August 15, 2019

Warren, Krishnamoorthi, Pressley, Porter, Press CFPB for Documents on Bureau Proposals to Exempt Fintech Companies from Anti-Discrimination Laws

Bureau Official Responsible for Enforcing Rules Against Lending Discrimination has Worked for Anti-LGBTQ Hate Group

Text of Letter (PDF)

Washington, DC - Today, United States Senator Elizabeth Warren (D-Mass.) and Representatives Raja Kristhnamoorthi (D-Ill.), the Chairman of the House Oversight Subcommittee on Economic and Consumer Policy, Ayanna Pressley (D-Mass.), and Katie Porter (D-Calif.), wrote to Consumer Financial Protection Bureau (CFPB) Director Kathy Kraninger, requesting information regarding a new proposal that would indefinitely exempt financial technology companies from complying with consumer protection and anti-discrimination laws.

"We seek information on two proposals that would be overseen by the Office of Innovation: the no-action letter program revision and the proposed Product and Disclosure Sandboxes.  We are concerned that these proposals would undermine crucial laws designed to inform consumers and protect them from discrimination and unfair acts and practices," wrote the lawmakers.  "We also seek information about Paul Watkins, the Director of the Office of Innovation, who would be tasked with overseeing these programs.  We have grave concerns about Mr. Watkins holding the authority to waive anti-discrimination laws given his prior employment at Alliance Defending Freedom (ADF) - a group that has been designated as a hate group by the Southern Poverty Law Center."

The lawmakers' letter reiterated their concerns about Watkins' broad discretion to unilaterally waive anti-discrimination laws for certain companies since he previously served as a senior counsel for an anti-LGBTQ hate group. 

Shortly after Mr. Watkins joined the CFPB in July 2018 to lead the Bureau's Office of Innovation, the CFPB proposed policies giving his office broad authority to exempt fintech companies from complying with anti-discrimination laws such as the Equal Credit Opportunity Act (ECOA), which bars lenders from discriminating based on demographic factors including race, religion, and sex. The CFPB considers discrimination based on gender identity or sexual orientation to be sex discrimination.

Specifically, under Mr. Watkins' leadership, the CFPB proposed a "policy on no-action letters" as well as "Product and Disclosure Sandboxes" to relieve companies from the threat of enforcement by any federal or state authorities. The lawmakers noted in their letter that the policies would allow widespread exemptions from consumer protection and antidiscrimination rules.

"CFPB's proposed changes to the policy, which may already be in effect, are far broader and open the door to widespread and unnecessary exemptions from consumer protection requirements," wrote the lawmakers.

The lawmakers reiterated their concerns with Mr. Watkins' ability to objectively carry out his responsibilities at CFPB, given his prior work for the Alliance Defending Freedom (ADF), a hate group that has worked "to legalize discrimination against LGBTQ people." In his role at ADF, he worked with the Blackstone Legal Fellowship (Blackstone), a program with a mission to "identify and train leaders who passionately demonstrate Truth." Blackstone pursued that mission in part by providing a "core curriculum" of reading resources, including a book titled The Homosexual Agenda: Exposing the Principal Threat to Religious Freedom Today.

"Given his past involvement with an anti-LGBTQ hate group, it is particularly concerning that Mr. Watkins will be empowered to unilaterally grant immunity from a bedrock anti-discrimination law," the lawmakers continued.

To address their concerns, the lawmakers asked the CFPB to provide documents related to its revised no-action letter program, its products and disclosure sandboxes, and documents related to the agency's hiring of Mr. Watkins. They asked that the CFPB provide the documents by no later than August 29, 2019.

Senator Warren and Representatives Pressley and Porter initially wrote to CFPB Director Kraninger in June 2019 outlining their concerns with Mr. Watkins' employment history and urging the CFPB to reconsider its continued employment of Mr. Watkins at the agency. In her response letter, Director Kraninger failed to address the lawmakers' concerns and instead defended Mr. Watkins as being "eminently qualified" for the position he holds.

Warren also wrote to the CFPB concerning its prior employment of Eric Blankenstein as Policy Associate Director after reports revealed that Mr. Blankenstein had previously written a blog expressing overtly racist views. A recently-released CFPB watchdog investigation concluded Mr. Blankenstein "may have abused his authority" and "created the appearance of a violation of the Standards of Ethical Conduct for Employees of the Executive Branch."