The Consumer Financial Protection Bureau is ramping up enforcement actions ahead of a possible political showdown between President Donald J. Trump and the agency's director, Richard Cordray.
The CFPB filed two separate consent orders Monday against CitiFinancial Servicing and CitiMortgage over claims the servicers failed to help borrowers with foreclosure relief. That came just days after the bureau filed lawsuits against TCF National Bank and student loan servicer Navient after both companies said they refused to be pressured into settling allegations of wrongdoing before the Trump administration took office.
Though the business community had hoped a new administration would rapidly put a halt to the CFPB's aggressive approach, so far the change in political power instead appears to be emboldening the CFPB to act.
"The CFPB is going to be more aggressive in the short term because their future is uncertain," said Ashley Taylor, a partner at the law firm Troutman Sanders. "Agencies in transition often become more aggressive if the people who work there think their power will be curtailed."
On Friday, the White House issued an executive order calling for a freeze of all pending or new regulations, akin to executive orders from the incoming Obama and Bush administrations. The order applies only to executive agencies and not the CFPB, though non-executive agencies are generally expected to follow suit.
The CFPB has not so far issued any new regulations — which might be overturned via the Congressional Review Act of 1996 — and has focused its efforts on enforcement activity.
"The CFPB has a strong interest in releasing cases to show the value of the work it is doing, partly to motivate its own staff and partly to remind its friends on Capitol Hill why the CFPB is there," said Tom Pahl, a partner at the law firm Arnall Golden Gregory and a former managing counsel in the CFPB's Office of Regulations. "They have an extra incentive right now because they're a political football."
Whether the Trump administration will target Cordray remains unclear, though there are signs that it is strongly considering it. It interviewed former Rep. Randy Neugebauer, R-Texas, for the job two weeks ago. However, Sean Spicer, President Trump's top spokesman, said Monday that "no decision" regarding the agency had yet been made.
Top Democrats, meanwhile, have vowed to defend the CFPB and have said that Cordray would legally challenge any attempt to remove him before his term expires in July 2018. Cordray is due to give a speech at a Wall Street Journal conference on Tuesday that may help clarify his plans.
Yet banks and financial services companies that are currently under investigation by or in litigation with the CFPB may drag their heels in the hopes that the Trump administration will eventually make a move.
"There are incentives to wait" until a new leader is in place, Pahl said.
Some lawyers said the CFPB began pushing cases forward after the election — and that more actions are expected soon.
"You will see some of that activity continue to bear fruit for a while," said Quyen Truong, a partner at Stroock & Stroock & Lavan, and a former CFPB assistant director and deputy general counsel. "And look for additional activity going forward to establish the value of the agency."
Both sides appear to be laying the groundwork for a possible legal battle ahead. A recent court decision, PHH Corp. vs. CFPB, suggests that a sitting president may have a legal basis for removing the CFPB director. That decision, which allows the president to remove the CFPB director at will, has been temporarily stayed pending an appeal.
It remains an open question whether the Trump administration wants a showdown with Democrats over the issue. Some have said that firing Cordray would be perceived as a nuclear option against Democrats, whose support is needed to pass regulatory reform.
"You want to effectuate change but you don't want to do so in a way that exhausts all your political capital on this one agency, or suck up all the energy and focus on this agency," Taylor said. "So you balance the desire to impact change with the finite resource of money, time and political oxygen."
But companies that fall under the CFPB's jurisdiction now are skittish because of the uncertainty.
"One of the things we most want to see is some predictability and structure around enforcement," said Erin Sheckler, the president of NexTitle, a Bellevue, Wash., title and escrow company.