Five challenges facing new consumer bureau chief

Kathy Kraninger faces a slew of daunting challenges as the new director of the Consumer Financial Protection Bureau (CFPB).

Kraninger was confirmed by the Senate on Dec. 6 in a 50-49 party-line vote, and began her five-year term atop the polarizing financial regulator on Tuesday. She promised a fresh start at an agency where many employees have felt demoralized during more than a year of turmoil under acting Director Mick MulvaneyJohn (Mick) Michael MulvaneyActing DHS secretary threatened to quit after clashing with Miller: report On The Money: Treasury rejects Dem subpoena for Trump tax returns | Companies warn trade war about to hit consumers | Congress, White House to launch budget talks next week | Trump gets deal to lift steel tariffs on Mexico, Canada Trump knocks Mulvaney for casting doubt on chances of infrastructure deal MORE, who was recently named acting White House chief of staff.

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Former Director Richard CordrayRichard Adams CordrayThe road to the White House still goes through Ohio Rep. Tim Ryan announces presidential run Sherrod Brown says he will not run for president MORE, a Democrat, oversaw the agency at a time when it issued strict rules intended to curb risky financial products and when it took aggressive legal actions against firms accused of defrauding consumers.

Mulvaney, appointed by President TrumpDonald John TrumpTrump calls for Republicans to be 'united' on abortion Tlaib calls on Amash to join impeachment resolution Facebook temporarily suspended conservative commentator Candace Owens MORE to replace Cordray after he resigned in November 2017, drastically changed the CFPB’s course by curtailing its enforcement actions, slashing industry fines, freezing new regulations and reducing the bureau’s budget.

CFPB veterans, Democratic lawmakers and liberal advocacy groups blasted Mulvaney for what they considered a fundamental betrayal of the agency’s mission. Republicans and the financial services industry praised him for reining in an agency they’d long considered overzealous.

Kraninger has sought to distance herself from Mulvaney's tumultuous stint, pledging to chart her own path for the agency.

Here are five critical issues that Kraninger must tackle as takes the helm.

Rebuilding morale and gaining trust

One of Kraninger’s most challenging tasks will be endearing herself to the CFPB’s staff amid internal battles between agency veterans and recent political appointees.

Mulvaney’s efforts to transform and rebrand the CFPB decimated the agency’s morale and inflamed divides among Obama-era and Trump-era hires.

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Staff sentiment plummeted between 2017 and 2018, according to the Partnership for Public Service’s annual ranking of best places to work in the federal government.

Senior CFPB officials and union representatives have called for the firing of Eric Blankenstein, a political aide hired by Mulvaney to oversee lending discrimination cases. Blankenstein later admitted to anonymously writing racially insensitive blog posts.

Veteran agency employees have also recoiled at Mulvaney’s push to change the bureau’s name and make the agency more amenable to industry concerns.

Speaking to reporters Tuesday, Kraninger acknowledged the “really challenging dynamics of the bureau” and said she’d start her term with a three-month listening tour of every CFPB department.

"I do recognize the concerns that have been out there,” Kraninger said. “I hope I made clear to the staff today that I will listen to them.”

Congress

Democrats have been skeptical of Kraninger from the moment her nomination was announced in June. At the time she was serving as an associate director at the Office of Budget and Management, which is directed by Mulvaney.

While Kraninger has worked in the federal government for more than a decade, Democrats cited her lack of experience with financial rules and her close ties to Mulvaney as they unanimously opposed her nomination.

Kraninger will have to pacify Rep. Maxine WatersMaxine Moore WatersDemocrats are running out of stunts to pull from impeachment playbook Maxine Waters: Trump 'has done everything that one could even think of to be eligible for impeachment' Maxine Waters: Parts of Trump immigration plan are 'very racist' MORE (D-Calif.), the incoming chairwoman of the House Financial Services Committee, who’s called on her to undo Mulvaney’s work at the agency.

Kraninger could also face headaches from Senate Democrats who fiercely opposed her nomination. Among those opponents were several potential 2020 presidential candidates.

Sen. Sherrod BrownSherrod Campbell BrownLawmakers grapple with the future of America's workforce The Hill's Morning Report - Presented by Pass USMCA Coalition - Restrictive state abortion laws ignite fiery 2020 debate On The Money: Mnuchin signals officials won't release Trump tax returns | Trump to hold off on auto tariffs | WH nears deal with Mexico, Canada on metal tariffs | GOP fears trade war fallout for farmers | Warren, regulator spar over Wells Fargo MORE (D-Ohio), the top Democrat on the Senate Banking Committee, told The Hill on Thursday that Kraninger should “go back to the original mission of this agency and reverse course."

Brown, who’s eyeing a presidential run, also renewed his call for Blankenstein’s firing, which he called ”a really wonderful sign that she means business."

Staffing and budget decisions

Trump nominated Kraninger in part to make substantial cuts to spending at the CFPB. Her allies have touted her extensive budgeting experience, and Kraninger on Tuesday said she’s interested in how the bureau’s resources “can be most efficiently utilized.”

There are concerns among CFPB veterans that Kraninger’s expected cuts could lead to a smaller staff. The White House fiscal 2019 budget released by Kraninger’s old department proposed a $155-million cut to the bureau’s $630-million budget for 2018.

Any effort to dismiss CFPB employees would be subject to lengthy union negotiations, and Kraninger has not explicitly said she would consider layoffs. Even so, Kraninger’s critics are likely to seize on any cuts to bureau funding, especially if they target crucial enforcement and supervisory staff.

Payday rule

One of Mulvaney’s first actions at the CFPB was delaying the compliance date for the agency’s 2017 rule on short-term, high-interest loans. The so-called “payday rule,” designed to help protect consumers from cyclical debt, was a top Democratic priority but loathed by Republicans and industry participants.

The CFPB announced in October its plan to issue an updated proposal in January that will likely be weaker than the finalized rule. Kraninger will decide how far the finalized rule should be rolled back, and risks backlash from all sides if she moves too far in one direction.

Legal threats

Kraninger may also have to decide how and whether the CFPB would defend itself in a case challenging the legality of its governance structure. The D.C. Circuit Court of Appeals upheld the CFPB’s constitutionality in January, but the appeals courts for the 5th Circuit and 9th Circuit will soon hear similar cases.

Kraninger has touted the bureau’s “critically important” mission, but Republicans are broadly opposed to the CFPB’s existence and would relish a chance to transform — if not eliminate — the agency.