Hearing on semiannual review of the CFPB with Director Kathy Kraninger touches on rulemaking processes and actions to change the bureau’s makeup.
3/10/2020 15:30
It didn’t take long for the ongoing debate over the Consumer Financial Protection Bureau’s leadership structure to start at the Senate Committee on Banking, Housing and Urban Affairs hearing, “The Consumer Financial Protection Bureau’s Semiannual Report to Congress,” with testimony from Director Kathy Kraninger March 10.
Right out of the gate the committee’s chairman, U.S. Sen. Mike Crapo, R-Idaho, addressed the constitutionality of the CFPB’s leadership structure, also an issue covered by ACA International in its letter submitted to the committee before the hearing.
ACA Federal Advocacy Manager Patrick Russell attended the hearing as well and ACA's letter was entered as part of the hearing record.
“There have been promising changes at the CFPB under Director Kraninger’s leadership,” Crapo said during the hearing. “But it remains abundantly clear that the fundamental structure of the CFPB must be reconsidered to make it more transparent and accountable.”
While the U.S. Supreme Court considers the constitutionality of the bureau’s leadership structure in Seila Law v. Consumer Financial Protection Bureau and if having a single director removable only for cause violates the Constitution’s separation of powers, legislative actions to change the structure are in motion.
This month, U.S. Rep. Blaine Luetkemeyer, R-Mo., recently reintroduced legislation to create a commission at the bureau.
“It has long been my position that the CFPB’s current single director structure lacks sufficient accountability, and I look forward to the Supreme Court ruling on this case later this summer,” Crapo said. “With this in mind, I continue to advocate for establishing a bipartisan board of directors to oversee the CFPB; subjecting the CFPB to the annual appropriations process, similar to other federal regulators; and establishing a safety-and-soundness check for the prudential regulators.”
Kraninger responded only that the CFPB supports the U.S. Department of Justice position in the Seila Law case recognizing that the for-cause removal provision for the director is a limitation on the president’s powers under the Constitution, noting clarity on the matter will provide “great help” with the bureau’s mission going forward.
“The regulatory certainty that stems from a commission, rather than a single director removable only for cause benefits the entire financial services marketplace and consumers,” ACA CEO Mark Neeb said in the letter to the committee. “ACA supports Rep. Luetkemeyer’s legislation and urges the Senate to take up similar legislation.”
On the issue of accountability, U.S. Sen. Tom Cotton, R-Ark., said the CFPB needs to continue to be accountable while the leadership issue makes its way through the courts and legislature.
“I hope the Supreme Court corrects the errors in the Dodd-Frank law and makes this bureau more accountable to the American people through its elected representatives,” Cotton said.
In the letter to the committee, Neeb also covers:
- ACA Supports Providing Regulations for the Fair Debt Collection Practices Act
- The Supplemental Notice of Proposed Rulemaking for “Time-Barred Debt” Must be Improved Upon to Ensure Small Businesses and Creditors are Not Harmed
- The CFPB’s Complaint Database Paints an Inaccurate Portrait of the Debt Collection Industry
- More Transparency and Due Process Should be Included in CFPB Enforcement and Supervision Processes
- Congressional Solutions Proposed by the Majority in the House Financial Services Committee have in Large Part been Woefully Flawed
Kraninger said increased transparency and communication have been a growing focus during her term leading the bureau.
Matters of CFPB Rulemaking
Members of the committee asked for updates on the CFPB’s oversight of federal student loan servicers and the small-dollar lending rule.
In February, the CFPB and U.S. Department of Education entered into an agreement restoring the agencies’ combined work related to federal student loan servicers and sharing of information, Kraninger noted.
Several lawmakers on the committee asked for updates on the CFPB’s small dollar lending rule. The rule is important for the industry to watch as it may provide insights on the process for the proposed rulemaking for debt collectors.
This year, the CFPB delayed the August 2019 compliance date for mandatory underwriting provisions of the small dollar lending rule regulation to November 2020.
U.S. Sen. Richard Shelby, R-Ala., stressed that the CFPB must utilize cost benefit analysis during its rulemaking processes because of the impact on consumers.
Kraninger agreed, noting it is part of the debt collection rulemaking.
“It is essential. We need to understand the impacts of what we’re doing and understand if it will be beneficial to the marketplace,” she said. “One of the things we’re moving through is the debt collection notice of proposed rulemaking [and] understanding that consumers do want to pay their debts and it’s good for society to pay their debts and pay what they owe.”
As part of the rulemaking, she explained the bureau is working on understanding the way debt collection takes place, what the communication mechanisms are as well as limitations in the law.
“Under your leadership, I believe the agency has made significant strides in becoming more efficient and transparent,” Shelby said.
Meanwhile, for the debt collection rule, members may weigh in on the CFPB’s Supplemental Notice of Proposed Rulemaking concerning out-of-statute debt through May 4, 2020.