CFPB has plenty of options for slashing its budget

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Mick Mulvaney, acting head of the Consumer Financial Protection Bureau, has made clear his desire to slash the agency's budget, but what he plans to cut to meet his spending goals is more of a mystery.

Mulvaney grabbed headlines in January when he requested "zero" in additional funding for the bureau in the second quarter of the fiscal year, choosing to fund the bureau instead with a $145 million reserve account set up by his predecessor, Richard Cordray.

But he has not revealed how much he will request from the Federal Reserve, which funds the CFPB's operations, for the rest of 2018, nor how he aims to fulfill a Trump administration promise of slashing the agency's budget by 30% next year.

"Basically, it comes down to whatever funding request [he makes] for the final two quarters of the fiscal year, but no one knows what that will be, except that there's going to be a reduction in the funding they get," said John Pachkowski, an attorney and senior banking analyst at Wolters Kluwer Legal & Regulatory U.S.

Mulvaney has signaled a pullback in overall funding for the CFPB, including freezing all enforcement actions and ordering an annual independent audit of the CFPB's operations and budget. His second-quarter budget of $145 million marked a 34% drop from the first-quarter budget of $217 million.

In the CFPB's latest strategic plan, Mulvaney said he wanted align the bureau's resources to its mission and "promote budget discipline."

As of last year, the CFPB estimated a $630.4 million budget for fiscal year 2018, which ends Sept. 30, but that estimate was during Cordray's tenure and few think Mulvaney will stick with that amount. He is expected to submit a funding request in April for the third quarter after the CFPB uses up the reserve fund.

Many lawyers applaud the drop in funding because it signals a pullback in enforcement actions against financial firms.

"The spending cuts are going to be consistent with the change in the nature of [the CFPB's] operations that's being implemented by the new regime," said Scott Pearson, a partner at Ballard Spahr. "If the agency can achieve its goals by spending less money, everyone would agree that's a good thing."

The industry's praise of Mulvaney is consistent with criticism during the Cordray years of budgeting at the bureau, which is isolated from the congressional appropriations process that limits other government departments and agencies. That means a CFPB director can essentially request whatever funds it needs from the Fed without scrutiny from other branches.

Since the CFPB was created in 2011, Republicans have wanted to subject the agency's funding to the congressional appropriations process. But politically the issue is a nonstarter because Senate Democrats, including the CFPB's founder, Sen. Elizabeth Warren of Massachusetts, have not been open to changing the CFPB's independent funding.

But that same latitude allow just as much authority for a more conservative director, such as Mulvaney, to slash the agency as he sees fit.

Also director of the Office of Management and Budget, Mulvaney is closely aligned with the White House, which wants to slash the CFPB's funding more than 30% by 2019. A White House budget plan seeks to cap the CFPB's funding in 2019 at $485 million, returning the agency to 2015 funding levels.

That mandate means Mulvaney is looking for more places to cut.

While employee compensation and benefits are the bureau's largest expenses, it is unclear whether Mulvaney can reach his budget goals through attrition and layoffs. But some say leaving certain positions unfilled is one way to trim spending.

"The natural rate of attrition coupled with a general hiring freeze, mean [the CFPB's] human capital costs would probably decrease," said Richard Horn, an attorney at Richard Horn Legal in Tucson, Ariz., and a former CFPB special counsel and special adviser.

Another area ripe for the chopping block involves the CFPB's contracts with outside consultants and vendors, lawyers said.

The CFPB spends roughly $200 million a year on contractual services, according to past budgets. For example, it spends more than $30 million a year on outside contracts and vendors, according to, a website mandated by the Federal Funding Accountability and Transparency Act to give the public access to information on how tax dollars are spent.

"Projects have a cost associated with them, and some of the money could be saved because [the CFPB] may not be doing more discretionary projects," Horn said.

Many of the contracts are for IT, software and technology projects, from large consulting firms including General Dynamics Information Technology, the cybersecurity firm Knowledge Consulting Group, KPMG, McKinsey & Co. and PricewaterhouseCoopers.

The contracts in 2015 ranged in cost from, for example, $148,944 spent for 28 contracts with Graceland University in Independence, Mo. — for computer training — to a $5.7 million contract with Deloitte Consulting.

Some of the CFPB's past contracting work has also come under criticism from conservatives for reasons other than the amount of funding costs. One firm that the CFPB has contracted with, GMMB, an advertising and political consulting firm, has come under attack for supposed ties to progressive political causes. The firm received more than $14 million in contracts in 2016 to advertise the CFPB's outreach to consumers.

Consumer advocates said they have expected Mulvaney would find his own way to defund the agency.

"If you’re going to eliminate an agency, the best way to do it is to cut off its funding," said Bruce Marks, president of the Neighborhood Assistance Corporation of America, known as NACA. "He’s going to continue to request very little funding.”

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Enforcement Enforcement actions Budgets Government accounting Mick Mulvaney CFPB