Director Kraninger's Remarks Before the National Association of Attorneys General Capital Forum

Thank you, Attorney General Landry.  It is a pleasure to be here with you all today as you meet to discuss so many pressing and important issues.  

For those of you who I have not yet met, let me take a moment to introduce myself.  My public service began in the Peace Corps and extended to the legislative branch as well as several cabinet agencies.  Throughout my career, I’ve emphasized the responsibility and duty to carry out public service as a public trust.

My experience working for Secretary Mineta, a former Democratic congressman and Clinton commerce secretary, who served as President Bush’s Secretary of Transportation, taught me the importance of working across the aisle.  He liked to say there are no Democratic roads or Republican highways.  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.

In the year since I have been Director, I have had the honor of meeting many of you.  As I have said in those meetings, there is tremendous opportunity for the Bureau and the state attorneys general to join forces to protect consumers.  I am committed to working with all of you, regardless of political affiliation to achieve our common mission of consumer protection. 

I truly believe that by engaging a variety of stakeholders we can arrive at better policies.  That is why I invited people to share their candid views with me.  In the past 12 months, I have met with more than 800 stakeholders in the realm of consumer protection, including attorneys general and state financial regulators, consumers, consumer groups, tribal leaders, military personnel, academics, non-profits, faith leaders, and both bank and non-bank financial institutions.

This engagement has included meeting with as many of you and your offices as possible, particularly as I traveled around the country. 

I have been to 17 states in this role and plan to visit more in the upcoming year.  Whenever possible my agenda includes meetings with the state’s AGs and financial regulators. Thank you for taking time out of your busy schedules to meet with me.  I want to have an open and direct relationship with you all, particularly in those instances where there may be a divergence of views on policy matters.  We will have differences in views from time to time. But what unites us–a shared commitment to protecting consumers–is greater than what divides us. 

Today I would like to discuss our joint efforts in protecting consumers through the use of supervision and enforcement.  I will also discuss our new partnership efforts with the states, including working together more closely on innovation policies.  Finally, I will discuss our small dollar and debt collection rules.  In short, I am firmly committed to maintaining and building strong partnerships with states because when we work together, we can achieve our mission of consumer protection. 

Supervision and enforcement are essential tools Congress gave the Bureau. A purposeful supervisory and enforcement regime can prevent consumer harm by promoting a culture of compliance and righting wrongs. Indeed, when we take enforcement action against wrongdoers, it sends a clear message to the public and to the marketplace that we will not tolerate illegal conduct. This deters unlawful behavior and supports a level playing field among competing firms. The bottom line is that we will effectively enforce the law to fulfill our consumer protection mission.

Every enforcement case we take on is managed by our staff to ensure compliance with consumer financial protection laws, and to prevent and redress consumer harm. We pursue cases only after thoroughly reviewing the facts. And once those facts are in our possession, I am committed to ensuring that we move as expeditiously as possible to resolve cases in the interest of justice, whether through public enforcement action, a determination that a particular investigation should be closed, or through the use of our education, regulatory or supervisory tools.

In FY 2019, the Bureau announced 22 public enforcement actions and settled six previous lawsuits. The final judgments we obtained required a total of more than $777 million in total consumer relief. That’s more than $600 million in consumer redress and more than $174 million in other relief. And those actions have resulted in more than $185 million in civil money penalties, not accounting for suspended amounts.

In addition to the public enforcement actions, during my tenure with the Bureau, institutions paid millions in restitution to over 247,000 consumers in connection with supervisory activities. In FY2019, the Bureau commenced 133 supervisory events at supervised entities and completed 147 supervisory events at supervised entities resulting in 433 matters requiring attention by these entities.

As has been true since the Bureau’s earliest days, many of these cases and exams have been worked jointly with state counterparts. As the Bureau vigorously enforces federal consumer financial laws, we recognize that we must work together with our partners in state government to ensure a fair and well-functioning consumer financial market.  In fact, the Dodd-Frank Act specifically contemplates joint investigations and requests for information.  Most of you  have consumer protection units or equivalent functions as part of the state’s attorney general organizational structure, and they have been focusing more and more on financial products and services. Working together we can achieve consistency in enforcement and address problems from a cross market perspective. Most consumers don’t know the difference between banks and non-banks selling a particular financial product.

Let me provide you with four examples of the great partnerships we’ve had over the past year under my leadership.  In July, we partnered with the FTC and 48 states, the District of Columbia, and Puerto Rico in a global settlement with Equifax to settle claims arising from the 2017 data breach.  That breach impacted approximately 147 million consumers, and now Equifax will pay up to $700 million as part of the settlement.

Second, in July, the Bureau and the New York Attorney General entered into a consent order with debt collectors based in Buffalo. Specifically, we alleged that, since at least 2009, the debt collectors together purchased millions of dollars’ worth of consumer debt, inflated those consumer debts, and relied on illegal tactics to extract as much money as possible from consumers. 

In addition, that the defendants misrepresented to consumers that they owed sums they did not owe or were not obligated to pay; that the defendants did not have a legal right to collect the money; that the defendants falsely threatened consumers with legal action that they had no intention of taking; and, finally, that the defendants impersonated law enforcement officials, government agencies, and court officers.

Because of the work we did with New York, these defendants are now permanently barred from acting as debt collectors and enjoined from engaging in any misrepresentation or omission in connection with any consumer financial product or service. Further, the settlement resulted in $40 million in redress to consumers and $20 million in civil money penalties. Other defendants in the case agreed to pay a $1 civil money penalty (with $2 million suspended), and consumer redress of $10,000 (with suspended payments of $4 million).

We have also partnered with the Minnesota Attorney General’s Office, the North Carolina Department of Justice, and the Los Angeles City Attorney, in our case against a student-loan debt-relief operation that we alleged was deceptively marketing its products and charging unlawful fees. Although the case is being actively litigated, the Bureau and its partners have obtained a preliminary injunction, asset freeze, and the appointment of a receiver.  

And, lastly, we partnered with the South Carolina Department of Consumer Affairs in a lawsuit against an operation brokering contracts offering high-interest credit to consumers, including veterans, many of whom are disabled. This action built on several of the Bureau’s other actions this year to address illegal practices in the marketing or administration of high-interest credit to veterans. This includes an action brought in August in conjunction with the Arkansas Attorney General’s office.

In the end, none of us can succeed in protecting consumers if we don’t work well together or communicate with each other. And working together strengthens all of our efforts, is better for consumers, and provides certainty in the marketplace. As we move into the new year, I look forward to finding more ways to do even more together with states on behalf of consumers.

Now I’d like to turn to talk about some of our new partnership efforts with the states.

Like Harry Truman said, “It is amazing what you can accomplish if you do not care who gets the credit.”  That’s why I believe one of the best ways the Bureau can harness all its tools is to focus on partnerships–not just with enforcement but with supervision, financial education, rulemaking and guidance. Under my leadership, the Bureau is committed to bringing together partners from across sectors to develop and execute strategies to achieve a common goal.  

Coordination with our fellow regulators is a crucial component of facilitating consumer-friendly innovation. A key component of this is our recently-announced American Consumer Financial Innovation Network or ACFIN.

ACFIN allows federal and state officials to coordinate efforts to facilitate innovation and further shared objectives such as consumer protection and access, competition, and financial inclusion, and it also provides a platform for our federal and state partners to coordinate as they develop new rules of the road and apply existing ones. This coordination also promotes regulatory certainty for innovators, which will benefit consumers and the economy alike. The network also seeks to keep pace with market innovations and help ensure they are free from fraud, discrimination, and deceptive practices.

Members of ACFIN accomplish these objectives through information-sharing and coordination of innovation-related policies and programs, such as office hours programs where regulators can learn about innovation in the market and provide informal regulatory feedback.  

So far, the fourteen members of ACFIN include attorneys general from Alabama, Alaska, Arizona, Colorado, Georgia, Indiana, South Carolina, Tennessee, and Utah and state financial regulators from Florida, Georgia, Missouri, and Tennessee. Thank you for those of you already working with us.

I encourage all of you to consider joining ACFIN. Hearing different perspectives will make ACFIN stronger and better.  In the end, different perspectives will enable us to ensure that we have the right policies to protect consumers while promoting innovation in the marketplace. I encourage you to join whether you have your own innovation policies or whether you question what we can achieve. If you are skeptical, you can provide the feedback that will ensure we get to the right policies. 

And, finally, I want to tell you about our payday and debt collection rules.  

One of the Bureau’s critical tools is rulemaking and guidance where appropriate–articulating clear rules of the road for regulated entities that promote competition, increase transparency, and preserve fair markets for financial products and services. Where Congress directs the CFPB to promulgate rules or address specific issues through rulemaking, we will comply with the law. Where the Bureau has discretion, we will focus on preventing consumer harm by 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.

To develop the best possible rules, the CFPB must use the best possible process. Because rules are general standards, they are not best articulated on a case-by-case basis through enforcement actions. Rather, they should be developed through a rulemaking process that is transparent; that allows stakeholders to submit comments; that allows partners to weigh in; that reflects rigorous economic and market analysis; and that provides for judicial review. Under my leadership, the CFPB will proceed deliberately and transparently in its rulemakings.

Let me start with our small dollar loan regulation. The states have an extensive history with small dollar lending, including payday lending, and are a rich source of practical approaches that root out problematic practices while enhancing the credit environment for legitimate actors and consumers. In the course of its rulemaking and compliance activities the Bureau has benefitted greatly from the experience of our state partners.

As you may recall, the Bureau announced in 2018 that it intended to reconsider the mandatory underwriting provisions in its 2017 rule. In February 2019, we issued a proposal to that end and are currently reviewing the comments we received. Fundamentally, the reconsideration is driven by concerns that the 2017 rule would make credit less readily available to consumers. 

The proposed rule outlines the rationale for reconsidering the mandatory underwriting provisions because of concerns about the factual, legal, and policy basis for the agency’s determination in 2017 that the failure to engage in such underwriting for payday loans is unfair and abusive. Given the significant effect of the mandatory underwriting provisions on consumers who may not be able to choose payday loans when they want them and lenders who may not be able to offer such loans to them, the agency decided that reconsideration was warranted.   

At this point, I maintain an open mind about the final rulemaking and the Bureau’s efforts related to payday lending. We are reviewing approximately 190,000 comments concerning the reconsideration of those provisions and considering what should go into a final rule, including comment letters from approximately 25 attorneys general. Our goal is to finalize the rule in April 2020. And in the meantime, I can assure you that the Bureau continues to engage in education, supervision and enforcement actions in this space.

As for debt collection, the Bureau issued a Notice of Proposed Rulemaking in May 2019.  The Bureau's proposal would, among other things, address communications in connection with third party debt collection. It would also interpret and apply prohibitions on harassment or abuse, false or misleading representations, and unfair practices in debt collection. And it would clarify requirements for certain consumer-facing debt collection disclosures. The proposal builds on the Bureau’s research and pre-rulemaking activities in this market, which remains a top source of complaints to the Bureau.  

We know that, like the Bureau, you hear from your consumers about debt collection complaints, and we recognize the long history of state work in the debt collection space. Among other things, we’ve looked at state specific debt collection laws and your enforcement work as we consider the rulemaking. And, again, we received comments from state AGs on this matter and I would like to thank you for your insights.

Where do we stand at this moment?  We are reviewing over 14,000 comments and making decisions about what would go into a final rule, including your perspectives. 

The Bureau also has completed testing of consumer disclosures related to time-barred debt disclosures that were not addressed in the May 2019 proposal. We plan to release a Supplemental Notice of Proposed Rulemaking on this very early in 2020. These disclosures are inextricably linked to state law. Reconciling these disclosures could help consumers receive the benefits of federal and state disclosures, while at the same time reducing uncertainty and compliance burdens for debt collectors.  

Once the Supplemental proposal is issued, we will be interested in practical and pragmatic ideas of how to make time-barred debt disclosures work. 

Before closing, I want to reiterate my commitment to engagement with all of our state partners in our mission of preventing consumer harm and protecting consumers. The Bureau cannot achieve that outcome alone. That means ensuring transparent processes, fostering relationships and communication, valuing the expertise that others bring, and supporting productive public discourse.

In this vein, I intend to meet with as many of you as possible. So, while you are in D.C., please stop by.  And if I make it to your respective state, I look forward to meeting with you. 

Thank you for your time.