Testifying before Senate, CFPB Director Kathy Kraninger Focuses on Rulemaking; Accountability Priorities

The Senate Committee on Banking, Housing and Urban Affairs met for its hearing on the bureau’s semiannual report to Congress March 12.

3/13/2019 1:10 PM

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Testifying before Senate, CFPB Director Kathy Kraninger Focuses on Rulemaking; Accountability Priorities

Consumer Financial Protection Bureau Director Kathy Kraninger testified before Congress the second time in a week on March 12 facing questions from the Senate Committee on Banking, Housing and Urban Affairs on the bureau’s data collection processes, small-dollar lending rulemaking, student loan servicing oversight and regulatory burdens faced by financial services companies.

Throughout the two-hour hearing, Tom Pahl, the CFPB’s policy director for research, markets and regulation, and a previous speaker at ACA events, sat behind Kraninger as an advisor. Just last week, Kraninger answered an array of questions about the CFPB’s activities and goals during a marathon session of the House Financial Services Committee.

“Looking ahead, I will be setting priorities for the bureau, including setting the tone for how we will operate as an agency. I expect to emphasize stability, consistency, and transparency as hallmarks as we mature the agency and institutionalize the many partnerships that are key to our success,” Kraninger said.

In a letter to Senate Banking Committee leadership in advance of the hearing, ACA International CEO Mark Neeb reiterated the ARM industry’s willingness to work with the CFPB to develop common sense, transparent debt collection rules and to support some efforts aimed at reforming the bureau’s leadership structure and funding resources.

Committee Chairman U.S. Sen. Mike Crapo, R-Idaho, starting the hearing with opening statements and questions for Kraninger, focused on the bureau’s data collection processes and data privacy.

“I have long raised concerns about big data collection by the CFPB, especially with respect to credit card and mortgage information,” Crapo said. “Although there have been positive changes in recent years under new leadership, the CFPB must ensure that the collection of consumer information is limited, information is retained only as long as is absolutely necessary to fulfill the CFPB’s obligations and that appropriate safeguards are in place to protect it.  It is also worth examining how the Fair Credit Reporting Act, or FCRA, should work in a digital economy, and whether certain data brokers and other firms serve a function similar to the original consumer reporting agencies.”

Several members of the committee questioned Kraninger about the bureau’s ongoing review of the small-dollar lending rulemaking.

In October 2018, under the leadership of then-Acting Director Mick Mulvaney, the bureau announced that it would issue Notice of Proposed Rulemakings to reconsider the rule’s mandatory underwriting requirements and to address the rule’s compliance date. 

In February, the bureau officially announced it is proposing to rescind certain provisions of its 2017 final rule governing “Payday, Vehicle Title, and Certain High-Cost Installment Loans.”

Specifically, the bureau is proposing to rescind the rule’s requirements that lenders make certain underwriting determinations before issuing payday, single-payment vehicle title, and longer-term balloon payment loans. The bureau is preliminarily finding that rescinding this requirement would increase consumer access to credit, ACA International previously reported.

“The reason for the reconsideration of the rule is the underlying legal and factual basis around the bureau’s determination of unfairness and abusiveness without those underwriting rules … that is the issue at hand,” Kraninger said. “The whole record of the prior rulemaking is absolutely part of the process going forward.”

Additional discussions during the hearing focused on accountability and transparency of the bureau; feedback from stakeholders; legislative proposals to change its leadership and funding structure; the bureau’s role in enforcement of the Military Lending Act; and the future of its student loan ombudsman office.

U.S. Sen. Robert Menendez, D-N.J., called for the hiring of a student loan ombudsman and the work of that office to be a priority for the bureau and Kraninger.

“When I voted to create this agency, that certainly wasn’t the type of action I envisioned,” Menendez said.

Former student loan ombudsman Seth Frotman left the CFPB last year and as of last week the bureau is seeking a replacement.

 “We still have an office focused on student loan issues,” Kraninger said. “I take seriously that Congress created that private student loan office position. Since I arrived, we’ve been working back and forth to get that position moving forward.”

Meanwhile, committee members called for cost benefit analysis, use of data and stakeholder input as the bureau proceeds with rulemakings and oversight actions.

“Wouldn’t you agree that you would need to have some data in order to assess what is happening with student loan [organizations]?” asked U.S. Sen. Tina Smith, D-Minn.

Kraninger said that assessment is ongoing.

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