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Did Mick Mulvaney just drastically change how the CFPB enforces fair lending laws?

Reportedly strips Office of Fair Lending of its enforcement powers

The way the Consumer Financial Protection Bureau enforces fair lending laws could be about to significantly change after CFPB Acting Director Mick Mulvaney reportedly stripped the bureau’s Office of Fair Lending of its enforcement powers.

The details of the move come courtesy of the Washington Post, which reported this week that Mulvaney is bringing the Office of Fair Lending directly under his own supervision.

From the Washington Post report:

The Trump administration has stripped enforcement powers from a Consumer Financial Protection Bureau unit responsible for pursuing discrimination cases, part of a broader effort to reshape an agency it criticized as acting too aggressively.

The move to sharply restrict the responsibilities of the Office of Fair Lending and Equal Opportunity comes about two months after President Trump installed his budget chief, Mick Mulvaney, at the head of the bureau. The office previously used its powers to force payouts in several prominent cases, including settlements from lenders it alleged had systematically charged minorities higher interest rates than they had for whites.

That unit now will move inside the office of the director, where staffers will be focused on “advocacy, coordination and education,” according to an email Mulvaney sent them this week. They will no longer have responsibility for enforcement and day-to-day oversight of companies, he wrote.

As the article notes, the Office of Fair Lending was previously responsible for the enforcement of fair lending laws, including pursuing redlining allegations against mortgage lenders.

Redlining is a practice of excluding certain areas from services due to the area’s racial composition or economic makeup.

In 2015, the CFPB’s Office of Fair Lending worked with the Department of Justice to take action against Hudson City Savings Bank for providing unequal access to mortgage credit in black and Hispanic neighborhoods.

The bank allegedly located branches and loan officers, selected mortgage brokers, and marketed products to avoid and thereby discourage prospective borrowers in predominantly black and Hispanic communities.

At the time, the $27 million settlement with Hudson City was the largest redlining settlement in the nation’s history.

But, now the way the CFPB enforces fair lending laws will almost certainly change, a move bemoaned by CFPB defenders, including former CFPB Director Richard Cordray.

“Very upsetting to see the CFPB squatter leadership now interfering with the Fair Lending unit’s important work enforcing laws against discrimination in credit markets,” Cordray tweeted in the wake of the Washington Post report. “We took on tough cases about redlining and other violations. Some don’t like it but it is the Law of the Land.”

Sen. Elizabeth Warren, D-Mass., considered to be the chief architect of the CFPB, also expressed displeasure with Mulvaney’s move.

“Since Mick Mulvaney took over the Consumer Financial Protection Bureau a couple months ago, he’s done nothing but undermine it,” Warren posted on Facebook. “Step after step to weaken protections for consumers, and wink after wink to predatory payday lenders and big banks. The latest example? Undermining the federal unit that investigates housing discrimination and lending discrimination – leaving neighborhoods and consumers across the country more vulnerable.”

Fair housing groups also voiced concern about the changes to the Office of Fair Lending.

“Fair Lending is a fundamentally important part of the work of the Consumer Financial Protection Bureau, and of a financial system that works for families and communities. The Office of Fair Lending and Equal Opportunity needs the authority, the resources, and the connections to key levers of change to do its job,” said Lisa Donner, executive director, Americans for Financial Reform. “These changes, by an improperly appointed acting director, threaten effective enforcement of civil rights laws, and increase the likelihood that people will continue to face discriminatory access and pricing as they navigate their economic lives.”

Vanita Gupta, president and CEO of The Leadership Conference on Civil and Human Rights, said that Mulvaney’s move is “yet another step” taken to disrupt the CFPB’s core functions.

“These changes to the Office of Fair Lending and Equal Opportunity send a troubling message about the enforcement of civil rights laws and will harm people – especially in communities of color – who are wronged by payday lenders, debt collectors, or auto dealers, among others,” Gupta said. “Shuffling around an office that has traditionally been run by career civil servants raises concerns that political appointees will interfere with this essential enforcement work. The CFPB was created to protect consumers – but under the Trump administration, it is being transformed to protect powerful corporations instead.”

John Taylor, president and CEO of the National Community Reinvestment Coalition, echoed those sentiments.

“The CFPB’s organization chart is the agency’s business, but enforcing consumer protection laws is also the people’s business. I am appalled to see one of the most effective offices within the CFPB stripped of responsibility to stop redlining, predatory lending, and other discriminatory behavior by financial firms,” Taylor said in a statement.

“The whole point of an independent CFPB is to have an agency with authority to enforce consumer protection laws, not just talk about them,” Taylor added. “There is a reason this office was mandated under Dodd-Frank. Some financial firms continue to take advantage of consumers and put them at risk. Without enforcement actions by this agency, it will be much slower and harder to protect consumers and stop abusive and discriminatory practices that should be stopped.”

Shanna Smith, president and CEO of the National Fair Housing Alliance, said the move “clearly prioritizes the wishes of Wall Street and loan sharks” over the rights of consumers.

“Mulvaney’s decision falls squarely in line with the approach that the Trump administration has taken regarding civil rights – undermine critical civil rights safeguards and those in government responsible for enforcing them under the guise of ‘efficiency’ and ‘accountability,’” Smith said.

“But by taking away the Office of Fair Lending’s enforcement authority, the Trump administration has sent a signal to the financial services industry that they can operate without fear of repercussions for discriminatory policies, practices, and products,” Smith added. “Consumers have not forgotten the devastation caused by unchecked lending discrimination and predatory lending abuses in the lead up to the foreclosure crisis. They also have not forgotten that the CFPB was created to focus protection on consumers – not lenders who would engage in discriminatory practices.”

As the Washington Post notes, the CFPB said that the move does not mean that it plans to make any changes to its enforcement practices.

From the Post again:

Mulvaney’s spokesman dismissed the criticism, saying the agency would continue to pursue fair-lending cases.

“By elevating the Office of Fair Lending to the Director’s Office, we have enhanced its ability to focus on its other important responsibilities,” spokesman John Czwartacki said in a statement. “By combining these efforts under one roof, we gain efficiency and consistency without sacrificing effectiveness.”

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