Internal Mulvaney Memo Sets Off More Controversy

Another internal memo from Acting CFPB (or BCFP) Director Mick Mulvaney has leaked to… well, it seems, everyone… announced more changes coming to the Bureau. Here are the highlights he announced yesterday:

The Office of Students and Young Consumers will be “folded” into Office of Consumer Education and Engagement (also known as the Office of Financial Education)

Consumer advocates and Democrats are livid. A statement in American Banker says the office will “Essentially [be] working on pamphlets and web content about student loans.”

Sen. Sherod Brown commented,

“Mick Mulvaney has defaulted on his obligation to help the thousands of Americans who are struggling with unfair student loans. The President should quickly nominate a Director with bipartisan support and a track record of strong consumer advocacy.”

Christopher Peterson, financial services director at Consumer Federation of America, said:

“Shuttering the CFPB’s student lending office is an appalling step in a longer march toward the elimination of meaningful American consumer protection law. This actively promotes greater profits for a handful of debt collection businesses at the expense of mistakes, neglect and confusion for millions of student loan borrowers.”

Allied Progress said,

“To date, the CFPB has received at least 53,000 complaints about student loans from consumers around the country. Student loan borrowers deserve a champion at the CFPB – Mick Mulvaney is nothing but an industry stooge who will do whatever it takes to support Education Secretary Betsy DeVos…”

About this change, CFPB spokesman John Czwartacki said,

“This is a very modest organizational chart change to keep the Bureau in line with the statute but the office is still operating within the same division. The work of the office continues, personnel are all on the job and working on the same material as they were before. The bottom line is there is no functional or even practical change."

But NPR reports that some staffers, who spoke on condition of anonymity, don’t think this is true.

A new Office on Costs and Benefits Analysis will be established, reporting to the Director.

This may not come as a surprise, given Mulvaney’s extensive set of Requests for Information (RFI). Many view this initiative as evidence-gathering to support changes in the bureau’s operations.

Lisa Donner, executive director of Americans for Financial Reform said about the development,

"Why is Mick Mulvaney creating a new office on 'costs and benefits' directly under his control, when the CFPB already has a robust research department?” 

The Office of Fair-Lending and Equal Opportunity will merge with Office of Equal Opportunity and Fairness, which handles internal employee issues, and report to the Director.

This move was announced earlier in the year but has not yet taken place. A report by the Brookings Institute said,

"It may not be immediately apparent, but the Acting Director of the Consumer Financial Protection Bureau Mick Mulvaney’s decision to re-brand the Office of Fair Lending and Equal Opportunity (OFLEO) will significantly reduce the Bureau’s ability to police discriminatory lending. Converting the Office of Fair Lending to one of internal policy advocacy will in effect dismantle it, creating a significant step backward for those whose goal is eliminating racial discrimination in lending."

Ben Olson, a partner at Buckley Sandler and former CFPB official, told American Banker,

"[Yesterday's memo] suggests that it hasn't happened yet; the union has objected. The practical reality is that, regardless of where the office sits, it cannot take any significant action without the acting director's approval."

A management layer of political appointees is in the process of being established.

insideARM has reported on a number of new appointments, but to date these are not reflected on the CFPB organization chart. Mulvaney’s memo suggests that will soon be updated, and "…will also highlight that the [policy associate directors] are my representatives in each division." 

An Office of Innovation has been created (this was previously Project Catalyst).

Project Catalyst has received criticism for not actually accomplishing anything. In its 5~ish years of existence, the office issued just one no-action letter. Ben Olson also told American Banker he thinks there will be more action from this Office now, including “providing more advisory guidance on e-commerce or new types of financial services products that don't fit within the lines drawn by regulations that were written before those products exist.”

insideARM Perspective

The last major leaked Mulvaney memo was from January 2018. In that one, he suggested that debt collection rules may be coming. So far that has not materialized, but he has hired Tom Pahl, who spent three years on debt collection rulemaking, then left to return to the Federal Trade Commission. Pahl returned to the Bureau last month as a political appointee, with a lot more authority than he had previously. Bureau staff has also considerably ramped up its engagement with debt collection stakeholders.

Mulvaney also said in January that the Bureau would be reviewing everything they do, which has come to pass in the form of 12 formal Requests for Information.

The Office of Innovation could be interesting for the ARM industry, which has been especially affected by regulations that were written before much of today's communications technology existed. I'm going to watch this.

Finally, the confluence of developments at the CFPB and the Department of Education are indeed interesting, especially if they have been coordinated. ED has annouced plans to launch an incredibly ambitious systems project to build a centralized database for student loan servicing and collections. which is really only just getting underway. A lot of their strategy is riding on this -- which is fine, but it seems so likely that a project of this scope can't possibly launch, successfully, on the aggressive timeline expected. Meanwhile, this system is already part of a plan to better manage loans prior to default. And, meanwhile, ED has cancelled a solicitation for large contractors to handle collection work for defaulted accounts. Instead, they will rely on small contractors -- who will now be in the position of outsourcing to, and managing the work of, large businesses, which requires a significant number of staff and experience. 

But I digress.