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Tensions flare as Democrats urge consumer bureau to boost penalties

Tensions flare as Democrats urge consumer bureau to boost penalties
© Greg Nash

Tensions flared at a House committee hearing Wednesday as Democrats accused a powerful federal watchdog of shirking its obligation to protect consumers from financial fraud.

A House Financial Services Committee hearing with Consumer Financial Protection Bureau (CFPB) Director Kathy Kraninger quickly devolved after a top Democratic congresswoman insisted the bureau had abandoned its mission under her watch.

“If you're not following direction from your staff to help consumers that are harmed, then you are absolutely worthless,” said Rep. Carolyn MaloneyCarolyn Bosher MaloneyGSA offers to brief Congress next week on presidential transition Biden aide: First Cabinet picks will be announced Tuesday, GSA holdup preventing background checks Democrats gear up for last oversight showdown with Trump MORE (D-N.Y.).

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Maloney was referencing Kraninger’s decision to not seek payback for consumers in a January legal settlement with Enova International, an online lender accused of illegally collecting debts from consumers.

While Kraninger approved a $3.2 million fine, she did not seek restitution for consumers, despite recommendations from career staff to do so, according to documents released by the committee Wednesday.

Though Kraninger had already faced criticism on the settlement from the panel’s chairwoman, Rep. Maxine WatersMaxine Moore WatersOn The Money: Democrats accuse Mnuchin of sabotaging economy in dispute with Fed | Trump administration proposal takes aim at bank pledges to avoid fossil fuel financing | JPMorgan: Economy will shrink in first quarter due to COVID-19 spike Democrats accuse Mnuchin of sabotaging economy in dispute with Fed Maxine Waters says Biden win is 'dawn of a new progressive America' MORE (D-Calif.), Republicans erupted after Maloney rebuked Kraninger’s leadership.

Rep. Ann WagnerAnn Louise WagnerDemocrats projected to retain House majority Live updates: Democrats seek to extend House advantage Democrats seek wave to bolster House majority MORE (R-Mo.) urged Waters to enforce the committee’s rules of decorum and denounce Maloney, but her request was swiftly denied.

"The chair is in charge and the chair will decide exactly how this committee will be run,” Waters shot back. “Thank you for your comments."

Rep. Bill PoseyWilliam (Bill) Joseph PoseyOVERNIGHT ENERGY: 20 states sue over Trump rule limiting states from blocking pipeline projects | House Democrats add 'forever chemicals' provisions to defense bill after spiking big amendment | Lawmakers seek extension for tribes to spend stimulus money House Democrats add some 'forever chemicals' provisions to defense bill after spiking major amendment House Republicans urge White House to support TSA giving travelers temperature checks MORE (R-Fla.) ripped Democrats for their “denigration” of Kraninger, arguing he would be dismissed from the committee if he spoke that way about her Obama-era predecessor, Richard CordrayRichard Adams CordrayConsumer bureau vet who battled Trump will lead Biden plans to overhaul agency Consumer bureau revokes payday lending restrictions Supreme Court ruling could unleash new legal challenges to consumer bureau MORE.

Posey then accused the Democrats of treating Kraninger with a “double standard” after Cordray set "a new level of bureaucratic petulance, arrogance, and defiance."

Rep. Bill Huizenga (R-Mich.) said that if Republicans ever addressed Cordray or Sen. Elizabeth WarrenElizabeth WarrenBiden: 'Difficult decision' to staff administration with House, Senate members The Hill's Morning Report - Presented by the UAE Embassy in Washington, DC - Trump OKs transition; Biden taps Treasury, State experience On The Money: Biden to nominate Yellen for Treasury secretary | 'COVID cliff' looms | Democrats face pressure to back smaller stimulus MORE (D-Mass.), the architect of the agency, that way, “there would be rioting out in those halls right now.”

“You frankly deserve an apology,” Huizenga added.

Lawmakers on the panel have battled for years over the CFPB and its immense authority, and Wednesday's hearing highlighted the partisan rancor that has overshadowed the agency.

On Wednesday, Democrats had little patience for objections from Republicans, who argued that the GOP routinely berated Cordray when he appeared before the committee.

“I do recall conversations from my friends on the other side with the previous director when they were actually screaming at the top of their lungs and calling him names,” said Rep. Juan VargasJuan C. VargasHispanic Caucus asks for Department of Labor meeting on COVID in meatpacking plants Hispanic Caucus requests meeting with private detention center CEOs Hispanic Caucus asks Trump to rescind invitation to Mexican president MORE (D-Calif.).  “If you look at the record, that’s there too.”

Nonetheless, Maloney apologized to Kraninger, explaining she did not “intend to say that [she] was worthless.”

“I only intended to echo the chairman's point about the bureau making consumers whole. I didn't intend to disrespect the director personally, and I'm sorry for the confusion that my statement caused.”

Kraninger has faced constant criticism from Democrats since taking over the CFPB in December 2018 from acting Director Mick MulvaneyMick MulvaneyMick Mulvaney 'concerned' by Giuliani role in Trump election case On The Money: Senate releases spending bills, setting up talks for December deal | McConnell pushing for 'highly targeted' COVID deal | CFPB vet who battled Trump will lead Biden plans to overhaul agency Consumer bureau vet who battled Trump will lead Biden plans to overhaul agency MORE, who now serves as acting White House chief of staff.

Kraninger had pledged to stabilize the CFPB after Mulvaney’s efforts to gut the agency. But Democrats and consumer advocates have condemned her efforts to loosen CFPB regulations on payday lending and easing oversight of financial institutions.

Republicans and financial industry advocates who have long been critical of the CFPB’s power have praised Kraninger and her willingness to reign in the bureau. Several suggested that Democrats had suffered from buyer’s remorse by giving the CFPB director immense personal power.

“They ought to blame themselves,” said Rep. Andy BarrAndy BarrRep. Andy Barr beats back Democratic challenge in Kentucky Reclaiming the American Dream Powell, Mnuchin stress limits of current emergency lending programs MORE (R-Ky.). “They deliberately designed an agency to elude congressional oversight or accountability.”

Hanging over the hearing was also a larger fight in the courts over the agency.

Democrats responded with outrage last month after Kraninger filed a joint brief with the Justice Department urging the Supreme Court to take up a case challenging the constitutionality of the bureau.

Top Justice Department and CFPB attorneys argued in a brief that the structure of the powerful financial watchdog infringes on the president’s executive authority. 

Kraninger also explained in a letter to lawmakers that she supported a ruling that would allow the president to fire the director at will, regardless of the personal consequences.

The move has angered Democrats, who see it as a serious threat to the agency. Democrats on the committee blasted Kraninger for the move.

"Congress deliberately created the CFPB as an independent regulator, and for you to second guess Congress's judgment on this constitutionality of the CFPB and to argue against the CFPB structure in court is disrespectful of Congress," said Maloney.

Kraninger added Wednesday that resolving the issue of the CFPB’s legal structure would allow the bureau to focus its time and efforts on enforcing consumer protection law.

“The constitutional question has delayed many enforcement actions, it has delayed regulatory actions and has been something that I believe fundamentally the Supreme Court and Congress need to decide and settle, once and for all, so that the bureau can move forward and finish and actually engaged in its mission,” Kraninger said.

Updated at 3:31 p.m.