Earlier today the Trump administration’s nominee to lead the Consumer Financial Protection Bureau (“CFPB” or “Bureau”), Jonathan McKernan, testified before the Senate Committee on Banking, Housing and Urban Affairs.  McKernan was most recently a member of the Board of Directors of the Federal Deposit Insurance Corporation and has also worked in private practice, in Congress, and at the Federal Housing Finance Agency.

During the hearing, news broke that the CFPB had moved to dismiss a number of pending lawsuits with prejudice.  Dismissing a case with prejudice is significant because it essentially prohibits the Bureau from filing the same claims against the defendant in the future.  These developments follow other moves the agency made to reverse prior actions, including filing a motion to withdraw an amicus brief it submitted in a lawsuit shortly before Trump’s inauguration.

While Bureau employees have been directed to pause all agency activity, the Bureau’s actions in these suits indicate that current Bureau leadership may be open to outreach from regulated entities challenging other CFPB positions. 

In his testimony, McKernan explained that the CFPB has acted in a politicized manner and pushed beyond the limits of its authority.  However, he also stated that, if he is confirmed, he would ensure the CFPB “will take all steps necessary to implement and enforce the federal consumer financial laws and perform each of its other statutorily assigned functions.”  During the hearing, Senator Elizabeth Warren stated that the Dodd-Frank Act includes at least 88 specific mandates for the CFPB, including responsibilities related to maintaining a consumer complaint hotline, maintaining specific offices, and implementing and enforcing consumer financial laws.  In response to her questioning, McKernan confirmed that, as director, he would follow the law. 

McKernan’s statements echo a brief the CFPB filed in the District Court for the District of Columbia earlier this week arguing that Acting Director Vought and other defendants did not intend to eliminate the Bureau.  The Bureau assured the court that it was continuing to take action consistent with the Bureau’s statutory mandate, and that it closed the CFPB’s DC headquarters out of concern for employees’ safety given protests in the area.   

The future of the CFPB continues to remain uncertain.  Legislation would be required to eliminate the CFPB entirely and such legislation is unlikely to pass because it would require 60 Senate votes.  Further, a temporary restraining order entered by the District Court for the District of Columbia currently prohibits Acting Director Vought from taking certain actions to shut down the Bureau, including firing employees other than for cause, destroying certain data, and returning CFPB funds to the Treasury.  A court hearing on the matter is scheduled for Monday, March 3.  Nevertheless, we do expect that the Bureau will continue to significantly change its approach to enforcement, regulation and supervision, as well as make major changes to its staffing.  

We will continue to analyze developments and publish additional updates as the situation unfolds.