CFPB Signals Retreat from Aggressive Regulation

The Consumer Financial Protection Bureau (“CFPB”) made significant announcements on January 16th and 17th reflecting a shift to a more industry-friendly regulatory approach under Trump-appointed acting director Mick Mulvaney. The CFPB is reconsidering existing rules and policies put in place under the previous CFPB director, Richard Cordray, with an eye toward rolling back burdensome rules and aggressive enforcement policies.

In its January 16th announcement, the CFPB said it will commence a rulemaking process to reconsider the so-called “Payday Loan Rule.” The Payday Loan Rule imposes new restrictions on payday, vehicle title, and certain installment loans under the CFPB’s authority to curb unfair, deceptive, or abusive acts or practices. The Payday Loan Rule has been heavily criticized by the small loan industry which says the rule will restrict consumers’ access to credit. The CFPB’s January 16th announcement coincides with the effective date of the Payday Loan Rule’s codification in the Code of Federal Regulations. But most of the provisions of the rule will not require compliance until August 19, 2019. The CFPB’s reconsideration process could result in the unwinding of the rule before that date.

On January 17th, the CFPB announced a “call for evidence” to ensure the CFPB is fulfilling its proper and appropriate functions. In particular, the CFPB will publish a series of Requests for Information (“RFI”) in the Federal Register seeking comment on the CFPB’s activities. Mulvaney states in the announcement: “Much can be done to facilitate greater consumer choice and efficient markets, while vigorously enforcing consumer financial law…”  The first RFI will seek comment on the CFPB’s use of Civil Investigative Demands (“CIDs”). Industry advocates criticized the aggressive use of CIDs by the Cordray-led CFPB, and several courts refused to enforce such CIDs for failing to describe the conduct investigated and the consumer financial laws implicated.  The RFI suggests that Mulvaney is looking to rein in the CFPB’s expansive use of CIDs and pursue a more restrained enforcement approach.

These announcements come while Mulvaney’s authority to lead the CFPB on an interim basis is being challenged in court by Leandra English, the CFPB’s current deputy director who worked alongside Cordray. English claims she is the rightful interim acting director of the CFPB. Mulvaney is showing that the pending court action will not slow down his efforts to take the CFPB in a different direction

Jay Spruill

About: Jay Spruill

Jay leads the Marketplace Funding Industry Team and is a member of the Banking Industry Team. Jay has extensive experience advising financial institutions in the development of products and services, including online loan products, and on regulatory matters affecting financial institution business models. View all posts by Jay Spruill
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