Mulvaney and the Decline in Enforcement Actions at the CFPB
Over the past year, there has substantial concern among consumer watchdogs that the Consumer Financial Protection Bureau (CFPB) has initiated fewer enforcement actions against financial services companies under Acting Director Mick Mulvaney than under his predecessor Richard Cordray. Although the volume of CFPB enforcement actions has certainly slowed over the past year, the decline has happened at other federal agencies and even state agencies as well.
A new report by Enforcement Watch shows that the CFPB took eight enforcement actions against financial services companies during the first two quarters of 2018, relative to the 26 enforcement actions during the first two quarters of 2017. Many blame Mick Mulvaney for this decline, who assumed the role of acting director of the CFPB in November 2017.
Indeed, part of the decline can be attributed to Mulvaney. As The Wall Street Journal reported in July, “After Mr. Mulvaney’s arrival, the bureau paused its enforcement activities to give him and top aides time to study individual cases.” Moreover, Mulvaney himself has expressed his desire to enforce the law and protect consumers without having to sue private companies. “If I can protect consumers without filing lawsuits, why would I file lawsuits?” Mulvaney asked. “Lawsuits are sort of the last resort.”
Nonetheless, it would be a mistake to think that the CFPB has completely forgotten about enforcement. The CFPB has announced more than five settlements with financial service companies over the past six months. The CFPB even fined Wells Fargo $1 billion in April, the second highest fine in CFPB history (the highest being a $2.1 billion fine against Ocwen financial and Loan Servicing in 2013).
In addition to showing a decline in enforcement actions by the CFPB, the report by Enforcement Watch also revealed that the decline in enforcement has been across the board, not just at the CFPB. For example, the Federal Trade Commission (FTC) and the Department of Justice (DOJ) initiated only 12 enforcement actions in the first half of 2018, relative to the 25 in the first half of last year.
This decline has taken place at the state level as well. States have only initiated 19 enforcement actions during the first two quarters in 2018, relative to the 42 actions taken last year. New York and Florida have seen the sharpest declines in enforcement actions.
Despite the decreased number of federal and state actions, the average penalty has been much more severe in recent quarters than in the past. “The increase in penalties recovered in Q1 2018 comes amid a decline in the total number of actions, meaning that actions were resolved for higher dollar values,” the report finds. “Q2 2018 saw a much higher return for agencies in the form of civil penalties, with agencies recovering $1.052 billion.”
Of course, most of that comes from the CFPB enforcement action against Wells Fargo, but even excluding that settlement, the civil penalties were still higher in the second quarter of 2018 than in previous quarters.