Democrats on the House Financial Services Committee grilled the Consumer Financial Protection Bureau’s new chief Kathy Kraninger on Thursday, in her first appearance before Congress since she was appointed in December.
Kraninger was questioned about decisions made under her predecessor, Mick Mulvaney, as well as about the bureau’s role in protecting service members and student debtors – and was at one point asked to calculate the annual percentage rate on a hypothetical payday loan.
Freshman California Rep. Katie Porter posed the math problem and provided the agency chief with a calculator. Porter, a former law professor who brought along the textbook she wrote titled “Modern Consumer Law,” also quizzed Kraninger about the definition of an interest rate.
Kraninger declined to answer, responding: “This is not a math exercise.”
Democrats are concerned not just that Kraninger may lack the expertise to lead the bureau, but also that she will follow Mulvaney’s playbook and scale back enforcement actions. Many Republicans have long argued that the bureau has overstepped its authority and created burdensome standards for businesses.
Kraninger worked for Mulvaney at the Office of Management and Budget and stepped into his shoes at the Consumer Financial Protection Bureau when he became President Donald Trump’s acting chief of staff in December.
“During his tenure running the consumer bureau, Mick Mulvaney, who is currently President Trump’s acting chief of staff, took many actions that hurt consumers,” said California Rep. Maxine Waters, the committee chair.
She accused Mulvaney of stripping divisions within the bureau of enforcement power, installing unqualified political employees and said he “cozied up to payday lenders.”
In a sharp line of questioning, Waters asked Kraninger if her office had initiated any new investigations over possible fair lending violations since her tenure began in December.
“I can assure you that fair lending is a continuing priority for the bureau. Supervision and enforcement work is ongoing,” Kraninger said, when interrupted by Waters.
“What you’re saying is no,” the chairwoman said, before moving on to another question.
Under Kraninger, the bureau has proposed rolling back a rule drafted under Obama-appointee Richard Cordray that was meant to protect consumers from predatory payday lenders. The agency is currently accepting public comments before formally rescinding part of the rule.
As a member of Congressrepresenting South Carolina, Mulvaney called the CFPB a “joke” and pushed to abolish it. During his 13 months heading the agency, he temporarily froze enforcement actions, dropped lawsuits against four payday lenders, and attempted to change the name of the agency – an effort Kraninger reversed because of the expense involved.
But when asking at the hearing if she had talked with Mulvaney since being confirmed, Kraninger replied that she had seen her former boss “several times socially” and separately, that she has had no conversations with Trump. She also testified that Mulvaney was not part of her appointment process.
The Consumer Financial Protection Bureau was created in the wake of the2008 financial crisis to protect consumer from predatory lenders. Republicans argue that the bureau has too much unchecked power and has overstepped its authority.
“Our fears were driven by the concern that Congress was creating one of the most powerful and unaccountable bureaucracies ever. Unfortunately we were right,” said Rep. Patrick McHenry, the Republican ranking member.
Under Mulvaney, the bureau stopped examining whether companies were in compliance with the Military Lending Act – but Democrats argue that falls under the consumer bureau’s purview.
Kraninger was asked several times if she would resume supervision under the Military Lending Act. She confirmed that she does not believe it falls under the bureau’s jurisdiction.
“I would argue that the lack of supervision puts all the onus on our service members to fix and that absolutely contradicts with your earlier state that said prevention of harm is your primary goal,” said Democratic Rep. Cindy Axne of Iowa.
Kraninger was also criticized for leaving the position of student loan ombudsman open. The position, which is mandated by Congress, has remained vacant since Seth Frotman quit in protest of Mulvaney’s actions.
Kraninger said she plans to find a new ombudsman and that the job was posted Wednesday.
