The CFPB’s next director may inherit an agency that’s already been fundamentally reshaped

Guest:	Alan Kaplinsky
Title:	Senior counsel at Ballard Spahr
Summary:	The Consumer Financial Protection Bureau has been through a year of significant change. As a new director's nomination moves forward, the question is no longer just who will lead the agency, but how much of its future has already been decided.

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Interview transcript

Terry Gerton You follow CFPB very closely. They’ve certainly been through an extraordinary period of change over the last year or so. In your assessment, where does the agency stand today? How are they operating?

Alan Kaplinsky Well, one thing is certain, Terry, and that is despite the efforts made by the Trump administration to get rid of the CFPB, to do it just through some kind of executive order or in some other fashion, they failed at doing that. Not surprising because Congress was the body that created the CFPB and only Congress can get rid of it. But, and there is a very big but — and we go into detail about this in on our consumer finance monitor blog — the big but is there are a lot of ways to skin a cat. And even though it’s become clear to the Trump administration, they can’t get rid of the CFPB, they do have a lot authority to minimize the CFPB, to make it not much of a factor anymore. And that is the strategy that they’ve embarked upon.

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Terry Gerton There certainly has been a lot of attention focused on those staffing reductions and enforcement pullbacks. Are there any places where CFPB is still actively engaged today?

Alan Kaplinsky Oh, they are, they haven’t gone away. They have actually a rather ambitious regulatory agenda. It’s about as long an agenda as I’ve ever seen. But if you analyze what they are actually doing in that area, it’s mostly to get rid of, or to amend in a significant fashion the various regulations that were put on the books during the Biden administration. So there’s a lot of activity there. There’s virtually no activity going on in the enforcement area. That’s been very limited. Things could change a little bit, you know, with the new director coming on board eventually. And they talk about starting to examine companies again and banks, but I haven’t heard very much feedback from any of my clients about, you know, anything really happening there. The real activity right now isn’t so much at the CFPB, it’s what the states are doing to fill that void. And of course they, a lot of state attorneys general and banking departments have been very aggressive. And a lot of new state laws have been enacted. So I won’t say that they’ve made up for what the CFPB has been doing, but they’ve definitely gone pretty far in trying to fill that consumer protection void.

Terry Gerton Well, let’s put a pin in that spot about state activity because it comes back to a question I wanted to ask about leadership transition at CFPB. Russ Vought has been the acting director. That tenure is about to expire, but they do have a nominee that’s been at least through confirmation hearings. So what are you seeing in terms of the leadership transition between Mr. Vought and Mr. Johnson, who may come in.

Alan Kaplinsky Well, I think we can, first of all, look at it in, before we get to when Johnson actually gets sworn in, we have to talk about what’s really going on now and what might continue for a rather lengthy period of time, unless when Congress returns from vacation in September, they give priority to confirming Johnson as the new director. And they don’t have many legislative days to do that because they stop everything come October 1 to go home and essentially campaign for the midterms. So right now you have as an acting director, Mark Paoletta, and he is a very close, I guess you would say confidant or friend has a very close relationship with the outgoing acting director, Russell Vought, whose term expired on August 1. So Mark Paoletta is acting director. And while there has been some rumor that Vought has stayed on as a senior advisor, I’m told that nothing official has ever happened that he’s not at the CFPB every day like he used to be, and my guess is it, you know, he and Paoletta are friendly and Paoletta is going to ask for any advice or guidance. He’s probably not going to turn to the incoming director Johnson, but rather he’ll turn to Vought. Once Brian Johnson gets sworn in, and as I said, it might be in September, but it may not be until December sometime, I think you’re going to see more of the same. And we’ve already seen something that happened this week with the consumer complaint portal on the CFPB website. They used to include narrative descriptions of every consumer’s complaint, even though none of them have been verified by the CFBB as being accurate. They are changing that. That’s changing immediately. And that’s something that the industry didn’t like when it happened many years ago, and that they’re very happy with that. Brian Johnson, I view him as being more independent, even though he has a close relationship with Vought and Paoletta, he is a real consumer financial services lawyer. Unlike Vought, or unlike Paoletta or, for that matter, a lot of the other people who held the position of director or acting director, he is an expert in the area of consumer finance law and he is going to, I think, be his own man. Now, does that mean he’s going to restore the CFPB in the two years or so of his remaining term to what it was like under the directorship of Rohit Chopra? No, he is a Republican. He, I’m sure, is a great believer in the need to reform the CFPB, and I would think would be working closely with the Republicans on the Hill, who right now are considering a discussion draft that would significantly change the way business is done at the CFBP.

Terry Gerton Well, I appreciate that description and let me put my cynic hat on for a minute and go back to the question about what states are doing, because at this point, given all of the changes that the Trump administration has wrought on the CFPB over the last 18 months, does it really matter who’s in charge of it, or, is most of what’s happening in this space now being led by the courts and Congress and the states?

Alan Kaplinsky Yeah. Well, your cynicism I think is pretty well taken. The only thing is that you’re going to see with Brian Johnson coming on board, he’s not going to be saying, you know, this agency has got to go away. We’ve got to get rid of it. I think the rhetoric is going to change. That in turn will help the attitude and the approach of the still many employees whose numbers have declined and who, you know, may very well decline some more because there’s still ongoing litigation against the CFPB. But he’s, I think, will be viewed by the remaining employees as a breath of fresh air. He’s a very collegial person is somebody listens to what other people think, and that can matter in terms of just getting things done. So I think, yeah, he is not going to go back to what it was like before under Rohit Chopra, but I don’t think the, at least the atmosphere is going to be as tense at the CFPB with the employees. And people will be more motivated to do things and to help with getting the regulations adopted that the Vought has been trying to do.

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