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Politics & MoneyMortgage

Leaked Mulvaney memo: CFPB must end regulation by enforcement

Bureau must protect "those who take loans, and those who make them"

A leaked memo attributed to Consumer Financial Protection Bureau Acting Director Mick Mulvaney says the bureau’s mission and governing mission is going to be refocusing on ending regulation by enforcement.

[Also read: Here's what's wrong with the CFPB's practice of regulating through enforcement.]

The memo, posted as part of an article by investigative journalism nonprofit ProPublica, was sent to CFPB staff and attacks former Director Richard Cordray, and details how the bureau, established to protect consumers, will now “protect the industry.”

From the memo (bold emphasis added):

“I think it is fair to say that the previous governing philosophy here was to aggressively ‘push the envelope’ in pursuit of the ‘mission;’ that we were the ‘good guys’ and the ‘new sheriff in town,’ out to fight the ‘bad guys.’

"Simply put: that is what is going to be different. In fact, that entire governing philosophy of pushing the envelope frightens me a little. I would hope it would bother you as well.

"We are government employees. We don’t just work for the government, we work for the people. And that means everyone: those who use credit cards, and those who provide those cards; those who take loans, and those who make them; those who buy cars, and those who sell them. All of those people are part of what makes this country great. And all of them deserve to be treated fairly by their government. There is a reason that Lady Justice wears a blindfold and carries a balance, along with her sword."

Further in the memo, Mulvaney tells CFPB staff what this change in focus means for the bureau’s operations.

“So, what does all of this mean, in terms of how we will operate at the Bureau? Simply put, we will be reviewing everything that we do, from investigations to lawsuits and everything in between. When it comes to enforcement, we will be focusing on quantifiable and unavoidable harm to the consumer. If we find that it exists, you can count on us to vigorously pursue the appropriate remedies. If it doesn’t, we won’t go looking for excuses to bring lawsuits.

"On regulation, it seems that the people we regulate should have the right to know what the rules are before being charged with breaking them. This means more formal rulemaking on which financial institutions can rely, and less regulation by enforcement. And we will be prioritizing. In 2016, almost a third of the complaints into this office related to debt collection. Only 0.9% related to prepaid cards and 2% to payday lending. Data like that should, and will, guide our actions.”

Changes already appear to be underway at the agency, which has quietly dropped an investigation into a South Carolina payday lender, reports International Business Times

Monday, a press release from World Acceptance Corporation announced that the CFPB’s investigation was completed and no enforcement action was recommended.

IBT’s Josh Keefe reports that World Acceptance Corporation, which is headquartered in Mulvaney’s home state, has a history with the acting director and has donated at least $4,500 to his previous congressional campaigns.

Consumer watchdog nonprofit Allied Progress said in a statement the memo shows Mulvaney’s interests are not focused on consumers.

“Apparently Mick Mulvaney is only interested in pushing the envelope when those envelopes are filled with campaign contributions from the very industries he now oversees at the CFPB. There's a reason not a single announcement from the CFPB on his watch has been about protecting consumers. He has no interest in protecting them — he is ideologically opposed to putting limits on the excesses of Wall Street and the greed of financial predators,” said Karl Frisch, executive director of Allied Progress, in an email sharing the memo. 

The CFPB has not responded to HousingWire's requests for comment. 

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