Payday loans, CFPB data collection and Warren face-off: Mulvaney's 2nd day on Hill

Published
  • April 12 2018, 5:25pm EDT
WASHINGTON — For the second consecutive day, acting Consumer Financial Protection Bureau Director Mick Mulvaney was in the hot seat on Capitol Hill, tackling criticism from the founder of the agency he runs, defending his review of a final rule to rein in payday lenders and answering concerns he plans to take the bureau's consumer complaint portal private.

It was his first testimony before the Senate Banking Committee in his role as consumer chief — Mulvaney also serves as head of the Office of Management and Budget — and he was careful not to give his views on the outcome of a slew of reviews he has undertaken of the agency's operations and powers.

Following were the top takeaways from Mulvaney's hearing:

Will the CFPB abandon its rule to restrict small-dollar lending?

One major concern by Democrats was whether Mulvaney plans to gut or rescind the CFPB's recently enacted rule to rein in payday lending. Mulvaney has publicly said he's against the rule and suggested it should be overturned by Congress, but claimed Thursday he had not made a decision on how to reshape the regulation.

“I don’t automatically conclude that making an indication to revisit the rule assumes that we will be revoking the rule or even changing the rule,” Mulvaney said. “I have the right, under the statute, to revisit the rules which I am doing, but we have not arrived at any preconceived notions of outcomes.”

Democrats are concerned that any changes to the rule would allow more predatory lenders into the small-dollar consumer loan space while Republicans and the industry argue the regulation went too far and will cut off access to credit.

“There was a great deal of work that went into it. I think the previous director took those actions because of an ongoing need” to regulate payday loans, Sen. Mark Warner, D-Va., told Mulvaney. “I was disappointed you took that as your first action” to review the rule.

Sen. Doug Jones, D-Ala., suggested there was a dire need to restrict payday lending because it traps consumers in a cycle of debt. But Mulvaney suggested that it was the role of state and federal lawmakers, rather than a federal agency, to check payday lenders.

"The best way to address the problem that you perceive is to pass legislation and not rely on me to do it for you," Mulvaney said.

WASHINGTON — For the second consecutive day, acting Consumer Financial Protection Bureau Director Mick Mulvaney was in the hot seat on Capitol Hill, tackling criticism from the founder of the agency he runs, defending his review of a final rule to rein in payday lenders and answering concerns he plans to take the bureau's consumer complaint portal private.

It was his first testimony before the Senate Banking Committee in his role as consumer chief — Mulvaney also serves as head of the Office of Management and Budget — and he was careful not to give his views on the outcome of a slew of reviews he has undertaken of the agency's operations and powers.

Following were the top takeaways from Mulvaney's hearing:

Will the CFPB abandon its rule to restrict small-dollar lending?

One major concern by Democrats was whether Mulvaney plans to gut or rescind the CFPB's recently enacted rule to rein in payday lending. Mulvaney has publicly said he's against the rule and suggested it should be overturned by Congress, but claimed Thursday he had not made a decision on how to reshape the regulation.

“I don’t automatically conclude that making an indication to revisit the rule assumes that we will be revoking the rule or even changing the rule,” Mulvaney said. “I have the right, under the statute, to revisit the rules which I am doing, but we have not arrived at any preconceived notions of outcomes.”

Democrats are concerned that any changes to the rule would allow more predatory lenders into the small-dollar consumer loan space while Republicans and the industry argue the regulation went too far and will cut off access to credit.

“There was a great deal of work that went into it. I think the previous director took those actions because of an ongoing need” to regulate payday loans, said Sen. Mark Warner, D-Va., to Mulvaney. “I was disappointed you took that as your first action” to review the rule.

Sen. Doug Jones, D-Ala., suggested there was a dire need to restrict payday lending because it traps consumers in a cycle of debt. But Mulvaney suggested that it was the role of state and federal lawmakers to restrict payday lending, not of a federal agency.

"The best way to address the problem that you perceive is to pass legislation and not rely on me to do it for you," Mulvaney said.

Senators sound alarm on data collection

A major concern lawmakers repeatedly raised with Mulvaney was on data collection and security, particularly as millions of consumers have been affected by recent data breaches at Equifax and elsewhere.

Senate Banking Committee Chairman Mike Crapo reiterated that he fears anonymized data collection by the CFPB could expose consumer information to risk of a breach.

“The CFPB’s data collection is especially concerning in light of a number of high-profile cyberattacks, such as last year’s Equifax data breach, and recent news about how outside groups have collected private information from Facebook users,” the Idaho Republican said. “Today, we should discuss how the CFPB’s data collection process can be narrowed and enhanced to better protect consumers’ personal information.”

The CFPB, under Mulvaney’s leadership, recently froze its data collection in order to assess what the agency needs to collect. Mulvaney said during the hearing that they are still collecting some data as it relates to enforcement but they changed some of their practices to simply look at the data rather than collect it.

The agency also hired a third party to test the security of their data collection system, said Mulvaney, who added that the CFPB has documented about 240 “lapses” in which “data got out that should not have gotten out.”

“Until I know that we are holding ourselves to at least as high a standard as we intend to hold the people we oversee, we are trying to be extraordinarily judicious in the amount of data that we take, the scope of the data that we take in and how we keep that data,” said Mulvaney. The CFPB is working on a report to submit to Congress about their data collection, he added.

Warner argued that the CFPB does not collect personal information in the data but instead uses it on a “macro level” to “see if there are inappropriate practices.”

“I think what happened with Equifax is a complete reason why we need a CFPB,” Warner said.

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Will Mulvaney take CFPB consumer complaint portal offline?

Democrats also raised concerns Thursday that Mulvaney would seek to harm the CFPB's consumer complaint portal.

The industry has long raised fears about the portal, noting that portions of a consumer's complaint are made public, potentially exposing them to reputational damage.

Under Mulvaney, the CFPB recently issued a request for comment on the complaint portal and whether the complaints should be public. Sen. Catherine Cortez Masto of Nevada worried it was a pretext to make the complaints private again.

If the complaint portal is taken offline, “how are we to gather information and see patterns and practices?” Cortez Masto said. “And how are you going to continue to work with other law enforcement agencies like the attorney generals across the states when you are looking at consumer complaints?”

Mulvaney responded that making the portal private “would not impact the collection of that data in any way.”

“The collection of the data is mandated statutorily so we will continue to do that,” he said. However, taking the compliant portal private is “is one option available to me . . . because it’s not statutorily mandated.”

Warren vs. Mulvaney

The Senate hearing was shorter and less heated than the lengthy questioning Mulvaney received the day before in the House Financial Services Committee.

But Mulvaney was challenged by Sen. Elizabeth Warren, who founded the agency before successfully running for Senate in 2012, who noted Mulvaney's history of opposition to the CFPB as a South Carolina congressman. She referenced Mulvaney's repeated public digs at Warren in criticizing the agency, saying it wasn't about her but the consumers he was ignoring.

"You are hurting real people to score cheap political points," she said.

Where are the new enforcement actions?

Democrats also pressed Mulvaney on why there have not been any new enforcement actions since he took helm nearly five months ago — a concern that dominated most of the House Financial Services hearing with Mulvaney a day earlier.

“Before Mr. Mulvaney arrived, the CFPB was doing its job, in initiating a handful of enforcement actions every month on behalf of the consumers it was created to serve,” said Sen. Sherrod Brown, the panel's top Democrat. “Not only has the CFPB not initiated a single enforcement action, but it has withdrawn lawsuits against four payday lenders that charge consumers triple digit interest rates.”

Brown was referring to a case the CFPB previously filed against four payday lenders that Mulvaney dismissed earlier this year, arguing the CFPB had gone too far in interpreting the law.

Mulvaney said during the hearing that “there’s a current ongoing investigation against the same entities” so he could not comment further on the case.

“We have over 100 investigations online right now. We have 25 lawsuits including, 10 against short-term, small-dollar payday lenders,” Mulvaney said. “It is a true fact that we have not filed a new lawsuit in the last five months, but I would disagree with the characterization that means that we are not enforcing the law.”

Mulvaney has also vowed to rein in the CFPB’s actions that were perceived as “regulation by enforcement,” in which the agency would take a different stance on a law by issuing an enforcement action rather than going through the typical public notice and comment period for a rulemaking. Democrats raised concerns with this change as well.

“Mr. Mulvaney is trying to convince us that protecting families and prosecuting shady lenders is ‘pushing the envelope.' That’s simply a lie,” Brown said. “Protecting consumers is not ‘pushing the envelope,’ that’s the agency’s mission. It’s a mission that Mr. Mulvaney is completely failing at.”

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Another push for a CFPB commission

Republican lawmakers once again returned to the idea of replacing the CFPB's single director with a commission.

“The fundamental structure of the CFPB needs to be reconsidered to make it more transparent and accountable,” Crapo said.

Mulvaney has recommended to Congress to pass legislation that would create a bipartisan commission at the CFPB, rather than a single director, among other structural changes. But he added that first and foremost, he wanted the agency’s budget to be subject to appropriations. Currently, the CFPB's funding is paid by the Federal Reserve and not subject to congressional approval.

“Please put me on appropriations,” said Mulvaney. “I’m not seeking to undermine the mission of the bureau” but “there’s no reason for this bureau to be a black hole . . . in order to conduct that mission.”

Crapo said that he would “continue to support a bipartisan commission instead of a single director, a congressional funding mechanism and a safety and soundness check.”