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Democrats assail Trump administration rollbacks at consumer watchdog

Kathy Kraninger, the new director of the Consumer Financial Protection Bureau, defended her leadership.

Kathy Kraninger, director of the Consumer Financial Protection Bureau, listens during a Financial Stability Oversight Council meeting at the Treasury Department on March 6. (Andrew Harrer/Bloomberg News)
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The Consumer Financial Protection Bureau, a watchdog bureau set up after the global financial crisis, has been “damaged” under the Trump administration, key Democrats said during a contentious committee hearing Thursday.

Over the past year, the CFPB has stripped its Office of Fair Lending and Equal Opportunity of enforcement powers, handed down fewer fines and proposed a major rollback of rules reining in payday lenders. That has weakened the bureau, said Rep. Maxine Waters (D-Calif.), chair of the House Financial Services Committee.

Republicans and the Trump administration have “undertaken a sustained effort to destroy the agency,” she said. “I’m deeply concerned about the damage they have done.”

CFPB Director Kathy Kraninger, making her first appearance before the committee since taking office in December, defended her leadership but refused to directly answer many questions about how she would handle specific issues. “I am starting to think around a philosophy of focusing on the prevention of harm,” Kraninger said. “We have tremendous tools and power to drive to that end. There are certainly institutions that are also motivated to support their customers and consumers to prevent harm.”

Lawmakers repeatedly asked Kraninger to disavow actions taken by her predecessor, former acting director Mick Mulvaney, for whom Kraninger previously worked at the Office of Management and Budget. Kraninger refused but said she was not being pressured by either Mulvaney or President Trump. “The decisions I make at the bureau are my decisions,” she said.

Addressing concerns the bureau was no longer being proactive, Kraninger said it may propose rules to address bank overdraft fees and is looking for a new ombudsman to safeguard student borrowers. The former ombudsman, Seth Frotman, resigned last August in protest, claiming the Trump administration was siding with predatory lenders over consumers. Democrats have been critical of how long the CFPB left the position vacant.

Kraninger’s four-hour appearance before the committee marks a new turn in the long-standing partisan battle over the direction of the CFPB. Democrats have praised the bureau for aggressively punishing companies that gouge consumers, but Republicans have complained that under the Obama administration, it went too far.

After Democrats won control of the House last year, Waters promised close scrutiny of the changes implemented under the Trump administration, even sending CFPB employees an open letter calling for whistleblowers to alert the committee about problems. Waters, and nearly two dozen other Democratic lawmakers, introduced legislation this week that would order the rollback of many of those changes, most of which were implemented under Mulvaney. Mulvaney, who is now Trump’s acting chief of staff, was invited to testify before committee but did not respond, Waters said.

[How Trump appointees curbed a consumer protection agency loathed by the GOP]

Republicans jumped to Kraninger’s defense, saying she was being “badgered.”

“The Democrat message today is that it is an independent bureau but we don’t like you. It’s a very confusing thing,” said Rep. Patrick T. McHenry (R-N.C.), the top Republican on the committee. Kraninger should act based on the law, he said, “not based upon what is being yelled at you by Congress.” Rep. Ann Wagner (R-Mo.) added that the “CFPB under [former director Richard] Cordray abused its power. I can’t tell you how much I am looking forward to your leadership.”

Among the most contentious issues was the bureau’s recent decision to stop proactively monitoring whether companies comply with the Military Lending Act, which provides special protection for military members and their families from financial fraud.

Such examinations occurred for years under the Obama administration. Last year, Mulvaney, then acting director, stopped them. Repeatedly questioned about the change, Kraninger said the bureau had determined it does not have the authority to do such work and that Congress should change the law.

That drew rebukes from some Democratic lawmakers. “Please be clear, we will not go gently into the night on the issue of how we protect service members … or their families,” Rep. Denny Heck (D-Wash.) said. In response, Kraninger repeated the law did not allow the bureau to conduct the examinations. “You’re wrong,” Heck shot back.

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