CFPB Director Returns to ‘Hot Seat’ in House Hearing

Consumer Financial Protection Bureau (CFPB) Director Kathleen Kraninger served as the focus of ire from Democrats on the U.S. House of Representatives’ Financial Services Committee in a hearing designed to serve as a semi-annual review of the Bureau and its education and enforcement activity.

In her opening remarks, Financial Services Committee Chairwoman Maxine Waters (D-Calif.) went on the immediate offensive, taking issue with the Director’s recent submissions that cast doubt on the Constitutionality of the Bureau’s structure, and some regulatory enforcement actions she elected not to pursue.

“Director Kraninger, the record shows that you are undermining protections for consumers and letting bad actors off the hook,” Waters said. “I’m deeply concerned by your anti-consumer actions.”

The delay of the small dollar payday lending rule was cited by the Chairwoman, followed by accusatory statements concerning debt collection firms, a recent CFPB decision related to the Home Mortgage Disclosure Act (HMDA), and Director Kraninger’s recent decision to abandon defending the constitutionality of the CFPB’s structure, including the independence of its director.

Other Democratic lawmakers followed Waters’ lead in criticizing Kraninger’s tenure as director, leading Republican lawmakers to come to Kraninger’s defense. One particularly tense comment came from Rep. Carolyn Maloney (D-N.Y.), who criticized a decision Kraninger supposedly made based on advice from political appointees over career CFPB personnel.

“If the consumer bureau can’t get relief for consumers who have been harmed, and you admit they’ve been harmed, then what are you doing?” asked Rep. Maloney. “If you’re not following direction from your staff to help consumers that are harmed, then you are absolutely worthless.”

This statement led Republican members of the committee to raise repeated concerns over the decorum exhibited by Democratic members during the proceeding, while also comparing Kraninger favorably to the level of transparency that was offered in the testimonies of former CFPB Director Richard Cordray in his appearances before the committee during the Obama Administration.

“I’m pretty sure Director Cordray’s middle name was ‘Stonewall,’” said Rep. Bill Huizenga (R-Mich.) at one point during the hearing.

Director Kraninger herself reiterated the mission of the CFPB and what she feels is necessary to accomplish the Bureau’s larger goals under her leadership.

“Preventing harm to consumers is the CFPB’s top priority,” Kraninger said in her testimony. “We prevent harm by educating consumers to protect themselves. We prevent harm by having clear rules of the road for regulated entities, [and] by using supervision and enforcement to promote compliance with the law.”

Last week, CFPB announced that it was issuing a new rule related to HMDA, which requires less data reporting for small lenders, including reverse mortgage lenders. The implementation of this rule will allow smaller lenders to avoid the “burden” of regulations, according to the CFPB. When pressed about recent changes made to HMDA, Kraninger detailed that the new approach is based on maximizing the utility of the Act as a “tool” for the CFPB to leverage going forward.

“This is something we’re going to continue to look at so we can ensure that the tool going forward is providing the users of the data sets the capabilities they need,” said Kraninger. 

Another matter of focus included issues related to the London interbank offered rate (LIBOR), which has served as the backbone of adjustable-rate Home Equity Conversion Mortgages (HECMs) for over a decade and which has formed the benchmark for expected rates and rate adjustments. Use of LIBOR is set to expire in 2021, and when asked about it by ranking member Rep. Patrick McHenry (R-N.C.), Kraninger detailed that the CFPB’s role in the transition out of LIBOR rests primarily in consumer education in concert with both the public and private sectors.

“The Bureau, specifically, has been engaged in [the transition] and has a key role in the education of the public,” Kraninger said. “We also have a handbook on what are generally affected [with the transition], the adjustable-rate mortgages, a big part of the market that relies on LIBOR. That handbook has been updated by the Bureau, and will be issued soon. We also have some information that we’re giving out to the public to start making them aware of that transition.”

Watch the full hearing at the House Financial Services Committee YouTube channel.

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