New Office of Consumer Affairs chief leads sudden turnaround

The defusing of a federal consumer watchdog agency began last week at a federal courthouse in San Francisco.

After a nearly three-year legal skirmish, the Consumer Financial Protection Bureau seemed to have been victorious. A judge agreed with the bureau in September that a financial firm had misled more than 100,000 mortgage customers. As punishment, the judge ordered Ohio-based Nationwide Biweekly Administration to pay nearly $ 8 million in penalties.

It only remained to recover the money. Last week, attorneys for the Consumer Affairs Office filed an 11-page brief asking the judge to force Nationwide to post $ 8 million bail while the proceedings are over.

Then Mick Mulvaney was appointed acting director of the consumer office.

Barely 48 hours later, the same lawyers filed a new two-sentence brief. Their request: withdraw their previous submission and no longer take a position on whether Nationwide should pay the money.

It was a subtle but unmistakable sign that the office of consumer affairs headed by Mr Mulvaney is heading in a new direction – one that is taking a lighter touch to regulate the financial sector. The reversal is part of a broad push by the Trump administration to free companies regulations of the Obama era.

Within the agency, the change was rapid. Mr. Mulvaney briefly stopped approving payments to certain victims of financial crime, halted hiring, froze all new rules and ordered a review of ongoing investigations and prosecutions. Some, he said, will be abandoned.

“This place will be different, under my leadership and under whoever follows me,” Mulvaney said Monday of an agency he had previously denounced as a “sad and sick” example of bureaucracy gone mad.

Mr. Mulvaney took over the management of the office, created in the aftermath of the global financial crisis, less than two weeks ago. The abrupt resignation of Richard Cordray, longtime director of the office, who had been appointed by President Barack Obama, start an extraordinary public fight for agency control. The battle has pitted Mr Mulvaney, appointed interim director by President Trump, against Leandra English, deputy director of the office under Mr Cordray. While Mr. Trump can appoint his own director, confirmation could take months. Until then, the acting director is in charge.

Last week, a federal judge ruled in favor of Mr. Mulvaney, denying an emergency motion that Ms English had tabled to prevent the White House from selecting a temporary director. The trial continues.

The office investigated Santander, the giant Spanish bank, for overcharging car loan customers. Given the tenor of recent conversations within the office, agency lawyers suspect the investigation could be suspended under Mr Mulvaney, according to four people with knowledge of the case who requested anonymity to discuss an issue. investigation.

Santander spokesperson Raschelle Burton said the company was not aware of any scheduled CFPB lawsuits.

Agency employees said they were scrutinizing every comment and memo from their new boss for clues about their future.

Some employees, including some of the top officials in the office, welcomed their new boss. Others, pointing to Mr. Mulvaney’s previous hostility to the agency and its mission, quietly resist. A small group is called “Dumbledore’s Army,” according to two of the people who were familiar with their discussions. The name is a reference to a secret resistance force in the “Harry Potter” books.

An atmosphere of intense anxiety has set in, several employees said. In some cases, conversations between staff that used to take place by phone or text now take place almost exclusively in person or through encrypted messaging apps.

Mr. Mulvaney has started reviewing the agency’s lawsuits and its process for collecting information from companies under investigation. The so-called letters of formal notice from the office – an investigative tool used at the start of investigations – are “quite broad and heavy enough,” he told reporters on Monday.

On the same day, the bureau suspended an investigation into a company that had opposed the regulator’s requests for information.

In this case, the office sent a request for information in August to Nexus Services, a company in Verona, Va. That provides bonds to detained immigrants. Nexus objected to the agency’s “too broad and excessively onerous” request and refused to comply. In October, the company sued the office in the Washington District Federal Court, seeking to prevent the office’s investigators from contacting its customers and business partners.

In a court appearance on Monday, attorneys for the office agreed to suspend the investigation until the Nexus lawsuit is resolved, according to court records. A senior adviser to Mr Mulvaney, who was not authorized to speak publicly, said the decision was made after discussions with Nexus and the judge.

The overhaul of the agency, which enjoys unusual authority and independence, has been a priority for Republicans since its inception in 2010. Until Mr. Cordray’s departure, they had had very little traction.

The agency has often taken an aggressive stance towards regulating and sanctioning businesses. It extracted nearly $ 12 billion in repayments and canceled the debts of 29 million consumers.

After Mr. Trump took office, Cordray appeared to double down on his aggressive approach. It sparked a shootout of rules and enforcement action, including new restrictions on the payday lending industry.

Mr Mulvaney said he believes Congress should repeal these rules, just as he recently did with a rule that would have allowed borrowers to join together in class actions against financial institutions for unfair and deceptive business practices.

But as the Nationwide case shows, congressional action is not the only way to change the strategy of the Office of Consumer Affairs.

Nationwide has described itself as a service provider to help clients reduce interest payments on their mortgages.

Two years ago, shortly after being sued by the consumer office, the company suspended operations. Now he wants to get back to business – but he can’t afford to do so if he has to immediately pay the $ 8 million fine. He’s too broke to even afford bail, company owner Daniel S. Lipsky said in a court file.

If the court does not require the bond, Nationwide Biweekly can resume operations, said Lipsky.

Early last week, Mr. Lipsky’s attorney overnight made a personal appeal to Mr. Mulvaney, pleading his client’s case.

Mr. Mulvaney said he was aware of the letter but had not read it. He has so far only held internal meetings with office workers, he said during the meeting with reporters, and has yet to respond to messages he has received from consumer groups, bankers and lobbyists.

“I don’t want anyone to say that Mulvaney was in some way influenced by someone who sent him a FedEx package,” he said.

The office’s withdrawal of his request for Nationwide to post a bond had come to Mr. Mulvaney’s management, according to two of the people.

Mr Mulvaney’s advisor took issue with the idea that the decision represented a significant change in the position of the office. The agency was simply playing a more agnostic role in the case, Mr Mulvaney’s adviser said.

Nationwide lawyer Helen Mac Murray said the change was a promising sign. His client is eager to get back to business. This week, a judge granted the company’s request to proceed without bail.

“As we’ve been saying for years, this is a law-abiding company that helps consumers save money,” said Mac Murray. “We hope that the new CFPB leadership will follow the law and stop using unchecked and unreasonable bureaucratic tyranny to shut down a business that helps consumers.”

About Wesley V. Finley

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