Business

Mulvaney Faces Elizabeth Warren Grilling Over New Tone at CFPB

For Mick Mulvaney, the tables have turned.

Mulvaney Faces Elizabeth Warren Grilling Over New Tone at CFPB

Mick Mulvaney

Photographer: Zach Gibson/Bloomberg

Back when he was a South Carolina congressman, Mulvaney eagerly joined other Republicans in making a pinata out of Richard Cordray, the Barack Obama-appointed head of the Consumer Financial Protection Bureau. Cordray’s trips to Capitol Hill were rife with partisan attacks, as GOP lawmakers regularly accused him of ducking oversight and burdening banks with rules that crimped lending.

This week, Mulvaney will be the one in the hot seat. President Donald Trump’s budget director is doing double duty as acting director of the CFPB. Starting Wednesday when he appears before the House Financial Services Committee, Mulvaney will endure two days of congressional scrutiny over his role leading a financial regulator that he once called a “sick, sad” joke.

The hearings will likely resemble a role reversal of the Cordray era. Instead of beating up the CFPB’s director, Republicans are almost certain to praise Mulvaney for taking steps to defang the agency, which was created to crack down on abuses that fueled the 2008 financial crisis. And this time around, the outraged lawmakers will be Democrats who are expected to scold him for putting consumers at risk.

Mulvaney Faces Elizabeth Warren Grilling Over New Tone at CFPB

Elizabeth Warren

Photographer: Andrew Harrer/Bloomberg

A highlight will be Mulvaney’s faceoff with Senator Elizabeth Warren, the financial industry’s most vocal congressional critic and the CFPB’s biggest defender. Since Mulvaney took over in November, Warren has scrutinized everything from his hiring of GOP congressional aides to his decisions to drop enforcement actions. Mulvaney’s Thursday appearance before the Senate Banking Committee will be the Massachusetts Democrat’s first chance to spar with him publicly.

While analysts and banking lawyers expect lots of theatrics, they don’t expect to learn much about what Mulvaney’s doing behind the scenes to overhaul the embattled agency.

“His time will be consumed by rhetoric and political debate more than substance,” said Quyen Truong, a former CFPB official who now practices law at Stroock & Stroock.

Here’s a look at what Mulvaney has been up to and what to expect lawmakers to home in on when he testifies:

Enforcement

Mulvaney has promised to stop “pushing the envelope,” a term he uses to make the point that under Cordray the CFPB used questionable legal strategies to go after financial firms.

Days after he took the helm, Mulvaney put a freeze on all enforcement actions. He’s since dropped a few cases, including investigations into South Carolina-based lender World Acceptance Corp. and Ohio mortgage company Nationwide Biweekly Administration. Other investigations have stalled, lawyers say.

“The slowdown has been a relief,” said Maria Earley, a former CFPB enforcement lawyer who now represents financial firms at Reed Smith. “It gives companies more room to breath.”

Yet risks remain for companies that have been investigation targets. Some states, particularly those with Democratic attorneys general, are champing at the bit to pick up the CFPB’s slack.

“Don’t forget, state attorneys general can enforce CFPB rules,” said Joe Jacquot, a former deputy attorney general in Florida and now a partner at Foley & Lardner. “There is certainly a segment of AG’s who are concerned about a pullback in enforcement at the CFPB.”

Reorganizing Staff

Mulvaney has laid the groundwork to make lasting changes. Key political hires include chief of staff Kirsten Sutton and senior adviser Brian Johnson. Both previously worked for House Financial Services Committee Chairman Jeb Hensarling, a Texas Republican who has sponsored legislation that would rescind much of the CFPB’s powers.

Mulvaney also has pulled the agency’s fair-lending staff out of its supervision and enforcement team. Instead, the group is now part of the office of equal opportunity. That means staff may not have the same tools to investigate companies suspected of discriminating against borrowers.

Regulation

Mulvaney has sought public input on everything from enforcement to specific rules to the CFPB’s processes for collecting consumer data. Analysts say the industry’s responses could provide a road map for how Mulvaney and his permanent successor to rein in the CFPB.

Advice to Lawmakers

Last week, Mulvaney proposed legislative changes that would strip away much of the CFPB’s independence.