Kraninger Testimony Before Senate Banking Committee Focuses on Data Privacy, CFPB Structure, Student Loans, Military Lending Act, and Payday Lending Rule

This morning, Consumer Financial Protection Bureau (CFPB or Bureau) Director Kathy Kraninger testified before the Senate Committee on Banking, Housing, and Urban Affairs about the Bureau’s semi-annual report to Congress. The hearing focused on similar topics covered in last week’s House Financial Services Committee Hearing, where Kraninger was also questioned. Below are highlights from today's hearing.

Data Collection and Privacy

Sen. Mike Crapo (R-ID) raised the issue of data collection and data privacy, specifically about his concern about the Bureau's voluminous data collection practices and whether the Bureau is ensuring that consumer privacy is not at risk from these practices. Kraninger testified that she shares this concern and that the Bureau is reviewing its internal policies, including how it collects data and how that data can be accessed in order to ensure consumers are protected. She said the Bureau's intent is to limit the data it collects to only what is necessary to do the job, e.g., limiting the collection of personal identifying information.

CFPB Structure

Sen. John Kennedy (R-LA) spent a significant portion of his time addressing the Bureau’s structure. He asked whether the Bureau should be governed by a board rather than a single director, and whether the Bureau should be subject to Congressional appropriation.  Kraninger testified that this is up to Congress and that she would carry out whatever legislative requirements are enacted. Sen. Kennedy also expressed his concerns that the CFPB director cannot fire the heads of the Bureau’s different divisions.

Kraninger mentioned that she hopes the Bureau will continue to mature. In general, Kraninger refused to criticize the Bureau's first few years of existence, understanding that standing up an agency is a big undertaking. She did indicate that the Bureau’s offices seemed to operate individually – as if they were siloed.

Student Loan Debt

Student loan debt was front-and-center today, just as it was last week in the House. Sen. Elizabeth Warren (D-MA), who was a staunch opponent of Kraninger during the confirmation hearings, started off the conversation -- and was joined by Sen. Bob Menendez (D-NJ) -- by stating that no enforcement actions against student loan servicers have been initiated during Kraninger's tenure, or during former Acting Director Mick Mulvaney's tenure. Several references were made to the resignation of the CFPB’s former student loan ombudsman, Seth Frotman, who testified at last week’s House hearing. Sen. Tina Smith (D-MN) expressed concern about the Bureau’s prior request to gather data on the student loan issue and how this request is still pending with the Office of Management and Budget.

Kraninger responded that student loans are a significant issue for her, and that the Bureau still has a group dedicated to protecting student loan borrowers. She also noted the Bureau now has an active job posting for the role of the student loan ombudsman, but that it is the Secretary of Treasury who gets to appoint someone to that position.  

Military Lending Act (MLA) Supervisory Authority

Many Democratic committee members, such as Sen. Jack Reed (D-RI), raised their concern about the Bureau’s decision to end supervision of the Military Lending Act. Kraninger justified this decision by stating that her interpretation of the statutes does not give the Bureau supervisory powers over the MLA, but that she would welcome Congress providing the Bureau such power. Sen. Catherine Cortez Masto (D-NV) disagreed, stating that Congress specifically designated this authority to the Bureau in the text of the MLA.

Payday Lending Rules

The Bureau’s decision to rescind the mandatory underwriting requirement of the payday lending rule (often referred to as the “ability to pay” requirement) came under a lot of scrutiny. Sen. Chris Van Hollen (D-MD) and Sen. Sherrod Brown (D-OH), for example, both referenced that four out of five consumers who get a payday loan either default or need to obtain a second loan to pay off the first, leading to an endless cycle of debt. Sen. Mark Warner called this decision a political one, since he does not believe anything has factually changed from the five years of research that the Bureau conducted and relied upon while putting together the payday lending rule.

Kraninger cited that this portion of the payday lending rule has been questioned and stayed in litigation. The Bureau is also looking at the full record, including the research previously done by the Bureau as well as comments received, as it determines next steps regarding the 'ability to pay' requirement.

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insiderARM Perspective

This hearing, which lasted roughly 2.5 hours, was a lot shorter than the two-part, all-day hearing held last week by the House Financial Services Committee. However, despite the difference in length, almost identical topics were addressed – and almost identical answers were provided. The only item covered today that was not covered last week was Sen. Crapo’s line of questioning regarding data collection and privacy, which seems to be an issue faced by both the government and industry.