The acting director of the Consumer Financial Protection Bureau outlined a less aggressive regulatory mission for the watchdog agency, saying it will enforce consumer protections but not go beyond its mandate under the Dodd-Frank law.

The mission statement by Mick Mulvaney, released Monday, said the CFPB’s main goals are to “ensure that all consumers have access” to consumer financial products and services and to “implement and enforce the law consistently” to ensure that markets “are fair, transparent, and competitive.”

The statement also said it will focus on protecting the legal rights of the financial companies it regulates and will write new rules that address what it deems as unwarranted regulatory burdens.

The new direction is a sharp departure from the aggressive regulatory stance taken by the CFPB’s first director, Richard Cordray. Under his watch, the agency targeted a number of financial services companies it felt were misleading or cheating consumers, often resulting in fines and other punitive measures.

Consumer Advocates Voice Dismay

All told, the CFPB returned more than $12 billion to consumers who were allegedly wronged by banks, mortgage servicers, credit card companies, and other financial services companies.

Consumer advocates fear that under the CFPB’s new strategic plan, unscrupulous industry practices will now go unchecked, leaving consumers more vulnerable.

“The CFPB’s new strategic plan effectively muzzles the consumer watchdog,” says Anna Laitin, director of financial policy for Consumers Union, the advocacy division of Consumer Reports. “The plan developed by Acting Director Mick Mulvaney eliminates any reference to enforcement from the bureau’s mission statement and emphasizes easing the rules governing banks instead of focusing squarely on protecting consumers.”

Yana Miles, senior legislative counsel at the Center for Responsible Lending, says the changes are particularly surprising because they come under a “de facto, part-time, short-term acting director.” She went on to say that “Mulvaney’s changes at the consumer bureau are many, far-reaching, and harmful to consumers.” 

“Congress created the CFPB after the last economic crisis because it recognized that consumers need an independent watchdog to protect them from shady financial practices and rip-offs,” Laitin says. “It is past time for the president to nominate, and the Senate to consider, a permanent nominee who will restore the CFPB’s critical consumer protection role.”

But the less aggressive stance was welcomed by the financial services industry, which pushed for reining in an agency it felt had been overstepping its mandate for years, stymieing the industry with rules that were difficult and expensive to follow.

“The changes are necessary because there’s an enormous cost with the regulations and the other initiatives that Cordray was involved with in the last five or six years, and that was costing a lot of money for our clients and making it difficult in terms of compliance,” says Alan Kaplinsky, founder of the Consumer Financial Services Group for Ballard Spahr, a law firm that represents banks and other financial companies.

Kaplinsky says those costs were being passed along to consumers.

“The CFPB was creating real harm and impeding the industry not because of the letter of the law but because of the whim of the agency,” he says. “Under Mulvaney it will be going after more things that are clear-cut, things like deception and fraud.”  

Changes Already Underway at the CFPB

There has already been a series of changes some advocates view as anti-consumer since Mulvaney took the helm of the bureau in late November. Among them:

  • Enforcement erosion. Earlier this month, Mulvaney ordered members of the bureau’s Office of Fair Lending and Equal Opportunity to be transferred to his office. Consumer advocates criticized the move because the staffers who will now enforce fair-lending laws will be generalists who have their hands full with numerous other consumer issues, says Deborah Goldstein, executive vice president of the Center for Responsible Lending, a Washington, D.C., nonprofit focused on fighting predatory lending. 

  • Prepaid card rule. In January, the bureau delayed implementation of a prepaid card rule, which was first proposed in 2012 and finalized in 2016. The rule is intended to protect the millions of people who use prepaid cards instead of debit cards tied to traditional bank checking accounts. It also places protections that limit liability in cases of unauthorized transactions or fraud. And it places limits on overdraft fees on the very few prepaid card brands that let consumers spend more money than they have loaded onto the card.

  • Payday lending. Also in January, the bureau delayed a payday-lending rule meant to protect consumers who take out high-cost payday, installment, and auto title loans. And it dropped a lawsuit against Golden Valley Lending, a payday lender that charged interest rates of more than 900 percent.

  • Arbitration rule. Last November, President Donald Trump signed a joint resolution passed by Congress killing the Arbitration Agreements Rule, which had been enacted by the CFPB. It was intended to stop financial services companies from shielding themselves from class-action lawsuits. The rule had been slated to go into effect in March 2018 and would have prohibited banks, credit card companies, and other financial services companies from including contract clauses that deny consumers the right to band together to sue in court over a grievance. Such clauses have shown up in millions of consumer contracts over the past decade.

Other Regulators May Step In

Despite the seemingly drastic change in direction by the agency, the impact on consumers may ultimately be limited because there are many other federal and state agencies that are still working in the best interests of consumers, says Kaplinsky, the industry lawyer.

“If the CFPB takes a few steps back, that void will be filled by others such as the Federal Trade Commission, state attorney generals, and state banking regulators,” he says. “State AGs in particular have been very vocal in their consumer protections.”

“We are saying to our clients that you may not have to worry about the CFPB, but you do have to worry about the others,” he added.