President Nominates Kathy Kraninger to Lead Consumer Financial Protection Bureau

By Colin D. A. MacDonald

On June 18, President Trump nominated Kathleen “Kathy” Kraninger to be the new Director of the Consumer Financial Protection Bureau (CFPB), to succeed Acting Director Mick Mulvaney.  Kraninger currently serves as Associate Director of the Office of Management and Budget (OMB) for General Government. She is an attorney with a long government resume but has not previously worked in consumer protection or financial regulation. Kraninger will require confirmation by the Senate to take office. The Senate Banking Committee held a hearing on Kraninger’s nomination July 19. Mulvaney is expected to continue acting as director in the interim.

Kraninger’s appointment sparked mixed reaction. The White House says that Kraninger “will bring a fresh perspective and much-needed management experience to the [CFPB], which has been plagued by excessive spending, dysfunctional operations, and politicized agendas.” Ohio Sen. Sherrod Brown, the ranking Democrat on the Senate Banking Committee, said that “The White House should pick an experienced, serious, independent leader.” Sen. Elizabeth Warren (D-MA) said that she would place a hold on Kraninger’s nomination, essentially preventing the Senate from voting on the nomination without extraordinary action by the Republican majority, until more information was provided about Kraninger’s role in current Trump Administration policies involving separation of immigrant families at the border.

Kraninger has served in a variety of legislative and executive roles for Republicans, but none of them involved the type of laws the CFPB enforces. At OMB, Kraninger’s role focuses on policy at the Department of Homeland Security (DHS) and the Department of Justice.  In addition to her work at OMB, she previously held political appointments at both DHS and the Department of Transportation under President George W. Bush. She was also a professional staff member for the Senate’s Homeland Security and Governmental Affairs Committee. Kraninger holds a J.D. from Georgetown University and a B.S. from Marquette University.

The CFPB Director has full authority over the agency’s enforcement, regulatory, and education activities. The Bureau regulates a broad range of consumer financial services providers, and its jurisdiction overlaps with the Federal Trade Commission as well as federal bank regulators. In addition to judicial and administrative enforcement authority, it has supervisory powers that allow it to compel large consumer financial services providers to submit to inspections of their practices. The director serves for a five-year term and may only be removed by the President for cause.

By nominating Kraninger – or anyone –  before June 22, the President cleared the way for Mulvaney to continue serving as Acting Director. Under the Federal Vacancies Reform Act, the President may designate a Senate-confirmed officeholder to act as the head of a federal agency during a vacancy, but that appointment is limited to 210 days unless a permanent replacement is nominated. June 22 would have marked 210 days for Mulvaney.

The nomination came after months of speculation about the Trump Administration’s intentions for the agency, which has been a target of Republican ire since it was created. Trump allies had criticized the leadership of Richard Cordray, the Obama appointee who led the agency from 2011 to 2017, for being too aggressive and hurting small businesses. Under the Congressional Review Act, Congress and Trump reversed two regulations promulgated by Cordray’s CFPB – one prohibiting financial service providers from using arbitration agreements that bar consumers from filing or joining class actions and one regulating indirect auto lenders.

The controversy over the directorship has long been fraught. Critics decry the single director structure as placing too much power in the hands of a single official whose actions are not subject to presidential review. Prior to taking his post at OMB, then-Congressman Mulvaney was particularly critical of the agency and called for its restructuring or abolition. Proponents of the agency argue that insulation from political control is necessary to ensure that the agency acts for consumers instead of industry. Opponents of the agency have challenged the leadership structure, as well as the very existence of the agency, as unconstitutional. Lower courts have issued differing opinions, but in January, the full U.S. Court of Appeals for the D.C. Circuit upheld the agency and its structure as constitutional by a margin of 7-3.

Shortly after the agency launched, President Obama was expected to appoint Warren as Director, but opted to appoint Richard Cordray instead when it appeared she could not secure Senate confirmation. Republican Senate leaders filibustered Cordray’s appointment as well, ultimately leading to the political showdown that ended the application of the filibuster to most presidential nominations.

The dispute took on a new dimension when the President appointed Mulvaney to lead the agency in an acting capacity on November 25, the day Cordray resigned. On his last day in office, Cordray named his chief of staff, Leandra English, to the long-vacant position of Deputy Director so that she could assume leadership until a permanent replacement was confirmed. Trump then promptly named Mulvaney, already serving as the Director of OMB, to simultaneously serve as Acting Director at the CFPB. English sued Mulvaney, unsuccessfully seeking an injunction blocking Mulvaney from taking office, but announced she would drop her suit and resign from the agency after Trump nominated Kraninger. For now, the status quo remains with Mulvaney as Acting Director at CFPB and Director of OMB and Kraninger as Associate Director at OMB.