CFPB staff shake-up seen hampering investigationsOctober 22, 2020
The Consumer Financial Protection Bureau became a lightning rod when it was first created because of its vast enforcement powers to investigate financial firms. But in a major shake-up, CFPB Director Kathy Kraninger has taken steps that critics say will undermine that authority.
In a memo to CFPB staff last week, a top official working under Kraninger announced a reorganization meant to streamline how enforcement decisions are made. But some observers say it will handicap the Office of Enforcement’s ability to launch independent investigations.
“This essentially weakens the enforcement office and substantially changes the way enforcement does its work,” said Jenny Lee, a partner at Arent Fox and a former CFPB enforcement attorney.
Bryan Schneider, the CFPB’s associate director of supervision, enforcement and fair lending, said in the memo and accompanying documents to staff that the changes will address tensions between the bureau’s two main offices of enforcement and supervision.
“To be candid, we spend too much time in [Supervision, Enforcement, and Fair Lending] arguing over which institutions to examine or investigate and, over the years, this has deteriorated morale,” Schneider wrote in the messages to staff on Oct. 14.
Final decisions on investigations and enforcement will now fall to a team that previously had dealt solely with supervision policy. That unit, formerly named the Office of Supervision Policy, will be renamed the Office of SEFL Policy and Strategy and will handle both supervisory and enforcement issues. Some staff from the Office of Enforcement, which will still conduct investigations, will move to the new office.
A separate office that coordinates exam schedules, the Office of Supervision Examinations, will be renamed the Office of Supervision, Schneider said.
Kraninger “prefers to handle things through the supervision process,” said Lucy Morris, a partner at Hudson Cook and a former CFPB deputy enforcement director. “The motivation is to allow for better and easier decision-making within SEFL. For a long time people felt enforcement was doing its own thing without a lot of controls on it, and this is a way to control what cases are brought, what decisions come out of enforcement, so it is in effect controlling a group that has in the past done its own thing.”
When Kraninger first laid out her priorities for the bureau in early 2019, she listed enforcement last, behind education, prevention and supervision. She has often said she wants enforcement to be used as a tool only when necessary if supervision fails.
“I have reiterated my view that supervision is the heart of this agency,” Kraninger said in a speech in April 2019.
The new policy and strategy office now will be responsible for critical decision-making functions including…