Warren to CFPB Director Kraninger: You Should Resign For Helping Mortgage Servicers and Credit Reporting Companies Cheat Consumers During the Pandemic
"You're getting more and more complaints from desperate consumers, but instead of using the Bureau's full authorities to enforce the law, you just told companies you're going to help them when they cheat consumers"; "Now, more than any time since the last crisis, consumers need strong leadership at the CFPB... Your leadership has been a miserable failure. Based on your actions in this pandemic, you should resign"
Washington, DC - In a Senate Banking Committee hearing today, United States Senator Elizabeth Warren (D-Mass.) said Consumer Financial Protection Bureau (CFPB) Director Kathy Kraninger should resign for failing to protect consumers during the coronavirus disease 2019 (COVID-19) pandemic and instead helping mortgage servicers and credit reporting companies cheat consumers.
In the hearing, Senator Warren noted that consumer complaints have increased roughly by 50%, the highest monthly complaint volumes in the Bureau's history, during the COVID-19 pandemic, the majority of which came from people struggling to pay their mortgages. Instead of enforcing rules to guard against foreclosures when people need protection the most, Director Kraninger issued guidelines to mortgage servicers that as long as they act in "good faith," the Bureau won't step in if they break the law.
Similarly, despite the massive increase in credit reporting complaints since the pandemic started, Director Kraninger put out guidance to let credit reporting companies know that the Bureau won't enforce the 30 or 45 day deadlines required by the Fair Credit Reporting Act as long as they make a "good-faith effort," an invitation to break the law.
The full transcript and video of her exchange with the hearing witnesses is available below.
Wednesday, July 29, 2020
U.S. Senate Committee on Banking, Housing and Urban Affairs
Senator Warren: Thank you, Mr. Chairman. So, in 2008 when the bottom fell out of the economy and people were cheated on their mortgages and credit cards and auto loans and other financial products, there was no cop on the beat to protect them and that's why ten years ago last week President Obama created the Consumer Financial Protection Bureau to protect consumers from abusive financial products. And so now, here we are in the middle of another financial crisis, this time caused by a global pandemic. And now, more than any time since the last crisis, consumers need strong leadership at the CFPB. Now, one of the ways that the CFPB monitors problems is through its consumer complaint hotline. Director Kraninger, do you know how much the volume of consumer complaints that the Bureau receives every month has increased since this pandemic started?
Director Kraninger: It's close to 30 percent, as I noted in the opening. March, April, May, all did set records in terms of how many complaints we've received in an individual month.
Senator Warren: So, I actually looked at your numbers, and thought it was about 50 percent and those, as you say, are the highest monthly complaints ever in the Bureau's history. So, let's talk about what those complaints show. Today, the biggest category of COVID-related complaints to the CFPB are coming from people struggling to pay their mortgages. It's the CFPB's job to ensure that the companies that handle mortgages are following the law so that families don't end up in foreclosure when the law says they shouldn't. So, Director Kraninger, over 9 million people lost their homes to foreclosure during the last crisis. And now we have rules to guard against those foreclosures. But instead of enforcing those rules, you issued guidelines to tell servicers that so long as they act in "good faith," the Bureau won't step in if they break the law. Director Kraninger, can you give me other examples of when law enforcement says, for example to a thief, that as long as you claim you're in "good faith" you're not going to be held responsible when you break the law?
Director Kraninger: Senator, if I could, the number of mortgage complaints were early in the process in March and April and I think they're actually a great example of the bureau responding to that and working with our federal partners to do, so the number of complaints related to that--
Senator Warren: I would just like an answer to my question, can you give me another example in law when enforcement steps in and says as long as you guys are in good faith, we're not going to enforce the law?
Director Kraninger: Senator, that's certainly not what our guidance says. Our guidance says the compliance with the law is critical, however again, you know well, the discretion that all law enforcement entities have with respect to the cases they take on, and where they spend their energy and so the ability to actually go after--
Senator Warren: Let me just stop you right there. Actually, the guidance specifically says that the rules that are written into law will not be enforced so long as the mortgage servicer claims that it's in good faith. And I'm just asking because I know, if nowhere else, that guidances like that are put out. If Congress had wanted to write into law a "good faith" exception, we certainly could have done that, but we didn't do it. Not enforcing law has a real impact and in the two months since you handed out a get-out-of-jail-free card to every mortgage servicer, consumer complaints related to foreclosures have gone up, not down. The Bureau even acknowledged this in the latest bulletin it put out this month to summarize the coronavirus compliance complaint.
So, let's move on to credit reporting. Errors on individual's credit reports can cost consumers thousands of dollars, hurt their scores for years to come. People are under a lot of financial pressure right now, so let's take a look at what you have done.
Director Kraninger, you told the credit reporting companies they didn't need to bother complying with the law when a consumer disputes something on a credit report. So, why do you think your job is to write the rules to allow credit reporting companies to break the law?
Director Kraninger: Senator, I'd also say that is false, that the point of fact with respect to dispute resolution is that it needs to be done but it is difficult to resolve a dispute if, for example, the merchant in, you know, a small business that could be at subject of this is actually closed and the credit reporting agency can't reach them so we still-- that is where complaint example comes into play.
Senator Warren: Let's again note, Director Kraninger, I just read what is that you actually put out, and what you put out said that you're not going to enforce the 30 or 45 day deadlines that are written into law under the Fair Credit Reporting Act so long as the credit reporting agencies are making a "good-faith effort." For me, you didn't limit it to small businesses, you didn't say we'll take one off advice on when we think someone is in good faith, you just sent it out there, across the board. And to me, that is an invitation to break the law, and it matters because we know now there's been an 86 percent increase in the complaints about credit reporting since the pandemic started. Your own data shows that since you put out this guidance, complaints have continued to go up, not down.
So, let's recap. You're getting more and more complaints from desperate consumers, but instead of using the Bureau's full authorities to enforce the law, you just told companies you're going to help them when they cheat consumers. And these are the same companies that had no problem screwing over consumers during the last financial crisis.
Look, there is no doubt that consumers are in a better position because the CFPB is out there, and I am grateful to the career employees who do this every day. But your leadership has been a miserable failure. Based on your actions in this pandemic, you should resign.
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