Heated House Hearing for CFPB's Kraninger as Dems Go On the Attack

CFPB political staffers have overruled recommendations by career attorneys, resulting in the agency signing settlements with companies that include no repayments to consumers, House Financial Services Chairwoman Maxine Waters (D-Calif) charged Wednesday.

“Consumers who were cheated were left with nothing,” Waters said, as the panel received the semiannual CFPB agency report.

During a hearing featuring Director Kathy Kraninger, panel Democrats released the results of an investigation into two settlements the agency reached with companies.

The Democrats charged that in one case, Eric Blankenstein, the head of the CFPB’s Division of Supervision, Enforcement and Fair Lending, rejected the recommendation of career attorneys who said the agency should seek consumer reimbursement for abuses by Enova International, a payday lender.

In the report, the Democrats said that the company agreed to pay consumers almost $1.4 million. However, Blankenstein, a former agency official who came under fire over racist posts on social media, recommended that Kraninger sign an agreement that included no reimbursement.

She signed that agreement.

Kraninger defended that position, saying that agency staff had a robust debate over the settlement. “The decision on the settlement was mine,” she said.

Kraninger said that in some cases, the agency is not able to locate consumers who were harmed.

She added, however, that the agency has entered into agreements with several companies that did include redress for consumers.

Democrats also attacked Kraninger’s decision to abandon the agency’s defense of its single-director structure. Several federal suits have been filed over the structure, which only allows the director to be removed for cause.

CFPB attorneys had defended the structure even though the Justice Department under President Trump have argued that it is unconstitutional.

Kraninger told the committee she decided to change the agency’s position.

“This gives ammunition to bad actors,” Waters said.

However, committee ranking Republican Patrick McHenry of North Carolina praised that decision.

He said that in the past, “Limitless power has never been an issue for my Democratic friends.”

But Rep. Carolyn Maloney (D-N.Y.) said that Congress purposely gave the CFPB independence. She said that Kraninger’s decision was “disrespectful of Congress.”

In her testimony, Kraninger said the agency is still reviewing possible changes to the agency’s payday lending rules, as well as possible rules or guidance providing a definition of Unfair, Deceptive or Abusive Acts or Practices, debt collection and other issues.

Kraninger also came under fire for the agency’s supervision of student loan servicing. Democrats criticized Kraninger for hiring Robert Cameron as the agency’s private student loan ombudsman.

They said that Cameron had worked for the Pennsylvania Higher Education Agency, which has been the subject of many complaints.

Kraninger defended Cameron, saying that he has decades of public and military service.

Members of the committee bitterly clashed after Maloney told Kraninger that if she is not following the recommendations made by her staff, she is “absolutely worthless.”

Those comments violated House rules that prohibit personal attacks, Republicans said. However, Waters insisted that Maloney was referring to the agency and not Kraninger personally.

Maloney later said that she wanted to clarify that she was talking about the agency and not Kraninger personally.