The acting head of the Consumer Financial Protection Bureau announced an organizational change this week that was welcomed by lenders but caused consumer advocates to worry about the agency’s commitment to go after predatory-lending practices.

The actual impact on consumers is far from clear, however. The agency said it will continue to enforce fair-lending laws. Borrowers also have other options to complain and get redress.

In a memo to staff released this week, Mick Mulvaney, acting director of the CFPB, ordered members of the bureau’s Office of Fair Lending and Equal Opportunity to be transferred to his office. These experts, who file legal “enforcement” actions against alleged bad-faith lenders, will now focus on “advocacy, coordination and education,” the memo says. 

Agency Defends Reorganization

Consumer advocates criticized the move.

The staffers who will now enforce fair-lending laws will be generalists who have their hands full with numerous other consumer issues, said Deborah Goldstein, executive vice president of the Center for Responsible Lending, a Washington, D.C., nonprofit focused on fighting predatory lending.

“Fair lending will not have an advocate in that division,” she said. 

“One of the reasons the CFPB was set up was because lending discrimination targeted people of color into high-cost loans that led to foreclosures,” Goldstein added. “We could see a return to those practices because lenders know the CFPB is not on the beat.” 

But the CFPB said the move was more of an internal reorganization and won’t stop the agency from investigating and prosecuting unfair-lending practices. 

“It never made sense to have two separate and duplicative supervision and enforcement functions within the same agency—one for all cases except fair lending, and the other only for fair-lending cases,” said John Czwartacki, senior adviser to Mulvaney. “By announcing our intent to combine these efforts under one roof, we gain efficiency and consistency without sacrificing effectiveness.” 

A trade association representing auto lenders also expressed support for the move.

“The CFPB’s former stated goal of ‘pushing the envelope’ in enforcement actions against companies who are working within the state laws and regulations where they conduct business activities is over,” said Jack Ferry, a spokesman for the American Financial Services Association. 

Series of Changes

The mission of the bureau’s Office of Fair Lending and Equal Opportunity includes oversight and enforcement of laws, “ensuring fair, equitable, and nondiscriminatory access to credit for both individuals and communities,” according to Dodd-Frank, the 2010 law that established the CFPB. 

A report published last spring showed that the bureau’s fair-lending actions in 2016 led to settlements to harmed consumers worth about $46 million. 

Since Mulvaney took the helm of the bureau in late November, he has made numerous changes that have concerned consumer activists and been praised by lenders. 

Last week, for instance, the bureau put off implementation of a prepaid card rule that gives prepaid cards consumer protections similar to those of debit cards. The rule, which was to have been put into place by April of this year, will be implemented a year later.

The bureau also recently announced that it was reconsidering a payday lending rule meant to protect consumers who take out high-cost payday, installment, and auto title loans. Consumers Union, the policy and mobilization division of Consumer Reports, supports the original mid-2019 implementation date for the rule.

Last month the acting director sent a bill of $0 to the Treasury, which funds the CFPB, saying the bureau didn’t need more funding because it already had a large reserve fund. 

Consumers Still Have Options

Consumer who believe they’re the victims of unfair-lending practices should continue to report their suspicions to the CFPB’s complaint database, Goldstein said. 

And, she noted, they should also talk to other authorities that handle such complaints, most notably including their state attorneys general.

For their part, consumer groups said they would continue to hold the CFPB to its mission.

“There is statutory language that requires fair-lending enforcement,” says Anna Laitin, Consumers Union’s director of financial policy. “That means we have to hold them to account.”