{"id":1740,"date":"2018-03-08T22:13:00","date_gmt":"2018-03-08T22:13:00","guid":{"rendered":"https:\/\/preprod.realtrends.com\/blog\/2018\/03\/08\/mulvaneys-top-priority\/"},"modified":"2025-03-13T02:30:37","modified_gmt":"2025-03-13T02:30:37","slug":"mulvaneys-top-priority","status":"publish","type":"post","link":"https:\/\/preprod.realtrends.com\/blog\/2018\/03\/08\/mulvaneys-top-priority\/","title":{"rendered":"Mulvaney\u2019s Top Priority: End \u201cRegulation by Enforcement\u201d"},"content":{"rendered":"

By Sue Johnson, strategic alliance consultant<\/em><\/p>\n

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Based on recent actions Mulvaney is wasting no time implementing a new agenda.<\/em><\/strong><\/p>\n

On January 31, the D.C. Circuit Court of Appeals announced its long-awaited decision in PHH v. the Consumer Financial Protection Bureau (CFPB),<\/em> in which it reversed a three-judge panel\u2019s 2016 ruling that the CFPB\u2019s single-director structure is unconstitutional. The decision means that, at least for now, the President can only fire the CFPB Director for cause. But, in a win for the industry, the court also upheld the panel\u2019s ruling that the CFPB could not impose penalties that were based on new legal interpretations of RESPA\u2019s anti-kickback provision without adequate notice and rulemaking.<\/p>\n

\"\"The court\u2019s constitutional ruling seems less significant now that President Trump has placed his budget chief Mick Mulvaney as acting head of the CFPB. In fact, Mulvaney now is assured the same broad power as a single director that former CFPB Director Richard Cordray had, coupled with a strong new legal precedent supporting his agenda to create a more transparent enforcement process.<\/p>\n

Based on his recent actions, Mulvaney is wasting no time in implementing this agenda.<\/p>\n

No More \u201cPushing the Envelope\u201d<\/strong><\/p>\n

In a January 23 memorandum to staff that was publish as a Wall Street Journal<\/em> <\/a>article, Mulvaney signaled that the era of \u201cregulation by enforcement\u201d at the CFPB is over.  It\u2019s not appropriate for a government entity to \u201cpush the envelope\u201d in enforcement cases where quantifiable and unavoidable harm to the consumer is not present, he said.  The CFPB \u201cwon\u2019t be looking for excuses to bring lawsuits,\u201d but will make enforcement decisions based on qualitative analysis, such as complaint data and measurable costs and benefits.<\/p>\n

In place of regulation by enforcement, Mulvaney said there would be more formal rulemaking because \u201cthe people we regulate should have the right to know what the rules are before being charged with breaking them.\u201d<\/p>\n

Mulvaney emphasized that the CFPB will still be vigorous in its enforcement of consumer financial protection laws, but only when all attempts at resolution have failed. \u201cIt should be the most final of last resorts,\u201d he emphasized.<\/p>\n

CFPB Request for Comments on the CID Process<\/strong><\/p>\n

A few days before Mulvaney\u2019s \u201cpushing the envelope\u201d memorandum, the CFPB announced that it is seeking public comment on its Civil Investigative Demand (CID) process.<\/p>\n

The CFPB issues CIDs to gather materials and testimony information from anyone it believes may have information relevant to an investigation. Under Cordray\u2019s term in office, it was not uncommon for a CID to describe the purpose of the investigation in extremely broad terms, allowing the Bureau to request a wide array of information and then to change the scope of the investigation based on what it learned from the acquired materials. Some CID recipients called the resulting investigations \u201cfishing expeditions\u201d that ultimately forced them to settle with the CFPB.<\/p>\n

In the CFPB Request for Information on the CID process, Mulvaney made it clear that he intends to enforce laws under his jurisdiction in a way that guarantees due process. Interestingly, the CFPB specifically invited comment from entities who have received one or more CIDs from the Bureau, or from members of the bar who represent these entities (comments are due March 27). Specific topics on which comments are sought include, but are not limited to:<\/p>\n