‘CFPB Has Gotten in the Way of Its Own Mission,’ McKernan Claims at Confirmation Hearing

Jonathan McKernan, appearing before the Senate Banking Committee during a hearing on his nomination to lead the Consumer Financial Protection Bureau, told lawmakers Thursday (Feb 26), “All too often, … the CFPB has gotten in the way of its own mission.”

“It has acted in a politicized manner,” he said during testimony. “It has pushed beyond the limits of its statutory authority. It has seized opportunities to expand its jurisdiction and power. It has offended our basic notions of fairness and due process when it has regulated by enforcement. And it has harmed consumers through higher prices and reduced choice when it has failed to strike an appropriate balance between costs and benefits in prescribing new regulations.”

McKernan’s criticism of the agency came as he appeared alongside other President Donald Trump administration nominees, a roster that included Dr. Stephen Miran, tapped to lead the Council of Economic Advisers; Jeffrey Kessler, nominated to be undersecretary of the Bureau of Industry and Security; and William Pulte, nominated to lead the Federal Housing Finance Agency as director.

During questioning from lawmakers, Sen. Elizabeth Warren of Massachusetts pressed McKernan on the state of the CFPB, noting that Trump and Elon Musk “seem hellbent” on shuttering the department, where stop-work orders were issued and there were directives “for everyone to leave the building … and then locked the doors and told people not to do any work.”

Warren asked about carrying out the “core” functions of the CFPB, “where you’ve been tapped to be the No. 1 horse at the glue factory.”

McKernan said that as director, he would be tasked with carrying out “specific statutory responsibilities that are mandatory.”

Warren said in further questioning that there are 88 such statutory responsibilities, as part of the Dodd-Frank Act, and that “Congress mandates them,” touching on everything from Section 1021 of the act that mandates consumer access to products and services that are “fair and transparent and competitive.” She cited other examples of tenets in the Dodd-Frank Act as well that include obligations to maintain CFPB websites and contact numbers for consumer complaints, as well as data sharing.

“I am fully committed to following the law fully and faithfully,” McKernan answered.

Warren asked McKernan if, upon being confirmed to lead the agency, he would lift the stop-work order.

“If confirmed, I will follow the law… I will have to get advised on the specifics… I’m going to make sure that the CFPB performs each of its statutory functions,” McKernan said.

Later in the hearing, Sen. Mike Rounds of South Dakota asked McKernan if he thought that the CFPB had been operating “outside of its statutory authority.”

McKernan responded that “there have been, too often, cases in which the CFPB has acted” beyond that authority, adding that “you don’t have to take my word for it. You can ask the courts.”

Rounds also inquired about McKernan’s priorities should he be confirmed. McKernan said that “we need to right-size it and make sure we have an efficient CFPB. We need to reinstate some accountability to our elected officials,” contending that “a big part of the problem is [the CFPB] has little accountability, whether to Congress or the president.”

Separately, Sen. Jack Reed of Rhode Island raised the issue of the existence of the agency at all, with a nod to comments from Trump that the CFPB had been set up “to destroy people.” Reed said it appears the CFPB has little support from Trump or the Office of Management and Budget, and that “I have a sinking feeling … you’re departing Liverpool on the Titanic. So good luck.”

Sen. Thom Tillis of North Carolina queried McKernan on his experience with consumer lending practices and laws. McKernan said he gained experience in those matters through a decade in private practice as a lawyer and during his tenure at the Federal Deposit Insurance Corp. (where he served on the board of directors) dealing with enforcement actions.

“Is rulemaking by enforcement an effective way to conduct regulation?” Tillis asked.

“No,” said McKernan, who offered an example where a mortgage servicer had to comply with a retroactive rule from the CFPB that extended beyond the statute of limitations, which was struck down in the courts as the ruling noted the judges ruled the CFPB had “violated bedrock principles of due process.”

McKernan also said he would “commend [former Director Rohit] Chopra on his work to increase our attention on some of the various policy issues proposed by data collectors, whether data aggregators or brokers. There are privacy issues and national security issues here.”

Sen. Mark Warner of Virginia demanded a yes or no response to whether the CFPB’s “return of $20 billion to 195 million consumers was good or bad.”

“I don’t think we can evaluate the success of the CFPB based on dollar numbers,” McKernan said.

Noting that the CFPB moved to drop lawsuits and enforcement actions, including a Thursday announcement that the agency would drop its action against Capital One, Sen. Tina Smith of Minnesota expressed concern over whether Musk or others would determine the direction of the CFPB and asked, “Who’s going to be in charge here?”

“If I’m confirmed, I’m the director,” McKernan said.

The Banking Committee’s approval of McKernan to lead the CFPB, should it come, would then move his nomination to be voted upon by the full Senate.

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