Republicans Win CFPB Hearing: How It Affects You

Article By: Ben Giumarra, Spillane Consulting Associates

What you should to know about the CFPB turmoil and how it affects you

The Debate

Mr. Cordray left a vacancy when he stepped down as director of the CFPB. The big question remaining – who will serve as acting director until a replacement can go through the appointment process (which can take years)? President Trump claimed authority to assign his choice (Mulvaney) pursuant to a general law giving authority to fill vacancies in such administrative positions. But the current deputy director (English) filed a lawsuit claiming she is the rightful replacement and that the Dodd Frank Act specifically requires the deputy director to take over if the director leaves.

So there is a conflict between an older general law and a newer, more specific law.

Nov. 28th Hearing: Trump Wins

Yesterday a Federal court in D.C. held a special hearing to settle this issue (although this decision could be appealed). In that hearing, the judge ruled in favor of President Trump. So Mulvaney is acting director and English is deputy director (although probably not for long).

What this means for you

The director of the CFPB, even an interim director, has significant power to reshape the agency’s enforcement, rulemaking, and other activities.


The acting director can make it significantly more difficult for CFPB examiners to take enforcement action, which predominantly affects the largest lending institutions and those in the CFPB’s crosshairs for other reasons. Think Santander. It might very well be a lucky break for organizations in the midst of dealing trouble with the agency. The director has broad powers to prevent enforcement action from being taken, and even then to limit the penalties imposed.

I’m not sure how much help this will be for the vast majority of other institutions. For those that see CFPB enforcement just as leveling the playing field, removing the CFPB’s enforcement threat just leaves them to deal with the same state regulatory agencies as before. Perhaps these state agencies are even bolstered by the CFPB’s struggles.

Rulemaking & Guidance

The CFPB is required by Dodd Frank to do certain things. But the director can slow things down. The most interesting issue to me right now is HMDA. Had Trump lost this battle, certainly a Trump appointee wouldn’t have been in place in time to disrupt implementation of the upcoming HMDA rules. some of these down, but probably can’t completely stop all of them. HMDA is an interesting issue because, while Dodd Frank does require that the CFPB implement changes here, the CFPB has the power to delay implementation. In fact, industry representatives have already written Mulvaney asking for a 1-year delay. The CFPB could also rewrite many (but not all) of the planned regulatory changes, intending to make the HMDA rule less burdensome.

If we do go ahead with HMDA implementation as planned, let’s at least hope that the CFPB is allowed to continue issuing clarifying guidance, as promised, because for now CFPB activities are frozen.

States and Other Regulators

The CFPB has ruled as king of all other regulators for the past several years, with Federal and state regulatory bodies following along with almost all of the CFPB’s rulemaking and guidance initiatives. But it can’t undo everything it has created by itself.

Will the FDIC, Federal Reserve, state enforcement agencies, etc. start to break ranks if politics derails the CFPB? This might be seen especially with state requirements. Yes, the CFPB wrote the Ability to Repay Rule. It’s a Federal regulation. But then states such as Massachusetts copied it and made it a state law. So even if the CFPB can rewrite the Ability to Repay or other regulations, or just stops enforcing it, much of the regulatory regime put in place over the past several years can’t be undone very easily.

In Other News

  • Stop seeing it as a compliance concern, and start seeing it as an opportunity for new business and/or improved customer service. CFPB’s blog – “5 Ways Banks and Lenders Work With People Who Speak or Understand Limited English.”

  • Check out the OCC’s revised enforcement manual here. And a good overview of what’s changed in this article.

  • ay attention to regulatory reform bill S.2155 that just passed the Senate. It doesn’t kill Dodd-Frank, but it might actually succeed and does address a number of items: Pace loans, originator licensing, Closing Disclosure waiting period, and protective provisions for community lending institutions. This free article from K&L Gates gives more information – Dodd-Frank Reform Efforts Intensify.

  • Interested in rolling out so-called “e-closings”? Well, giving someone here at SCA a call might not be a bad way to get started. But another vendor that’s proving itself helpful in this space is Rhode Island based Equity National Title. Read this Housing Wire article about Equity’s new website tool to help its lender-partners navigate e-Closing requirements.

On My Mind …

What’s the key to empowerment and employee engagement? Who knows! There probably is no single key. But one thing some companies do is give employees time to work on their own ideas;freedom to innovate. 3M for example, has had such a policy of”15% time” in place since 1948. This has produced some of its best inventions (including sticky notes). Google, who used to have a similar policy, also benefited from a surprising number of inventions, including the wildly popular G-Mail. According to 3M: “If there’s a secret ingredient to 3M’s more than 100 years of innovation, it’s this: give talented people the time and resources to prove the worth of their ideas, and in the long run you’ll come out well ahead. Even if those talented people are mistaken, you’ve learned something.”

“Not finance. Not strategy. Not technology. It is teamwork that remains the ultimate competitive advantage, both because is it so powerful and so rare… If you get all the people in an organization rowing in the same direction, you could dominate any industry, in any market, against any competition, at any time.”

– Patrick Lencioni,
in “The Five Dysfunctions of a Team”

Thanks so much for reading our weekly newsletters. We’re not always going to be perfect, but because we always do our best and try not to overpromise, we hope that we’re always going to be trustworthy. Your calls and e-mails are very helpful – please keep contributing.

**These are our opinions. We’re not authorized, or willing, to express those of others.**

Thank you to Ben Giumarra, Spillane Consulting Associates, Inc., a member of our Education Committee, who with the support of other experts at SCA have put together this newsletter.

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