Consumer watchdog office loses powers in enforcing lending discrimination cases

Civil rights groups say action weakens federal office’s ability to pursue cases

The Trump administration has stripped enforcement powers from the leaders of a Consumer Financial Protection Bureau unit responsible for pursuing discrimination cases, part of a broader effort to reshape an agency it criticized as acting too aggressively.

The move to sharply restrict the responsibilities of the Office of Fair Lending and Equal Opportunity comes about two months after President Donald Trump installed his budget chief, Mick Mulvaney, at the head of the bureau. The office previously used its powers to force payouts in several prominent cases, including settlements from lenders it alleged had systematically charged minorities higher interest rates than they had for whites.

That unit now will move inside the office of the director, where staffers will be focused on “advocacy, coordination and education,” according to an email Mulvaney sent them this week. They will no longer have responsibility for enforcement and day-to-day oversight of companies, he wrote.

The reorganization comes as Mulvaney looks to remake the agency into one that shows far more restraint than it did under his Democratic predecessor, Richard Cordray.

Beyond moving the fair-lending office, Mulvaney has also dropped a lawsuit against payday lenders and said the agency will reconsider rules the financial industry complained would be particularly onerous. He also updated the bureau’s mission statement to include addressing “outdated, unnecessary, or unduly burdensome regulations.”

In a memo to staffers last week, Mulvaney said the CFPB would no longer attempt to “push the envelope” in enforcement cases. “We are government employees,” he wrote. “We don’t just work for the government, we work for the people: those who use credit cards and those who provide them.”

Enforcement will not end, he said. Instead, in the case of the fair-lending office, that responsibility will remain with career professionals in the division of supervision, enforcement and fair lending, which conducts oversight and enforcement actions in a wide range of cases of financial wrongdoing. The Office of Fair Lending had previously been part of that division.

“I do not expect that staff will experience changes in employment status, but it is possible that some may experience changes in jobs and duties,” Mulvaney said in the email.

Civil rights and consumer groups said separating the fairlending office from its enforcement power weakens its power to pursue cases.

“These changes . . . threaten effective enforcement of civil rights laws, and increase the likelihood that people will continue to face discriminatory access and pricing,” said Lisa Donner, executive director of Americans for Financial Reform.

Mulvaney’s spokesman dismissed the criticism, saying the agency will continue to pursue fair-lending cases.

The Office of Fair Lending and Equal Opportunity has headed up some high-profile cases, including a 2015 settlement against Hudson City Savings Bank, a New Jersey bank accused of racially discriminating against minority borrowers. The bank was required to provide $25 million in loan subsidies in what the CFPB called the country’s largest settlement in a redlining case.