Last month, President Trump nominated Kathy Kraninger to be the next director of the Bureau of Consumer Financial Protection (BCFP).
Kraninger is currently an associate director at the Office of Management and Budget (OMB) and her nomination met swift criticism due to her stature in Washington — she isn’t a high-profile figure in politics or in the administration.
{mosads}However, these supposed shortcomings are advantages. What the BCFP needs right now isn’t flash or political intrigue but a steady and competent leader who can continue the work of acting Director Mick Mulvaney to bring accountability to an agency that still desperately needs to be reined in.
New leadership at the bureau has substantiated concerns that the agency had been in need of reform. Not only has evidence of wasteful spending under previous leadership emerged, but the lack of empirical support for the rules and regulations promulgated by the bureau under Richard Cordray has come under scrutiny.
The overregulation resulting from Cordray’s politically driven approach hurt the most financially vulnerable Americans, especially low-income consumers who have little or no access to traditional banking services.
As our organization has pointed out, among the bureau’s most glaring mistakes under Cordray were its misguided rules on arbitration and on small-dollar lending.
The intent of the arbitration rule was to make it easier for consumers to sue their bank in the event of a dispute. As framed to the public, the rule sounded like a win for consumers. However, in reality, the rule would have led to an increase in frivolous class-action lawsuits with little gain for consumers.
Far from benefiting those the rule was designed to help, it would have enriched powerful trial lawyers and raised the litigation and compliance costs for financial institutions.
Those increased costs, in turn, would have been passed on to consumers in the form of higher prices for banking products and services, as well as higher interest rates for loans. The Trump administration rightfully repealed this rule last year.
With respect to the small-dollar-lending rule, the bureau’s mission was to place more regulations on companies that issue payday loans in the hope that this would give consumers using these services additional safeguards.
While well meaning, the final rule will make credit more expensive and less accessible to low-income borrowers. The bureau even recognized that the rule “may limit some physical access to credit for consumers, and this limit may be felt more acutely by consumers in rural areas.”
Yet, the agency ultimately failed to acknowledge that cutting off or restricting a critical source of credit will push consumers to find ways to meet their financial needs that may be even more costly and unsavory.
Moreover, the BCFP’s own data found that less than 2 percent of the 1.2 million comments made to the bureau’s Complaint Database related to short-term loans. Despite Congress failing to act to repeal the rule, acting Director Mulvaney has re-opened it for consideration.
Proper management of the bureau is just as important as policy, and Kraninger’s resumé indicates that she is well suited for the job.
In her role at the OMB, Kraninger oversaw the budget process for $250 billion in federal spending, including 100 percent of all financial services regulatory agencies. Her experience demonstrates that she understands the fiscal discipline needed at an agency that operates independently with minimal congressional accountability and oversight.
Furthermore, her experience on the House and Senate Appropriations Committee indicates the importance the White House places on subjecting the BCFP to appropriations, which should have been the case from day one.
In his endorsement of Kraninger, Mulvaney said, “I know that my efforts to rein in the bureaucracy at the Bureau of Consumer Financial Protection to make it more accountable, effective, and efficient will be continued under her able stewardship.”
While we need to hear more from Kraninger directly about where she stands on financial regulatory policy and reform, we are encouraged that the Trump administration has chosen a dedicated public servant to continue the work Mulvaney has started in reforming the BCFP and in putting consumers first.
Beau Brunson is a senior policy advisor for Consumers’ Research.