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Under new director, consumer bureau's mission shifts to preventing harm

One of the financial industry's top Washington regulators is turning to education and outreach as its main tool to protect consumers from exploitation.

Consumer Financial Protection Bureau Director Kathy Kraninger said in her first major policy address since becoming director of the bureau in December 2018 that "prevention of harm" is the agency's No. 1 mission.

Kraninger's address also caps months of speculation about how she will lead the agency after her predecessor, Acting Director Mick Mulvaney, unraveled many of the agency's operations.

SNL Image

CFPB Director Kathy Kraninger

Source: Associated Press

Her approach marks a departure from the last permanent director of the agency, Richard Cordray, who wielded enforcement actions to the chagrin of industry.

In her speech, Kraninger said Congress created the CFPB to be "singularly focused on consumer protection in the market for financial products and services." As a result, she said the agency will use its regulatory tools of supervision and enforcement through the lens of consumer education.

Kraninger said the agency's mission is to empower "consumers to help themselves" by educating them about protecting their own interests and choosing the financial products and services that best fit their needs.

With respect to rulemaking, the director also said the agency will look at financial services oversight with an eye to preventing consumer harm.

Kraninger said the CFPB will focus its approach to rulemaking on "maximizing informed consumer choice, and prohibiting acts or practices which undermine the ability of consumers to choose the products and services that are best for them."

This approach echoes comments that Kraninger made during a March 12 congressional hearing defending her agency's decision to loosen rules for payday lenders.

Kraninger said at the time that the bureau's duty is to inform consumers and not let regulations get in the way of their choices.

"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," Kraninger said in April 17 remarks before the Bipartisan Policy Center in Washington, D.C. "The CFPB must acknowledge that the costs imposed on regulated entities absolutely affect access to, and the availability of, credit to consumers."

After three months of meetings with bureau staff all over the U.S. and various stakeholders, Kraninger said she directed the agency's financial institution supervision team to undergo a top-to-bottom review of all their processes.

Kraninger said she hopes the increased focus on prevention will mean the bureau needs to rely less on its enforcement powers.

"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."