Doomed by design
Trump appointees are methodically dismantling the Consumer Protection Bureau they despise
WASHINGTON — Mick Mulvaney struck a jovial tone as he introduced the political appointees who would run the Consumer Financial Protection Bureau. One was nicknamed “Dreamboat,” he said in an email. Another was “Mumbles.” A third had been a “Jeopardy” contestant.
“They are really great people,” Mulvaney, the acting director, wrote in a holiday message to the agency’s 1,600 staffers last December.
One year after Mulvaney’s arrival, he and his political aides have constrained the agency from within, achieving what conservatives on Capitol Hill had been unable to do for years. Publicly announced enforcement actions by the bureau have dropped by about 75 percent from average in recent years, and consumer complaints have risen to new highs, according to a Washington Post analysis of bureau data.
Over the past year, the agency’s workforce has dropped by at least 129 employees amid the largest exodus since its creation in 2010.
Created by Congress to protect Americans from financial abuses, the bureau under Mulvaney has adopted the role of promoting “free markets” and guarding the rights of banks and financial firms as well as those of consumers, according to statements by Mulvaney and bureau documents.
Much has been written about Mulvaney’s controversial leadership. This story provides an inside look at one of the Trump administration’s signature successes: how Mulvaney and a team of political appointees used the levers of government to hinder career employees and roll back oversight of private industry. It is based on scores of internal emails and other documents reviewed by The Washington Post, along with interviews with two dozen current and recent employees.
“The bureau is forcing hundreds of staff to sit on their hands while millions of Americans suffer from predatory practices happening right under its nose,” said Seth Frotman, who resigned as the bureau’s assistant director and student-loan ombudsman in August and is starting the nonprofit Student Borrower Protection Center to focus on helping consumers.
As the agency curtailed its operations, Mulvaney repeatedly said he was making it more efficient, documents show.
On Thursday, the Senate confirmed a new agency director, Kathy Kraninger, an associate director at the Office of Management and Budget, where Mulvaney splits his time as director.
Kraninger, who has no experience in financial services and has never run a federal agency, inherits a bureau that is very different from the one that was run by Richard Cordray of Ohio, who was director of the bureau under President Barack Obama. Cordray resigned in late 2017, seven months earlier than expected, to enter the Ohio governor’s race. He lost to Mike DeWine in last month’s election.
Meanwhile, Democrats have pledged to examine Mulvaney’s tenure at the Consumer Protection Bureau after they take control of the House in January.
Mulvaney and his political appointees declined to be interviewed for this story.
The agency’s new mission
When Mulvaney took over as acting chief Nov. 27, 2017, he already was well-known to many inside the agency as one of its fiercest critics.
The former congressman from South Carolina and other conservatives had long called the bureau a threat to free-market capitalism and a symbol of everything wrong with progressive politics in America.
The bureau had been launched by the Obama administration in response to abuses that came to light during the economic meltdown a decade ago.
In its first six years, the bureau aggressively pursued lenders, including payday lenders, and other financial firms, returning more than $12 billion to more than 29 million consumers and imposing nearly $600 million in civil penalties.
In 2016, the Republican Party’s platform referred to it as a “rogue agency” and compared Cordray to a dictator. Mulvaney was blunt in his loathing, once saying, “I don’t like the fact that CFPB exists.”
Almost from Day 1, career employees said, Mulvaney used his new authority to redirect the agency, announcing a temporary halt to the creation of new policies and to hiring.
He also recruited the bureau’s first team of political appointees to monitor each division, control the workflow and keep him posted. Some of the dozen appointees received salaries up to $259,500. They had little experience in consumer protection enforcement or managing large groups of people, their resumes show. But many shared a common profile, having worked for the financial sector or against the bureau. One was a former financial lobbyist. Another was a lawyer who once argued the bureau was “unconstitutional” while representing a bank accused of deceptive practices, legal documents show.
On Dec. 21, career employees took note of a subtle but significant change to language describing the agency’s mission on news releases. In addition to protecting consumers, the bureau was now “regularly identifying and addressing outdated, unnecessary or unduly burdensome regulations,” the new language said.
The end of Fair Lending
In late January, Christopher D’Angelo was doing his best to persuade Mulvaney to back away from a plan that was sending shock waves through the bureau’s corridors, according to a briefing memo prepared for D’Angelo.
The plan called for dismantling the Fair Lending Office, the operation responsible for protecting minorities from financial discrimination.
D’Angelo was an associate director, a seasoned veteran who had been at the bureau from the start. He argued the move could cripple the agency’s ability to investigate discriminatory lending, subvert the intent of Congress and damage the bureau’s reputation, the person said.
Mulvaney was unmoved. Five days later, he announced the overhaul, saying he would strip enforcement powers from Fair Lending and fold it into the bureau’s administrative operation. “These changes are intended to help make the Bureau more efficient, effective and accountable,” Mulvaney wrote in an announcement.
There was still more work to do. Mulvaney and his team inherited scores of ongoing cases, but they now moved forward at a glacial pace, as political appointees micromanaged every stage, employees said.
“It has all ground to a halt,” a bureau lawyer told The Post. “It’s sort of ‘Hurry up and wait.’ And it’s very much by design. They want everyone to leave.”
Mark Totten, a law professor at Michigan State University, found what he called a “precipitous drop” in the total number of administrative and judicial enforcement actions under Mulvaney.
Some of the cases that did go forward were drained of vigor, with penalties that fell far below what career regulators recommended, employees said. The new pattern gave rise to a phrase among staff: “The Mulvaney Discount.”
In one case, career staff recommended an $11 million fine for a South Carolina lender, Security Finance, for allegations that it improperly pressured consumers to buy insurance and approached borrowers at their homes and jobs to collect on debts, according to two people familiar with the discussions.
The recommendation went to a political appointee named Eric Blankenstein, the former private-sector lawyer who once described the bureau as “unconstitutional” in legal papers. Blankenstein ordered the staff to abandon some of their initial complaints and pushed to slash the fine, which was eventually lowered to $5 million. A scrambled new name
As the staff came to terms with the decline in enforcement actions, they faced what senior officials described as another perplexing decision. On March 22, Mulvaney adopted a new seal that changed the agency’s name. The new name, the Bureau for Consumer Financial Protection, scrambled a widely used acronym that the agency had spent tens of millions of dollars to promote.
Critics said the name change was a costly stunt aimed at undermining the bureau’s identity, noting that the legislation uses both names.
“This is a bizarre waste of time and money that has no redeeming social or policy value,” said Christopher Peterson, a law professor at the University of Utah and consumer protection specialist who served as a senior adviser to CFPB’s director for four years ending in 2016. “There’s nothing in the law that prohibited the bureau from using the original name.”
Mulvaney told The Post that the agency “does not comment on such internal deliberations, and certainly not on unvetted preliminary assumptions and estimates.”
Tensions between the political team and the civil servants exploded Sept. 26 after The Post reported that Blankenstein had questioned in a blog more than a decade ago whether using the n-word was inherently racist and claimed the majority of hate crimes were hoaxes.
Staffers were stunned because Blankenstein oversees the bureau’s fair-lending operation responsible for protecting minorities from financial discrimination. The staff called on Mulvaney to remove Blankenstein and reverse the decision to dissolve the Fair Lending Office, according to internal email.
The director of the office, Patrice Ficklin, told Mulvaney and others in the bureau via email that she was alarmed by the blog posts and questioned whether Blankenstein truly intended to carry out Mulvaney’s “repeated yet unsubstantiated commitment” to fair lending.
Ficklin did not respond to requests for comment.
“The suggestion that a racial slur is intended to do anything other than demean and oppress on the basis of race undermines constructive discourse and is inconsistent with the consumer protection and fair-lending mandates of the Bureau,” D’Angelo, the associate director who had argued against dismantling the Fair Lending Office, wrote in an Oct. 1 email to hundreds of employees in the supervision, enforcement and fair-lending division.
Within hours, Blankenstein apologized for the writings, a turnabout from the defiant statement he issued when The Post revealed them, when he said he was being attacked for “governing while conservative.”
Over the ensuing weeks, Democratic lawmakers, consumer advocacy groups and the employees’ union jumped into the fight, calling on Mulvaney to reverse course on the Fair Lending Office and push Blankenstein out.
Mulvaney addressed the controversy in a meeting with senior managers and in email to staff. He called racial discrimination “abhorrent” and said it wouldn’t be tolerated, according to a recording of the meeting obtained by The Post.
But he was defiant in the face of the criticism.
“Be assured I am not going to let any outside group dictate how I structure or manage the Bureau,” he wrote. “Our focus must always remain on doing our jobs, enforcing the law, and working together to do a great job for the American people.”