The Consumer Financial Protection Bureau (CFPB) plans to use its tools to prevent consumer harm, but it won’t hesitate to use its enforcement powers, the Bureau’s Director, Kathleen Kraninger, said in a speech to the Bipartisan Policy Center on April 17, 2019.
Kraninger’s tenure began with a listening tour, aimed at gathering input from a variety of stakeholders, including the Innovative Payments Association, about the Bureau’s operations and the state of consumer financial services. According to the Director, she identified four themes that emerged from these conversations.
“The CFPB’s mission and the agency itself are critical to our economy and are not going away,” she said.
Additionally, Kraninger reiterated her commitment to ensuring a level playing field for providers, to holding bad actors accountable, and to taking care of the people using financial services.
“All stakeholders expressed a strong interest in protecting consumers, though they differ on the best way to accomplish that mutual interest,” Kraninger said.
For Kraninger, the best approach for protecting consumers starts with preventing them from having problems in the first place, and then stepping in when necessary. She identified four tools for making this method work.
“Those tools include education, regulation, supervision, and enforcement, each of which serves an important component in the Bureau’s execution of its mission,” Kraninger said.
Educating consumers was the first tool in preventing harm, because it enables individuals to make better choices and avoid potentially dangerous products, she said.
“Let me be clear, however, the ultimate goal for the Bureau is not to produce booklets and great content on our website,” Kraninger said. “The goal is to move the needle on the number of Americans in this country who can cover a financial shock, like a $400 emergency.”
To that end, the Director said she wants to leverage the already substantial investment in financial education across the country and create a strategy that involves providers, educators and other stakeholders to help improve the finances of American consumers. She pointed to the Bureau’s recently launched “Start Small, Save Up” program as a starting point for this larger initiative.
Moving on from education, Kraninger said regulation was another area where the Bureau could help prevent problems and foster innovation at the same time. By ensuring that rules are keeping up with the times, the Bureau can help protect consumers while enabling them to access to good products.
She gave the Fair Debt Collection Practices Act as an example, which was first put into place in 1977. The advances in communications technology since that time require updates to the rules, according to the Director. The Bureau is planning to propose clarifying rules on this matter in the near future.
Although rules will be reviewed and updated, that doesn’t mean there will be scores of new regulations for the industry, according to Kraninger.
“I take seriously our responsibility under the law to reduce unwarranted regulatory burden and to consider the impact of rulemaking on regulated entities and consumers,” she said.
Along with regulation comes supervision. Kraninger believes that regular exams for financial services providers can be part of the preventative approach to consumer protection by catching lapses in compliance and internal controls before they become larger problems.
“Heading trouble off at the pass may not grab big headlines, but it will prevent a lot of headaches for the consumers we serve,” she said.
Of course, not all trouble can be headed off, and Kraninger says the Bureau is ready for that.
“Let me state emphatically my view that enforcement is an essential tool Congress gave the Bureau – particularly because education, rulemaking, and supervision will not prevent every violation,” she said. “There will always be bad actors who don’t comply with the law.”
Enforcement actions take time while the Bureau is building a case, and this process often entails cooperation with other agencies—including state regulators and attorneys general. Conducting enforcement thoughtfully and well is a critical component to the Bureau’s mission, she said.
“I hope that our emphasis on prevention will mean that we need our enforcement tool less often,” Kraninger said. “But when we do discover violations, enforcement is essential to hold wrongdoers to account, make things right for consumers, and deter future violations.”
Despite the current political atmosphere, the Director struck a bipartisan note and said that the common goal of protecting individual Americans should drive the Bureau’s mission and actions.
“I worked under Secretary [Norman] Mineta, a former Democratic congressman and Clinton commerce secretary, who served as President Bush’s Secretary of Transportation. He liked to say there are no Democratic roads or Republican highways,” Kraninger said. “While being mindful of the political environment and considerations, we focused on developing and promoting the right policies for the American people. We also engaged in robust and transparent discourse on what those right policies were – both internally and externally with the many stakeholders who cared about those policies. I have adopted that model in my career and am bringing that to my leadership of the CFPB.”
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