While the Consumer Financial Protection Bureau is in flux as the Trump administration attempts to dismantle the agency, experts say they expect oversight of financial institutions to continue, although what that will look like is in question.
The disruptions, which include an order for CFPB staff to stop virtually all work, could delay the bureau’s litigation against some financial institutions, including Rocket Homes, a subsidiary of Detroit-based Rocket Companies. The agency filed suit in December, alleging that Rocket Homes provided kickbacks to brokers and agents who steered homebuyers to Rocket Mortgage, violating the Real Estate Settlement Procedures Act, or RESPA. Rocket Homes has denied the allegations.
“It’s kind of a jump ball right now whether or not they continue to pursue it …” said Kevin Heal, analyst at investment services firm Argus Research. “Because right now the CFPB is basically shut down. So nobody knows.”
Heal noted other major companies facing lawsuits including Capital One, which the CFPB sued last month for allegedly cheating consumers out of more than $2 billion in interest payments on savings accounts. Capital One has denied the allegations.
As for Rocket Homes, Chuck Cain, an Ohio-based attorney specializing in the title industry, said the lawsuit against the company could move forward. In the meantime, The agency awaits the confirmation of President Donald Trump’s nominee to lead it, former FDIC board member Jonathan McKernan.
“If the Bureau has explicit evidence in regard to these suits, they’re going to move forward,” he said. “RESPA violations are pretty clear. Pretty cut and dry. Obviously right now they’re on hold until there’s a change because they’re still acting under their stand-down orders until Jonathan McKernan is confirmed. And we’re probably looking at another month before he even gets around to being confirmed. … But I think that in regard to that particular litigation, if the Bureau does have evidence to move forward against Rocket I think they will continue to move forward.”
Since taking office last month, Trump fired the CFPB’s director and his administration issued the stop-work order and ousted some employees. A district judge ordered the Trump administration not to fire the agency’s employees or delete its data for now, pending a March 3 hearing on a lawsuit filed by a union that represents CFPB workers.
In response to the bureau’s limbo status, Rocket Homes said in a statement: “While we don’t know what is next for the CFPB, we believe the most important thing is for regulators to focus their energy on bad actors that cause real harm to consumers. The claims against Rocket Homes from the CFPB’s previous leadership were untrue and seemed born out of a desire for headlines rather than justice. The truth is that Rocket Homes has always connected buyers with top-performing agents based only on objective criteria like how well they helped a homebuyer achieve their dream of homeownership.”
Cain said that while there may be changes in enforcement priorities, he expects the CFPB to continue to exist.
“The Bureau has been in business now for almost 14 years,” he said. “It’s not going away. It was an act of Congress that created it and it was an act of Congress that gave it its authority. So, I think you’re still going to see it in existence.”
Cain said that Trump’s nominee for CFPB director, McKernan, will likely focus on clarity and transparency, offering businesses more certainty in regulatory requirements. He said he thinks he’ll be confirmed pretty easily, noting his service on the FDIC board.
“As the Bureau has faced uncertainty, it’s been important to emphasize that consumer protection won’t be left by the wayside,” Cain said.
Heal said that if and when the CFPB returns to work, it will look different under the new administration.
“So the question becomes what the reach of the CFPB will be and what form it will take,” he said. “It remains to be seen what shape it will take and what the focus of that group will be. I see some of the lawsuits that have been going on. I’m not sure whether they will continue, but a lot is still up in the air.”
Heal said it’s business as usual for the mortgage industry with the desire for longer-term rates to decrease, as people realize that cutting short-term rates, as the Federal Reserve board has done, doesn’t always lead to lower long-term rates. Mortgage rates have been trending downward this year, with the average 30-year rate declining last week to 6.85%, according to Freddie Mac.
Heal noted that Rocket continues to advertise, including its 60-second Super Bowl ad that debuted last week. He said he doesn’t expect the lawsuit to impact consumer sentiment.
“Unless it’s like a massive, massive fraud, people will (have a) tendency to go to the cheapest and the easiest way to get a mortgage,” he said.
State regulators are stepping up their consumer protection efforts. Cain points out that state attorneys general, including Michigan’s Dana Nessel, are increasingly playing a role in consumer protection.
Nessel has been vocal about the importance of the CFPB, releasing a statement last week noting the agency’s instrumental role in recovering billions for consumers through actions against unfair practices. She said that although the future of the CFPB is unclear, her office will continue to pursue cases. She also provided information on the state’s consumer protection team.
“As a state Attorney General, consumer protection is a crucial pillar of my work, and we hear from hundreds of Michiganders daily about the hardships they endure at the hands of unscrupulous businesses,” Nessel wrote in a statement. “Now, most of our businesses in the state and nation are good neighbors — offering fair pricing, honest agreements, and care for their customers, but not all of them. Whether you know it or not, the Consumer Financial Protection Bureau has had your back for years, and delivered justice (and billions of dollars) to millions of defrauded consumers across America. We simply, and literally, cannot afford to lose the CFPB.”
Cain said people should expect to see more state regulatory action than in the past, depending on the state.
“I think you probably hear a lot more from out of Lansing on these topics because the Michigan AG and the Michigan regulators have always been very mindful and in regard and have been there when there has been an issue,” he said. “But I think they will probably be a bit more attentive and a bit more forceful than they have in the past.”
@CWilliams_DN
