In the midst of the chaos at the CFPB, PerformLine’s David Morgan sat down with Venable’s Alexandra Megaris and Jonathan Pompan to discuss the ins and outs of what’s going on at the CFPB. The group offered a comprehensive look at the major impact the new management is already having on consumer financial providers and what to expect going forward.
Let’s start at the beginning…
Before leaving office on November 24th, Richard Cordray appointed his Chief of Staff Leandra English to become the new Deputy Director, a move she felt was backed by the Dodd-Frank statute that created the CFPB. Since English was named to the role by departing Director Richard Cordray, she continues to assert that she, the deputy director, “shall…serve as the acting Director in the absence of unavailability…” of a director.
However the White House believes that one act can overrule that statute, the 1998 Federal Vacancies Reform Act, where the President has authority to appoint a new director during a vacancy in an agency. That is what led to the Trump appointment of Mick Mulvaney.
“The change in leadership at the CFPB wasn’t entirely unexpected, but its shock waves will probably be felt for a long time,” said PerformLine’s David Morgan.
With new management in place, demonstrating compliance is more important than ever.
Ready to breathe a sigh of relief? Not just yet. Compliance programs and being able to defend actions taken will continue to be as important as before, and in ways not as obvious. For example, the UDAAP provisions of Dodd-Frank that gave Cordray broad leeway, empower state AG’s as well. There are at least 17 AG's who are likely candidates for using that power. Even during the Cordray era, there were notable enforcement matters from states in team-ups or under Dodd-Frank on their own. For those reasons alone, and many more, individual products or activity-based compliance programs will be critical enterprise-wide.
“What that means is being able to demonstrate compliant activity, avoiding investigations, and nuanced legal arguments will be as important or more important than ever." - Alexandra Megaris, Venable
Do changes at the top mean no more rulemakings?
During the freeze yes, but afterwards, it’s too early to tell. There’s still unfinished business here. Some rulemakings like the Payday Lending Rule are susceptible to Congressional challenge, while other rulemakings were already delayed.
It's no secret that many weren’t pleased with where the Cordray era landed or would have landed within certain rulemakings, but having known rules as opposed to ad hoc UDAAP interpretations would have been useful. Jonathan Pompan also touched on the unfinished business that could be supported by modernizing the rules. What happens next, and the impact that will have on consumer financial service providers, nobody really knows, but for now it should mean business as usual for any compliance practice.
Want to hear more? Listen to the the full recording from the webinar and find out what else you need to know about the CFPB's new management.