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 MulvaneyTrump administration asks Supreme Court to take up challenge to consumer bureau NOAA chief praises agency scientists after statement backing up Trump tweet The Hill's Morning Report — Biden steadies in third debate as top tier remains the same MORE, who was recently named acting White House chief of staff.

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Former Director Richard CordrayRichard Adams CordrayTrump administration asks Supreme Court to take up challenge to consumer bureau Watchdog agency must pick a side: Consumers or scammers Kraninger's CFPB gives consumers the tools to help themselves 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 conversation with foreign leader part of complaint that led to standoff between intel chief, Congress: report Pelosi: Lewandowski should have been held in contempt 'right then and there' Trump to withdraw FEMA chief nominee: report 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 WatersBipartisan housing finance reform on the road less taken Manufacturing group leads coalition to urge Congress to reauthorize Ex-Im Bank Democrats' impeachment message leads to plenty of head-scratching 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 BrownBipartisan housing finance reform on the road less taken Hillicon Valley: Google to promote original reporting | Senators demand answers from Amazon on worker treatment | Lawmakers weigh response to ransomware attacks Senate Democrats want answers on 'dangerous' Amazon delivery system 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.