Congress narrowly confirmed Kathy Kraninger as the new director of the Consumer Financial Protection Bureau, ending a period of uncertainty for the agency.
Kraninger, a White House official nominated by President Trump to head the CFPB, will serve a five-year term and replace Mick Mulvaney, who’s been acting director of the agency since last November.
In recent months, the agency has been in some turmoil, with several senior staff members leaving their posts. And while having a newly confirmed director brings some stability back to the CFPB, other questions remain. Chief among them is whether Kraninger will continue what many believe has been a trend of weaker financial oversight under Mulvaney’s leadership — or whether she’ll carve her own regulatory path.
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What’s the background?
The CFPB is a watchdog agency that was established under the Obama administration to help protect consumers from predatory lending practices, and to help regulate consumer financial products including student loans, personal loans and credit cards. The agency — founded as part of the Dodd-Frank Act following the financial crisis that unfolded in 2007 — has evolved over the years as White House administrations have changed.
Under the leadership of the first CFPB director Richard Cordray, the agency focused on setting new mortgage lending rules and taking a hard stance against abusive debt collection agencies. After the government changed hands, Cordray’s approach drew criticism from the Trump administration for its emphasis on regulatory oversight. Cordray left his post last year, marking growing uncertainty within the agency.
With Cordray out, President Trump appointed Mick Mulvaney, the director of the Office of Management and Budget — aka the OMB — to step in as acting CFPB director. In the past year, Mulvaney’s faced criticism for trying to lessen the agency’s enforcement focus on payday lenders, particularly those offering payday loans to members of the U.S. military. Also during his interim leadership, there were two notable departures: deputy director Leandra English, who was on the team that helped launch the CFPB, and Seth Frotman, who led the CFPB’s office focused on protecting student loan borrowers.
In June this year, the Trump administration announced that the associate director for general government at the OMB, Kathy Kraninger, would be the nominee to replace Mulvaney. But her nomination moved slowly through Congress because of broad debate over her qualifications for the role.
What’s the debate?
Kraninger’s nomination passed the Senate by a vote of 50-49 along party lines — a reflection of the controversy around her.
Democrats have said Kraninger lacks experience both in running a federal agency and in dealing with the financial services sector. Republicans, on the other hand, pointed to Kraninger’s experience as an associate director of the OMB as a signal of her leadership abilities and qualifications to head the CFPB.
For her part, during testimony before the Senate, Kraninger stated that she is “firmly committed” to fulfilling the CFPB’s mandate and intends to “take aggressive action against bad actors who break the rules by engaging in fraud and other illegal activity.”
Why does this matter?
As an agency tasked with protecting consumers, the CFPB is supposed to help ensure that those who sell financial products are doing so in legal and transparent ways. The CFPB’s enforcement work has a direct impact on consumers: For example, past actions by the CFPB have delivered $12 billion back to consumers through refunds from financial institutions and canceled debts. Having stable leadership that’s committed to the CFPB’s consumer-focused mission is key to the agency’s continuing work curbing predatory financial practices.
What’s next?
During her Congressional testimony, Kraninger outlined four key priorities she intends to focus on during her term as CFPB director. These include:
- Working to ensure the CFPB is fair and transparent
- Collaborating with other regulatory agencies and states on enforcement actions
- Limiting consumer data collection
- Ensuring accountability within the CFPB for its own spending
Democrats are poised to take control of the House in 2019 and are likely to battle with the CFPB over what many believe has been a weakening of the agency under the Trump administration.
Consumer-focused groups, the banking industry and lawmakers will be keeping a close eye on the CFPB to see how the agency might evolve under Kraninger’s leadership.