WASHINGTON — Rep. Mick Mulvaney (R-S.C.) said he disagreed with the CFPB's decision to spend more than $5 million to retroactively raise employee performance ratings from the last two years.

“It's a wonderful example of how a bureaucracy will function if it has no accountability to anybody. It turns out being a joke and that's what the CFPB really has been in a sick, sad, kind of way,” Mulvaney said after his speech at NAFCU's Congressional Caucus Sept. 10.

He also said a Republican majority in the Senate could bring about changes to the CFPB.

The CFPB gave the highest rating of five to employees who received a three or four out of five on their performance reviews in 2012 and 2013. The CFPB made the change after racial disparities in employees' performance ratings were exposed.

The bureau estimated the modifications would cost an additional $5 million to $5.5 million. The CFPB did not specify how much money would go to each employee who received the highest rating.

The House Financial Services Committee held a series of hearings with current and former CFPB employees alleging racial and gender discrimination among CFPB managers.

Rep. Mick Mulvaney (R-S.C.) said because the CFPB has no oversight, it doesn't feel it has to answer to Congress. He said the House Financial Services Committee can't get answers to simple questions from the bureau.

CU Times asked CFPB Director Richard Cordray if it was his idea to retroactively raise the performance ratings.

“I have no comment on that,” Cordray responded, following his remarks at NAFCU's caucus.

Mulvaney, a member of the House Financial Services Committee, said the CFPB gets its funding through the Federal Reserve, not directly through congressional appropriations, which makes it harder for Congress to exercise oversight.

“It makes it difficult to get a phone call returned. It makes it difficult to schedule a hearing. It makes it difficult to get answers to simple questions: 'When are you coming back to see us again?' We can't get an answer to that. It has been a truly adversarial relationship,” he said.

Mulvaney, who also serves on the House Small Business Committee, said the CFPB has tremendous authority over financial institutions and there is very little elected officials can do to protect those entities from any overreach by the agency.

“It's extraordinary frightening,” he said. “I am somewhat encouraged in that we do have some bipartisan support for reforms to the CFPB and we'll see if we can make some progress on that in the next Congress.”

Mulvaney suggested Congress replace the CFPB's director with a five-member commission and require the agency to go through the same rulemaking processes as other regulators.

“(Senate Majority Leader) Harry Reid is preventing most of these from going forward; even bills, by the way, that have Democrat support in the House,” he said. “A change of control in the Senate would allow us to at least force the President to have a debate on these issues because that discussion is not taking place.”

Congressman Patrick Murphy (D-Fla.), also a member of the Financial Services Committee, told the NAFCU Caucus audience that Fannie Mae and Freddie Mac must be reformed, not eliminated.

“The extent to which, is the question,” he said. “I think they need to combine. I think they need to be downsized. I think we need to have more private sector involvement. I do believe we need a government backstop. Ensuring a 30-year fixed rate mortgage exists is critical for our housing market.”

CFPB Director Richard Cordray talked up the credit union exceptions in the qualified mortgage rule. He also warned credit unions that although the qualified mortgage rule's implementation date isn't until next summer, they should be preparing now.

Murphy said he hopes the next Congress tackles GSE reform by adopting a reasonable solution.

Meanwhile, during his Caucus speech, Cordray addressed the CFPB's mortgage rules, saying the bureau has been working to ensure a smooth transition to compliance for financial institutions. He said so far, the rules have yielded positive results with minimal market disruption.

The CFPB has coordinated with other agencies, published plain-language guides and other compliance aids, and kept in regular contact with industry participants, consumer advocates, legal aid attorneys, housing counselors, and others to answer their questions and address issues that they raised, Cordray said. The bureau has also produced educational materials to help people better understand the kinds of consumer protections the CFPB has put in place under the new rules, he added.

“We have done all this because we believe that consumers will be best served if the financial industry understands and properly implements the rules,” Cordray said. “The results, so far, have been very positive – few market disruptions, greater consumer protections, and a more sustainable financial marketplace that will support a stronger economy.”

Both Mulvaney and Rep. Blaine Luetkemeyer (R-Mo.) mentioned the NCUA in their speeches.

Mulvaney told the audience the NCUA should release detailed budgets.

Rep. Patrick Murphy (D-Fla.) said he hopes GSE reform passes in the next Congress. However, the preservation of the 30-year fixed mortgage is important in states like his, where housing is a large part of the economy.

“If a federal agency won't tell you how it's spending your money then you have a right to be concerned,” Mulvaney said.

He also assured credit unions that the Republicans on the House Financial Services committee are pushing the NCUA to soften proposed risk-based capital requirements.

Luetkemeyer, a member of the House Financial Services Committee, criticized NCUA Chairman Debbie Matz for asking the committee in a letter to reject any amendments involving the proposed risk-based capital rule during a full committee markup in July.

Luetkemeyer sponsored an amendment to the Community Bank Mortgage Servicing Asset Capital Requirements Study Act of 2014, which would have included the NCUA among the federal agencies required to conduct a study of appropriate capital requirements for mortgage servicing assets.

“Here's a regulator petitioning us, Congress, not to do our job. I mean, it's just beyond explanation. They don't want any oversight. They don't want anybody to interrupt their little games that they're playing,” he said.

The amendment, which was ultimately not approved by the committee, could have delayed implementation of the proposal.

Instant Insights /

Lawmaker Says Republican Senate Could Reform CFPB

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