CFPB should take back seat to bank regulators on supervision: Mulvaney
Mick Mulvaney, the acting director of the Consumer Financial Protection Bureau, said Thursday the agency may allow prudential regulators to take the lead on more supervisory matters to cut down on duplication and ease the burden of exams on financial firms.
Mulvaney said regulators should strive to avoid overlapping exam processes, suggesting regulators like the Office of the Comptroller of the Currency and the Federal Reserve Board could have a greater supervisory role on consumer compliance matters.
"There's no reason why folks have to go through sequential regulations for the same thing," Mulvaney said at a U.S. Chamber of Commerce event on small business lending. "We've already started to sit down with some of the other prudential regulators. I don't see why we can't work together on supervision."
Under the Dodd-Frank Act, the CFPB has supervisory authority for consumer regulations over banks, thrifts and credit unions with assets over $10 billion, while prudential agencies supervise banks for safety and soundness. But the suggestion that the CFPB would allow prudential regulators to take the lead in certain cases for larger institutions represents a major shift in both attitude and action.
"I'm cautiously optimistic that of all of our discussions with co-regulators, there's a desire for us to work together," he said.
Earlier this month, Mulvaney met with Comptroller of the Currency Joseph Otting to discuss ways to coordinate supervision of financial companies.
Mulvaney has been making the rounds in Washington, speaking to various stakeholders. On Thursday, he continued to heap criticism on his predecessor, former CFPB Director Richard Cordray, as well as Sen. Elizabeth Warren, D-Mass., the agency's architect.
"The CFPB may have in the past seen itself as separate and apart, [from other regulators] and if you've heard some of the criticism about some of the other regulators, we've heard [the CFPB] didn't cause the financial crisis, [other regulators] did," Mulvaney said.
He also made an analogy that regulators are like a lifeguard watching children swimming in a pool, which means all regulators should agree on a common approach instead of there being outliers.
"They should all agree on whether the child should be able to go into the deep end," he said.
Asked how he planned to change the CFPB's small-dollar, payday lending rule, Mulvaney implied that he planned to leave well enough alone and allow the states to regulate.
In January, Mulvaney said the CFPB planned to reconsider the payday rule, which was finalized in October under Cordray, and would have required that payday lenders determine a borrower's ability to repay a short-term loan of 45 days or less.
As part of a review of the payday rule, Mulvaney said he found a note sent to the CFPB in 2015 by a state attorney general saying the states had "figured out a way to protect consumers."
The note said, "'Please don't do this, we [the state] have already done it and it works,'" Mulvaney said. "My gut is [that note] was completely ignored."
When Mulvaney took over the CFPB, he immediately halted all enforcement actions and began a complete review of the agency including all lawsuits and investigations that were in the pipeline from his predecessor. He implied that some, but certainly not all, pending cases could be dropped.
"The analysis has essentially been, where are we going after bad actors who have really broken the law, and there are those, that is real," he said. "At the other end of the spectrum is stuff where [the CFPB] decided we didn't like somebody and we found a way to bootstrap ourselves into a lawsuit to go after those folks. That's the part that is stopping. We don't get to decide who the bad guys are."
Asked what he found most surprising since taking the helm of the CFPB, Mulvaney said — contrary to his prior criticism of and efforts to delegitimize the agency — that he has been impressed with the agency's lawyers.
"I was worried about the institutional credibility of the CFPB," he said. "Some of the legal stuff I have read at the CFPB is some of the best legal work I've seen, some of the best lawyering I've seen. They're just good technocrats. They're not all activist."
He also complimented the CFPB's staff generally.
"There are really, really good people to work with at the CFPB and most of them are very talented and right-down-the-middle folks, and that's been a pleasant surprise," he said.
But Mulvaney repeatedly mentioned the policies of Cordray in a critical light and continued a steady stream of negative comments about Warren.
"Elizabeth Warren now has been in the habit of writing me every week," he said. "I'm tired of writing the same form letter back to her every time [saying] if you don't like it, talk to the person who wrote the statute."
Mulvaney said the CFPB under his leadership would be transformed into the "gold standard" for regulatory agencies.
"Right now it's tainted by its original sin; it's tainted by who created it," he said, in another reference to Warren. "I want it to be the gold standard."