What A Leadership Change For a Financial Watchdog Could Mean For You

Mick Mulvaney leaves the Consumer Financial Protection Bureau in Washington
Mick Mulvaney leaves the Consumer Financial Protection Bureau in Washington, Nov. 27, 2017. Jacquelyn Martin/AP Photo

Update: A federal judge ruled Tuesday that President Donald Trump’s pick, White House budget director Mick Mulvaney, would become the acting director of the Consumer Financial Protection Bureau until a permanent director is confirmed.

The decision came after CFPB Deputy Director Leandra English filed a lawsuit to bar Mulvaney from taking on the position. According to English, the Dodd-Frank Act, which established the CFPB after the 2008 financial crisis, specified that she should take over after Richard Cordray resigned from his director post.

U.S. District Judge Timothy J. Kelly, who ruled on the case, is a Trump appointee. The decision will likely be appealed.

The Consumer Financial Protection Bureau has a branding issue.

The government watchdog agency was created after the 2008 financial crisis to look out for the interests of consumers and make sure none of our financial institutions could run amok at our expense.

Since then, it has taken on federal and private student loan servicers, payday lenders, subprime auto lenders, credit reporting agencies and big banks accused of unfair, deceptive or abusive practices.

With Director Richard Cordray at the helm, the CFPB has imposed about $12 billion in fines on financial institutions and returned it to consumers who were wronged.

But major leadership changes are coming to the agency following Cordray’s resignation.

On Friday, the CFPB issued a press release announcing Leandra English as deputy director of the bureau. The assignment would mean English, Cordray’s former chief of staff, would become the acting director in Cordray’s absence.

The same day, the White House issued a press release naming Mick Mulvaney, the current White House budget director, as interim director. Mulvaney has actively worked to limit the CFPB’s power in the past, Reuters reported.

As the drama plays out, many people still have no idea what the CFPB is or what its employees do every day. Now may be the time to learn.

Not Everyone Loves the CFPB

The agency’s most notable actions include a lawsuit against Navient, one of the largest federal student loan servicers. The CFPB accused the company of steering borrowers into more expensive repayment plans despite a public commitment to help borrowers manage their loans in a way that works for them.

In response to the CFPB lawsuit, Navient admitted that “there is no expectation that the servicer will act in the interest of the consumer,” Bloomberg reported.

The CFPB also forced Wells Fargo to pay a $100 million fine after the discovery of its widespread practice of creating unauthorized customer accounts to boost profits.

Those may sound like major wins if you were impacted by either either company’s questionable tactics. But since the CFPB’s creation by the Obama administration in 2011, the bureau has faced opposition because of its broad powers to regulate, fine and sue financial institutions.

U.S. Rep. Jeb Hensarling, a Republican from Texas, called the agency “the most powerful, least accountable agency in U.S. History” in an op-ed in The Wall Street Journal.

Hensarling said the CFPB’s meddling is hurting — not helping — consumers.

“Since the CFPB’s advent, the number of banks offering free checking has drastically declined, while many bank fees have increased,” Hensarling wrote. “Mortgage originations and auto loans have become more expensive for many Americans.”

New CFPB Leadership Brings Lawsuit, Donuts and Twitter Fights

As Cordray exits, new leadership will play a significant role in the CFPB’s future and how the agency will protect consumers and wield its power.

But determining who will run the agency this week is more difficult than it sounds.

The political drama over who will lead the CFPB has played out on Twitter and in court.

Sen. Elizabeth Warren, a Democrat from Massachusetts who pushed for the CFPB’s created, tweeted screenshots of the Dodd-Frank Act and accused President Donald Trump of violating it by naming an interim director.

On Saturday, Trump called the CFPB a “total disaster.”

“Financial Institutions have been devastated and unable to properly serve the public. We will bring it back to life!” Trump tweeted.

Then on Sunday, CBS reported that English filed a federal lawsuit to block Trump and Mulvaney from taking over the bureau.

On Monday, both English and Mulvaney reported for work. Both also sent emails to staffers signed them as “acting director.”

Mulvaney’s email also told CFPB employees to report any additional communication from English and invited his new employees to visit his office to “grab a donut” in honor of his first day on the job.

It’s not clear who will really lead the agency for now, but while that’s being figured out, Trump will have to get to work choosing a new permanent director.

That person, who Congress will need to confirm, will get to decide if the CFPB continues to be the regulatory force that its proponents want it to be — or if its power is stripped away, as its critics hope.

Desiree Stennett (@desi_stennett) is a staff writer at The Penny Hoarder.

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