CFPB chief takes heat from Senate Dems for regulators' response to virus
Consumer Financial Protection Bureau Director Kathy Kraninger came under fire Tuesday from Senate Democrats who questioned what steps the bureau — and other regulators — had taken to help consumers who sustain wage or job losses because of coronavirus outbreak.
Sen. Sherrod Brown, D-Ohio, led the charge by asking Kraninger why the Financial Stability Oversight Council — which is supposed to identify emerging threats to the financial system — has not met since November though it is required to meet quarterly.
“Considering what’s happening with the financial markets and the public health crisis around the country, would you demand that [Treasury] Secretary Munchin call a meeting immediately to explain publicly what this administration’s plan is to make sure regular Americans don’t end up paying the price?” Brown said. “The purpose of FSOC is to understand and put plans together so things aren’t happening with such chaos as they are now.”
Kraninger, who is one of the 10 voting members on the 15-member council, said it plans to meet in late March, but she would not commit to speeding up the council's plans.
She also initially refused to say that the coronavirus had created an economic emergency, but then relented under repeated questioning.
Read more: Complete coverage of the coronavirus impact
“It clearly is a public health emergency that has significant economic impact. It’s something that the administration is looking at day to day,” Kraninger said. “The bureau has a pandemic plan, and we’ve reminded institutions we regulate that they should have pandemic plans. Again, there is an ongoing business-continuity concern and a mission concern in terms of how this is affecting consumers and making sure that we are getting the best possible information out.”
Kraninger said the CFPB is working to ensure the safety of its employees. The bureau is trying to adopt a telework policy but has about 50 employees who have not signed on, she said. The CFPB also is taking precautions by asking the public to live-stream its events rather than attend them.
Sen. Chris Van Hollen, D-Md., asked Kraninger if she planned to use her authority to ask credit card companies and others to provide forbearance plans to consumers who may be out of work or unable to pay their debts because of the coronavirus.
“I hope in the coming days you take more aggressive action, because that could turn a lot of households upside down, because we know that 40% of households are literally $400 away from essentially going underwater,” Van Hollen said.
Kraninger made clear that said she has not contacted any credit card firms, auto lenders or credit bureaus to address consumer credit issues, and she did not say if she planned to do so.
For their part, Republicans continued to argue that the CFPB’s structure is flawed. Nearly every Republican on the committee reiterated the constitutional issues dogging the agency, with several saying it should be headed by a commission rather than a single director.
“It remains abundantly clear that the fundamental structure of the CFPB must be reconsidered to make it more transparent and accountable,” Senate Banking Committee Chairman Mike Crapo, R-Idaho, said. “I continue to advocate for establishing a bipartisan board of directors overseeing the CFPB.”
Last week the Supreme Court heard arguments in a case, Seila Law vs. CFPB, that Kraninger said will help the bureau resolve outstanding litigation.
“Only the Supreme Court and Congress can provide that certainty,” Kraninger said. “It has thwarted many of our enforcement actions. In the history of the bureau, it is an issue that is raised regularly in litigation.”
Republicans have long argued that a provision in the Dodd-Frank Act that allows the president to fire the CFPB director only “for cause” is an unconstitutional infringement on executive power.
Sen. Tom Cotton, R-Ark., told Kraninger that his fellow lawmakers could do nothing to hold her accountable.
“You may be the single most powerful person in the executive branch of the federal government,” Cotton said. “What can any of us do to you or your bureau? Nothing. You’ve got a five-year term, and you’re barely into your term. Sen. Brown wanted you to talk about whether the FSOC will convene. Well, guess what? President Trump doesn’t have much say over what you do either. You can only be removed for cause.”
During a testy exchange with Sen. Brown, Kraninger defended the agency’s oversight of Wells Fargo and the role of a former CFPB political appointee, Eric Blankenstein, who allegedly offered assurances privately to Wells Fargo’s former CEO Tim Sloan.
“Did you know he promised the [former] CEO of Wells Fargo that the bureau would settle any matter in private without fines?” Brown asked.
“Senator, I can tell you with respect to the ongoing oversight of Wells Fargo that the buck stops with me,” Kraninger responded. “That is an alleged statement that is complete hearsay in a staff report that the committee has not even actually voted on.”
Brown then said: “You have a reputation for being a little easy on Wells Fargo.”
When Kraninger said that the CFPB had levied a $1 billion fine against Wells — the largest fine in the agency’s history — Brown later asked to correct the record by stating that the fine was not assessed during Kraninger's watch. Brown also noted that Kraninger’s use of the word “hearsay” was inaccurate because the information about Blankenstein was contained in emails published as a part of a recent House report on Wells.
Kraninger also fielded questions on payday loans, student loans and the Military Lending Act during the nearly two-hour hearing. In response to a question from Crapo, Kraninger said the CFPB is still sorting through the 190,000 comments it received on a proposal to revamp its payday lending rule.
“We are working through those comments and our final position is to issue a rulemaking or at least some decision with respect to that rulemaking in April,” Kraninger said. “It is evident that there is continued demand for small-dollar, short-term products in the marketplace. The other thing that we are looking at very carefully is research into disclosures.”
Lawmakers, though, returned to questions about the CFPB’s response to the coronavirus.
Sen. Robert Menendez, D-N.J., and Sen. Catherine Cortez Masto, D-Nev., said they are worried that predatory lenders will step up their efforts to target vulnerable consumers with high-cost loans. Menendez noted that the CFPB’s website “still doesn’t have any advice to Americans on how to financially prepare for scams and frauds that may come as a result of the coronavirus threat.”
As has happened at past hearings, some lawmakers spoke over Kraninger when she resorted to talking about bureaucratic processes rather than specifics to address everyday consumers.
Rep. Mark Warner, D-Va., told Kraninger he was “gravely disappointed” by her response to the coronavirus. He said the Trump adminstration's efforts at interest rate cuts, a broad-based stimulus and payroll tax cuts miss the mark.
“We should be looking at those industries, like travel and food and beverage, that have been put in dire straits,” Warner said. “Independent contractors and gig workers have no social insurance to fall back on. I want to hear what specific steps you will take. I don’t think your response had any level of detail to it. If you are the most powerful person, what kind of guidance are you giving to auto and credit card lenders?"
"We are monitoring this day to day," she said. "There is a lot of information sharing happening at the interagency level. Guidance is being regularly updated as to what the appropriate responses are, what responses people are taking.”