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Wither Enforcement? CFPB Reorganization Signals Big Changes

On October 14, 2020, the Consumer Financial  Protection Bureau (“ CFPB”)  announced a series of organizational changes affecting the Supervision, Enforcement and Fair Lending Division (SEFL), the result of an organizational review that began in February of this year.  While there are a number of minor changes that will be implemented, the most impactful – and most controversial – change is the creation of the Office of SEFL Policy & Strategy.  This newly created office will have final sign-off on any new research matters or investigations undertaken by the Office of Enforcement (“Enforcement”).  According to the CFPB, these changes “will increase efficiency, promote role clarity, reduce friction, establish consistency in policy and strategic outcomes SEFL-wide, and leverage existing expertise across SEFL.”  However, this announcement has had its share of critics, including U.S. Sen. Sherrod Brown, the ranking member of the Committee on Banking, Housing, and Urban Affairs. 

According to Senator Brown, the reorganization “will diminish the resources, authority, and ultimately the effectiveness” of Enforcement.  Specifically, Sen. Brown cited (1) disbanding of the Policy and Strategy Team; (2) stripping Enforcement of its ability to determine whether potential violations should be resolved through supervisory examinations or through an enforcement action, and (3) removing Enforcement’s E-Litigation Team.  Despite this criticism, the redistribution of Enforcement’s authority should not be surprising in light of remarks made by CFPB Director, Kathleen Kraninger, before the House Financial Services Committee in October 2019, that the use of enforcement was the last resort for the CFPB in preventing harm to consumers.  While the CFPB stated that the planned restructuring should take roughly six months to complete, it is not clear whether the reorganization will be implemented if there is an administration change in January 2021.  Absent such a change, however, it appears that enforcement actions will continue to be a low priority for the CFPB, and that Enforcement will lack the autonomy to change that direction.

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