A decade-long Republican campaign to weaken the U.S. consumer watchdog’s independence is set to backfire if Democrat Joe Biden wins the presidential election, by handing him the power to swiftly replace the agency’s director with a consumer champion, nearly a dozen lawyers, lobbyists and policy experts said.
The Consumer Financial Protection Bureau (CFPB) has been a political lightning rod since it was created following the 2009 financial crisis, beloved by Democrats as a guardian of ordinary Americans but reviled by Republicans as too powerful and unaccountable.
The Trump administration has clipped the agency’s wings, relaxing enforcement and some rules, and asking the Supreme Court to decide whether the president should have discretionary power to fire its director, as Republicans have long argued.
In June, the court ruled that he could.
That landmark decision, however, would also give a Biden presidency the power to fire current CFPB Director Kathy Kraninger, a Trump appointee Democrats accuse of bowing to industry lobbyists.
“Given the recent Supreme Court ruling, if Biden wins the White House and the Senate flips too, I think there’s a very high likelihood that Kraninger will be quickly replaced,” said Christopher Willis, a partner at law firm Ballard Spahr, adding that some banks, anticipating new leadership, were becoming more risk-averse on consumer issues.
Kraninger, whose term ends in 2023, declined to be interviewed.
“Director Kraninger continues to carry out the Bureau’s mission of protecting consumers through regulation, supervision, enforcement and education,” a spokeswoman for the agency said.
Powerful progressives like Senator Elizabeth Warren believe the CFPB should play a key role in tackling wealth inequality and racial justice problems underscored by the pandemic, and policy experts expect Biden to nominate a progressive pick who would ramp-up enforcement and review some of Kraninger’s rules.
Chief among them are payday-lending and proposed debt-collection regulations, which influential consumer groups say won’t protect Americans. They also hope Biden’s director would scrap proposals that they say could make it harder for low-income Americans to get mortgages.
Other priorities should include stamping out exorbitant lending rates and abusive debt-collection practices, addressing the student debt burden and gaps in minorities’ access to credit and overhauling the credit reporting system, they said.
“This will be one of the most important jobs for progressives to ensure that one of their own takes over so he or she can begin to quickly rebuild the bureau,” wrote Washington research group Beacon Policy Advisors in a client note.
Potential candidates floated in Democratic circles include Warren’s protégé Representative Katie Porter, Federal Trade Commissioner Rohit Chopra and Bharat Ramamurti, Warren’s former aide who sits on a pandemic congressional oversight panel.
Thomas Pahl, Kraninger’s deputy and longtime CFPB staffer, is a likely contender to lead the agency in the interim while Biden’s pick is vetted by the Senate, said the sources.
Porter, Chopra, Ramamurti and Pahl declined to comment.
“As president, Biden will put an end to Republican assaults on the CFPB and he’ll work to revitalize its efforts to hold big banks and financial institutions accountable and ensure that hard-working Americans are treated fairly,” said Michael Gwin, a campaign spokesman for Biden.
See a FACTBOX here of what a Joe Biden win could mean for financial policy.
As millions of unemployed Americans struggle to make ends meet, the CFPB is more important than ever, say consumer groups.
From March to July, complaints to the agency jumped 50% over the same five-month period a year ago, led by credit reporting problems, according to an analysis by U.S. PIRG and the Frontier Group.
The agency has launched a campaign educating consumers on how to protect their finances during the pandemic, but it could be doing more to help Americans confronting foreclosures, evictions and repossessions, said Diane Thompson, of counsel at the National Consumer Law Center and founder of the Consumer Rights Regulatory Engagement and Advocacy Project.
Generally, though, CFPB has taken a softer stance on the industry under Trump, bringing an average of 20 enforcement actions annually compared with 31 under former President Barack Obama. And in some of the Trump administration enforcement actions, companies walked away without paying the full penalty.
“Companies can wink, nudge and walk away disregarding the law,” said Ed Mierzwinski, a director at PIRG.
The CFPB spokeswoman said agency data showed that in 2019 — Kraninger’s first full year as director — the total amount of consumer redress and total consumer relief was the third highest in the agency’s ten-year history.
“Moreover, the number of new actions filed by enforcement under Director Kraninger in 2020 is on pace for the highest number in five years, and includes settlements that have resulted in consumer redress, penalties and consumer debt forgiveness in the hundreds of millions of dollars.”
When enforcing penalties, staff have to weigh the benefits and costs of pursuing litigation, Kraninger has said. She has also said it is better to rely on strict, behind-the-scenes supervision of financial firms to prevent wrongdoing.
Lawyers, though, said clients were taking a potential Biden CFPB more seriously.
Quyen Truong, partner at law firm Stroock & Stroock & Lavan and former CFPB lawyer, said some companies were starting to beef up compliance teams.
“Proactive clients are already identifying areas or practices that might raise questions under a new CFPB leader,” she added.