.
Rep. Al Green (D-TX) told Mulvaney he appreciates his candor, and that allows him to be candid as well. He said, “I’ve had to sit in the back of the bus, drink from colored water fountain, etc. so am first hand familiar with discrimination.” He then raised the concept of testing – the practice of sending multiple people of varying race/gender into an institution, such as a bank, to see whether they are treated the same way. He said that banks at large are against testing, and that this committee has fought the practice. He asked Mulvaney whether he supports bank testing? Mulvaney said, “I am told we do it now, I support it, and will continue to support it.”
Over the course of the approximately three-hour testimony, I did not hear one mention of debt collection, in spite of the fact that Acting Director Mulvaney has announced this is at the top of his priority list.