Richard Cordray has announced his long expected resignation from the Consumer Financial Protection Bureau (CFPB). The day after his resignation was announced to his staff, news reports began circulating that Mick Mulvaney will be appointed the interim director of the bureau after Cordray leaves. With these changes coming, and quickly, what can industry members expect from the bureau going forward?
Cordray told his staff in a letter Nov. 15 that he would step down by the end of the month, urging his employees to continue the good work they have done.
“One thing I have tried to reinforce this year is that the consumer bureau is far more than its director,” he wrote. “I am confident that you will continue to move forward, nurture this institution we have built together, and maintain its essential value to the American public.”
On Nov. 16, reports began circulating, first reported by CBS News, that former South Carolina representative and current director of the Office of Management and Budget (OMB) Mick Mulvaney would be appointed as the interim director of the bureau. Mulvaney was a member of the House Financial Services Committee during his two terms in Congress, terms that coincided with the passage of the Dodd-Frank Act and the CFPB it created. As of Monday, no formal appointment has been made.
Without the appointment of an interim director, Acting Deputy Director David Silberman would become head of the CFPB. The appointment of a permanent director must be approved by a majority in the Senate.
“The appointment of Mick Mulvaney as interim director evidences the approach that the executive branch is going to take with the CFPB at least in the short run; Have someone in charge who is going to crunch the numbers and make decisions about what is most economical for the Bureau to undertake, and what type of actions should be pursued,” said Francis X. Riley, partner, Saul Ewing LLC.
“Given Mulvaney is coming from the OMB and is a numbers guy, that his role is to assess where the Bureau has been and is spending its money and then report this to Secretary (Steven) Mnucin or (President Donald) Trump. The executive branch and the Republicans in Congress are desperate for this information.”
He said one of the areas that may get curtailed is new investigations.
“Now, does that mean that every single new investigation that could initiated based upon a complaint or data that the Bureau has otherwise collected will be quashed? No, I don’t think that is the case,” he said, “but I do think that these more high profile investigations such as payday lending and student loan servicing and things of that nature are, at least for the short term, going to be put on the back burner.
“I, however, do not believe that the day-to-day examinations that the Bureau does of covered persons is going to be affected at all. People who conduct those day-to-day, examinations are career civil servants, and unless there is a change in the statute or in the regulations, they are going to stick to and carrier out their job description. .”
Frank Pellegrini, president and CEO of Prairie Title, also said the anticipated appointment of Mulvaney will definitely bring a change to the CFPB.
“I think it’s going to be a much different CFPB now,” he said. “I think Mulvaney is going to be a completely different director. We are going to see a different direction for the CFPB. I hope, if anything, there will be more formal regulatory guidance and less regulation through enforcement. But we will also have, if Mulvaney is in fact the director, we’ll have a director with a much different approach to the enforcement of the Dodd-Frank Act than we saw in Director Cordray.
“We can only hope for more guidance and less regulation,” Pellegrini continued. “It is certainly a reasonable expectation that that might be the case. I believe it will probably be a little less aggressive than under Director Cordray.”
He also said that consent orders, such as the Meridian Title order that recently came down, may not come along as frequently as they had.
“Consent decrees aren’t helpful to us,” he said. “They haven’t been helpful to allow us to decide what specifics we should avoid, what specifics we should adopt. They are too nebulous. That is what is good about the courts. The courts allow the framework for fact finding. Consent decrees allow no form for fact finding. It’s conjecture; and nobody can talk about it because there are nondisclosure aspects to these consent decrees. Nobody can really find out what exactly happened to attract the attention of the CFPB, what exactly was decided and why exactly did they settle. So there are little conclusions that can be drawn from them and hardly any lessons to be drawn from the cases.”
Pellegrini did say that Cordray did the title industry a great service in 2012 when he released the third-party service provider bulletin.
“It forced us as an industry to really look seriously at ourselves and take stock of how we conducted our business, from top to bottom and from the largest companies to the smallest agents,” he said. “It really became clear to us that we needed to adopt methods for our businesses that took our regulation into our own hands rather than having it imposed on us from the outside. That was the period of time that we established the best practices, and I firmly believe that was a defining moment for the industry, and I think we came out much better on the other end of that because of what we were faced with with enforcement from the CFPB under Cordray.”
He also said that Mulvaney likely will be less visible than Cordray, given that he will be adding the CFPB to his already existing duties.
Riley said that we will get more insight into the direction Mulvaney wants to take the CFPB if he is still interim when it is time for the director to testify before Congress about the Bureau’s activities.
“I think it is going to be very interesting to see what it is he says is the Bureau’s top policy objectives,” he said. That will shed some real light on where we’ll see the agency go in 2018.”
Charles Cain, executive vice president, agency development, WFG National Title Insurance Co., noted that while the director may be an appointee of President Trump, the staff is still there.
“I think at the bureau we will see a new director, and I think it is going to be a director who is more sympathetic to the needs of the industry,” he said. “But the downstream staff is still going to be there. And whether the deputy is fired is another question, whether that sets the tone also.”
Riley agreed, but noted that in the short term there may be some turnover.
The en banc decision in PHH may have a significant impact on what the bureau does and whether Republicans in Congress will put forth legislation to create a commission to run the CFPB instead of a single director.
“It won’t affect [the decision in] PHH. But if there is a decision by the full en banc panel before the end of the year, what will Mulvaney’s position be concerning an appeal?” Riley asked. “The bureau is going to have to decide whether it will ask the Justice Department approval to an appeal. I think that Cordray’s departure will have an impact on what happens there.”
Riley said he doesn’t expect a permanent director to be put in place until the PHH decision is rendered, because will not make sense to name and have a permanent director confirmed only to have a single director structure found to be unconstitutional.
“Depending on how that turns out, and everyone I’ve talked to thinks there will be some revisions as to the penalty by the court, that it will be sent back for a review, that it was a decision beyond its authority, but there will not be a direct challenge to the constitutionality and structure of the bureau,” Cain said. “They would have to go back and amend [the law] if they want to create a commission. I think they have a really good shot at getting a commission in lieu of a director, getting that through in 2018.”