Shift in CFPB's priority towards cases involving non-bank institutions and fair lending matters.
The Consumer Financial Protection Bureau (CFPB), under the leadership of Chief Legal Officer Mark Paoletta, has announced a new strategic focus for the agency. This shift aims to be more restrained and legally cautious, with a greater emphasis on defending the agency's budget authority and curtailing expansive regulatory actions.
In contrast to the previous administration, the CFPB under Paoletta's leadership will focus on providing redress to affected consumers, particularly military members, their families, and veterans. The bureau will also prioritise matters involving proven actual intentional racial discrimination and identified victims.
The CFPB's new strategy will see a reduction in the enforcement of fair lending laws based solely on statistical evidence and stray remarks. Instead, the bureau will focus on fraud against consumers with material and measurable damages, particularly related to mortgages, data furnishing violations, consumer contracts issues, fraudulent overcharges and fees, and loss resulting from lax controls to protect consumer information.
The bureau will also no longer focus on non-depository institutions and will aim to return to the 2012 proportion of focusing on the largest banks and depository institutions. This was previously the case, with 70% of the Bureau's supervision focused on banks and depository institutions, while 30% focused on nonbanks.
The CFPB has already demonstrated this shift in strategy through its participation in redlining lawsuits against Fairway Independent Mortgage Corp. and Townstone Financial. The bureau secured settlements of $9.9 million and $105,000 respectively, with $1.9 million from the Fairway settlement going to the CFPB victims relief fund. The bureau has also moved to vacate the Townstone case.
However, not everyone is in agreement with this new approach. David Silberman, a former associate director at the CFPB, has expressed concerns about the future of fair lending supervision and enforcement under the new policy.
The CFPB's new strategy also includes a focus on defending the agency's discretion in budgetary matters. Paoletta has publicly pushed back against the Government Accountability Office (GAO) for questioning the CFPB's decision not to request full available funding from the Federal Reserve, framing GAO's investigation as politically motivated.
This legal posture indicates a narrower interpretation of the CFPB's authority and a focus on limiting the scope and cost of the agency’s operations compared to prior leadership. The CFPB under Paoletta’s leadership is planning to shift enforcement and supervisory matters to states, further reducing the agency's regulatory footprint.
This marks a clear departure from the previous administration’s active regulatory and consumer protection emphasis. The CFPB's new strategy is expected to have significant implications for the future of consumer financial protection in the United States.
[1] [https://www.cfpb.gov/press-releases/2022/02/cfpb-takes-action-to-vacate-townstone-case] [2] [https://www.cfpb.gov/newsroom/op-eds/2021/03/op-ed-the-cfpb-is-not-a-taxpayer-funded-agency] [3] [https://www.cfpb.gov/press-releases/2021/03/cfpb-sues-debt-settlement-company-for-illegal-debt-collection-practices] [4] [https://www.cfpb.gov/newsroom/press-releases/2021/08/210818-cfpb-takes-action-against-debt-relief-company] [5] [https://www.cfpb.gov/newsroom/press-releases/2021/06/210610-cfpb-sues-debt-relief-company]
- The Consumer Financial Protection Bureau (CFPB) under Chief Legal Officer Mark Paoletta's leadership is planning to focus more on business matters, such as defending its budget authority and establishing a more restrained and legally cautious approach.
- In the new strategy, the CFPB will prioritize matters in finance that involve fraud against consumers with material and measurable damages, particularly related to mortgages, data furnishing violations, consumer contracts issues, fraudulent overcharges and fees, and loss resulting from lax controls to protect consumer information.
