Democratic lawmakers are demanding that acting Consumer Financial Protection Bureau Director Mick Mulvaney turn over "all documents" related to his decision to strip the agency’s fair-lending office of enforcement powers.
Sen. Sherrod Brown of Ohio and Rep. Maxine Waters of California sent a letter to Mulvaney on Friday questioning how a reorganization of the CFPB’s fair-lending office would protect consumers from unfair discrimination.
The letter said that the office was created because of the "economic disaster" of the financial crisis, in which "financial institutions were able to sell consumers dangerous products that fueled the Great Recession."
The CFPB’s fair-lending office has “played an important role in fighting discrimination — just as Congress intended,” Sen. Sherrod Brown, above, and Rep. Maxine Waters said in a letter signed by 52 other Democrats.
Some lawmakers and consumer advocates are concerned that Muvlaney’s efforts to loosen mortgage lending requirements and reverse the collection of home loan data will result in more fair-lending violations at a time when the CFPB is demoting the office of fair lending.
"While Mr. Mulvaney once blamed the predatory lending occurring in the mid-2000s on CFPB inaction — notwithstanding the fact that the Bureau did not even exist until 2011 — that economic disaster was the result of the same regulatory indifference he is displaying today," the letter stated.
The letter, signed by 52 other Democrats, including Sen. Elizabeth Warren of Massachusetts, who founded the agency, asked whether the CFPB had performed a legal analysis of the effects of demoting the Office of Fair Lending.
The letter followed a similar one from Sens. Chris Van Hollen and Ben Cardin, both of Maryland, who wrote Wednesday to Mulvaney arguing that Wells Fargo’s targeting of minority borrowers during the mortgage crisis is one of the chief reasons the office, formally known as the Office of Fair Lending and Equal Opportunity, was created in the first place.
"The destruction and equity stripping of communities throughout our country did not have to happen, but serious enforcement gaps in the mortgage and financial markets, especially with regard to fair lending and consumer lending laws, allowed it to happen," Van Hollen and Cardin wrote. "Changing OFLEO’s structure and splitting the office apart will harm its ability to perform its critical duties."
The CFPB’s fair-lending office has worked closely with the Department of Justice and enforcement attorneys to file lawsuits on discriminatory practices, according to the letter from the 54 Democrats. The office also counsels banks in their efforts to build compliance systems, but that would change under a restructuring.
"Of those functions, only the counseling will be supplied after the reorganization, though in the absence of a dedicated anti-discrimination enforcement, it’s not clear whether there will be continuing demand," the letter said.
Some lawyers have raised questions about whether it is legal for Mulvaney to take enforcement away from the fair-lending office, because "supervision and enforcement" functions are both mandated by the Dodd-Frank Act.
Mulvaney must respond to a list of questions by March 1 and provide the names of "lobbyists or other representatives of the banking or financial services industry," who met with CFPB officials and political appointees to discuss the restructuring of the fair-lending office.
Muvlaney said in a memo to staff on Feb. 1 that the CFPB’s fair-lending office would focus on advocacy, coordination and education, while its supervision and enforcement functions would be carried out by those divisions individually. He also said some staff would have their jobs and duties changed.
"The possibility that the CFPB might stray from carrying out its responsibilities to enforce fair-lending laws is especially worrisome in light of proposed legislation that would open the door to increased discrimination in mortgage lending," said the letter from the 54 Democrats, referring to bills that passed the House last month on regulatory relief and changes to the Home Mortgage Disclosure Act.
The Democrats’ letter cited several examples from the financial crisis to bolster their arguments for keeping the fair-lending office on the supervisory and enforcement side of the CFPB’s operations.
The CFPB fined financial institutions $400 million from 2011 to 2016 through fair-lending supervisory and enforcement actions, the letter said, citing redlining charges in 2015 against Hudson City Savings Bank and in 2013 against Ally Financial.
"OFLEO’s record makes it clear that the office has played an important role in fighting discrimination — just as Congress intended," the letter said. "Regulators and other watchdogs will lose critical information used to police the mortgage market, and it will become even more important for OFLEO to keep a vigilant eye on discrimination."
Kate Berry covers the Consumer Financial Protection Bureau for American Banker.
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