Removing Barriers Blog

Bloomberg News: Enforcement Actions Drop Sharply at Trump-Led CFPB
Posted October 11, 2018 by CUNA Advocacy

In an article published by Bloomberg News on October 11th, it was reported that the Consumer Financial Protection Bureau took only three enforcement actions in the third quarter of 2018 and is on pace for the lowest yearly total in its seven years of existence.

"The bureau levied $1.6 million in penalties in the three-month period ending in September, compared to $7.3 million on eight actions during the third quarter of 2017, according to Bloomberg Law’s CFPB Enforcement Tracker.

The enforcement drop shows that acting CFPB Director Mick Mulvaney, who was put in charge of the CFPB last November by President Donald Trump, is following through on his pledge to curb enforcement activity. Mulvaney ordered a top-to-bottom review of investigations and pending actions when he took power and issued a staff memo stating that the bureau would no longer “push the envelope” in its enforcement actions.

“Exactly none of this should come as a surprise,” Richard Gottlieb, a partner at Manatt, Phelps & Phillips, said of the third-quarter results. “Mr. Mulvaney is practicing precisely what he preached.”

While the CFPB may not be pursuing enforcement cases as vigorously as it did under former Director Richard Cordray, the bureau has continued to conduct rigorous examinations to make sure banks and other financial companies comply with consumer finance laws, according to Gottlieb.

”Don’t be fooled: The bureau is doing its job, just not for headlines,” he told Bloomberg Law. “Rich Cordray weaponized enforcement, such as in the PHH case, to punish companies for legal activities that the bureau found distasteful.”

Cordray critics pointed to PHH, a New Jersey-based mortgage company, as a prime example of agency overreach under his watch.

A CFPB administrative law judge recommended a $6.5 million fine against PHH, which the CFPB accused of referring consumers to mortgage insurers in exchange for kickbacks. Cordray raised the penalty to $109 million, a decision that prompted the company to successfully challenge the higher penalty in federal court.

The bureau under Mulvaney seems to be working harder to settle cases instead of litigating them, according to Lucy Morris, a former CFPB deputy enforcement director who is now a partner at Hudson Cook LLP in Washington.

“The emphasis appears to be on resolving cases rather than expending resources to litigate over a few extra dollars,” she said in an email to Bloomberg Law.

The CFPB has taken only six enforcement actions in the first three quarters of 2018, compared to 31 in the first three quarters of 2017. The total number of fines levied by the CFPB is much higher—$506.6 million so far in 2018 compared to $35.1 million for the first nine months of 2017—but much of the 2018 figure is due to the CFPB’s $500 million settlement with Wells Fargo in April.

Wells Fargo settled for $1 billion over allegations of improper insurance charges on auto loans and improper fees on mortgage interest rate locks. It was ordered to pay half the sum to the CFPB and the other half to the Office of the Comptroller of the Currency.

Much of the CFPB investigation into Wells Fargo came under Cordray, and President Trump himself expressed preference for a big penalty. Four months before the settlement was announced, Trump lashed out at Wells Fargo on his Twitter account and vowed hefty fines against companies “when caught cheating!”

In a second action against a financial giant this year, the CFPB settled in June with Citibank, which agreed to repay credit card holders who lost $335 million because it failed to adjust interest rates.

But Mulvaney’s CFPB did not fine the lender. Instead, the agency gave credit to Citibank for discovering the error, alerting regulators, and setting out to repay borrowers before being ordered to do so.

The decision to forgo a penalty was slammed by Sen. Sherrod Brown (D-Ohio). The Senate Banking Committee’s ranking member said in a statement that when a bank cheats more than 1 million customers out of more than $300 million, “there should be a penalty, not an ‘attaboy’ for confessing.”

CFPB enforcement actions announced this year “largely, if not entirely, resolved investigations or examinations opened under Cordray’s leadership,” said Hudson Cook’s Morris.

“What new investigations are being pursued by the new administration?” she said. “That’s an open question.”"