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New consumer watchdog director shifts focus to education from enforcement

The Consumer Financial Protection Bureau is trying to find a happy medium after spending the better part of eight years as a political football.

Republicans have long objected to the heightened level of independence the bureau enjoys, while Democrats have cried foul over the agency's rollbacks under President Donald Trump.

The Trump White House replaced Director Richard Cordray, a President Barack Obama appointee, with Office of Management and Budget Director Mick Mulvaney, who ran the CFPB on an interim basis for a little over a year. Kathy Kraninger, then the little-known OMB policy associate director, was chosen to lead the agency in 2018.

Senate Democrats criticized Kraninger during nomination hearings, saying she had no experience prosecuting or investigating the wrongdoings of financial institutions. She was confirmed nonetheless, and almost eight months into her tenure, Kraninger is moving the agency toward a more moderate stance relative to those of the enforcement-heavy Cordray bureau and the "less-is-more" Mulvaney agency.

A middle road

Rick Fisher, a senior partner and financial services policy expert at Morrison Foerster, said in an interview that the bureau is taking a more "realistic approach" to regulation under Kraninger.

"She has the the opportunity to come in and look like something right in the middle," he said.

Shortly after taking office, Kraninger began a three-month, cross-country tour to gain a better understanding of the challenges consumers face. The director returned to Washington with a new vision for the CFPB: Focus on consumer engagement and financial literacy.

In her first public policy speech, Kraninger announced a number of initiatives that promote financial literacy as the primary method of mitigating consumer issues like high-interest debt via payday loans.

"Empowering consumers to help themselves, protect their own interests and choose the financial products and services that best fit their needs is vital to preventing consumer harm and building financial well-being," Kraninger said in her speech.

Enforcement actions: Use when necessary

According to data compiled by S&P Global Market Intelligence, Kraninger has taken many more enforcement actions in her first seven months as director than did either of her predecessors over similar time periods. Since mid-December, Kraninger has handed out 13 enforcement actions against firms, compared to just three by Mulvaney's term.

Cordray took just one enforcement action during his first seven months, but the agency was still in its infancy at that time, and he was at least partially responsible for hiring staff and developing operational policies.

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Despite her higher enforcement count, Kraninger has focused on "one-off" actions that any CFPB head would have taken, Raymond James public policy analyst Ed Mills said in an interview.

Mills said Kraninger's CFPB has engaged in less-aggressive rule-writing and enforcement action, which has resulted in loosened rules for payday lenders and financial firms lending to military personnel.

"The CFPB is using enforcement actions just to let industry know it still has that [authority]," Mills said.

Further, Kraninger's focus on consumer financial education "fits the brand of Republican views" that consumers can make decisions for themselves without government intervention, he said.

Though a Republican, Kraninger has taken some similar actions to Cordray, a Democrat, said Makada Henry-Nickie, a former senior analyst for the CFPB. Kraninger has "taken a stand" against the debt collection industry and has returned a significant amount of money back to consumers, Henry-Nickie said in an interview.

Nevertheless, her leadership style still aligns more closely with Mulvaney's, which will likely result in a weakened CFPB, according to Henry-Nickie.

"I want to be on the record saying she is not reckless, she is not overtly aggressive, she's not as partisan as [Mulvaney] is," Henry-Nickie said. "But she seems to align with his stance to being more deferential to industry."

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Few allies in Washington

As Kraninger attempts to maintain the agency's moderate stance, the tides of Washington are still trying to pull the agency in one direction or the other.

Norbert Michel, director of the Center for Data Analysis at the Heritage Foundation, a conservative think tank, said that even with the agency's shift to the right under Mulvaney and Kraninger, "we still don't need the CFPB."

"They just get hit from all these special-interest groups, it's a lot to deal with, there's a lot of pressure, I'm sure," Michel said in an interview. "You're always going to get hit from the people who are most impacted by [the CFPB's] rules."

From the left, Sen. Sherrod Brown, D-Ohio and ranking member of the Senate Banking Committee, said he doesn't approve of anything Kraninger has done as director.

"She's not been affirmative for [military personnel] ... and for people who have been wronged by the financial system," Brown said in a brief interview.

The CFPB declined to comment for this story.