The Consumer Financial Protection Bureau last year sued four lenders affiliated with a Northern California Native American tribe, alleging their costly loans violated interest rate caps in more than a dozen states.
The enforcement action came amid a probe into yet another high-interest lender, World Acceptance, which the federal watchdog was considering accusing of consumer-protection law violations.
Months later, the agency issued tough regulations aimed at reining in the practices of payday lenders, including limiting the number of costly short-term loans they can offer to cash-strapped Americans.
But since the start of this year it's been a different story.
The bureau asked a federal judge in Kansas to dismiss its case against the tribal-affiliated lenders, ended its investigation of World Acceptance and said it may reconsider its payday-lending rules.
Welcome to the new CFPB under White House budget chief Mick Mulvaney, appointed by President Trump in November to temporarily lead the bureau after the departure of Obama appointee Richard Cordray.
Between the bevy of recent moves by the bureau and the launch of a wide-ranging review of its practices ordered by Mulvaney, a picture is emerging of what a Trump-era CFPB will look like — and it appears it will not the resemble the agency that developed a pugnacious reputation over the last six years.
Mulvaney outlined his view in a memo, obtained by news site ProPublica, criticizing the bureau for being overly aggressive under Cordray and saying it would now serve not only consumers but the financial-services companies it was created to regulate.
"We don't just work for the government, we work for the people. And that means everyone: those who use credit cards and those who provide those cards; those who take loans and those who make them; those who buy cards and whose who sell them," wrote Mulvaney, a free-market advocate who once called the CFPB a "sad, sick joke."
For Lauren Saunders, associate director of the National Consumer Law Center, such a mission statement simply means unwinding consumer protections.
"I think we'll see a lot of rollbacks," she said.
For now, the practical implications of the pullback appear to be limited to the agency's more aggressive interpretations of consumer-protection law.
The lawsuit against Golden Valley Lending and other firms owned by the Habematolel Pomo of Upper Lake tribe is an example.
In that case and others, the agency relied on what industry attorneys have described as a novel argument: that lenders broke federal consumer protection laws that forbid unfair, deceptive or abusive practices by collecting on loans that carried interest rates higher than state laws allow, in some cases as high as 950%. In other words, the argument goes, the bureau piggybacked on state laws to allege a violation of federal laws.
Saunders said dropping the case looks to her like a clear sign that Mulvaney, who accepted contributions from high-interest lenders while serving in the House of Representatives, plans to go easy on players in that industry. Mulvaney in 2016 was one of a group of House members who argued in a 2016 letter to Cordray that federal regulation of the payday loan industry ignored states' rights and would cut off access to credit for many Americans.
"He seems to have a sweet spot for predatory lenders," Saunders said.
But Ori Lev, a partner at law firm Mayer Brown and former deputy enforcement director at the CFPB, said the bureau could be dropping the case for other reasons.
"When they first brought these cases, the criticism was they were federalizing state law," Lev said. "But it's not clear if Golden Valley was dismissed because of the novelty of the claim, because it was a payday case or because of the involvement of Indian tribes."
Stephanie Robinson, another Mayer Brown partner, said she also expects the CFPB under Mulvaney will be much less likely to bring claims alleging unfair, deceptive or abusive acts and practices — known as UDAAP, the type of claim made in the tribal lending case — which some in the industry argue has become a catchall for practices the bureau finds objectionable.
"Mulvaney did make a statement about making the law clear through rule making rather than through enforcement," Robinson said. "So I think we'll see fewer UDAAP enforcement actions and fewer novel theories like this."
In his memo, Mulvaney, echoing industry complaints about novel legal arguments, said, "the days of aggressively 'pushing the envelope' of the law in the name of the 'mission' are over."
That could factor into another recent shift.
Just last week, the Washington Post reported, the bureau transferred a team focused on lending discrimination out of the bureau's enforcement division and made it part of Mulvaney's office, a move critics said makes it less likely that the bureau will take action against firms that appear to be violating fair-lending laws.
Some of the bureau's fair-lending cases, notably several lawsuits filed against auto lenders, were seen by agency critics as prime examples of envelope-pushing actions.
The bureau accused Ally Financial, Toyota Motor Credit and others of allowing car dealerships to saddle black, Latino and Asian borrowers with loans than cost hundreds of dollars more than white borrowers paid. In those cases, the bureau used an algorithm — one developed for healthcare research — to guess the race of borrowers, a tactic Republican lawmakers derided as "junk science."
Still, the bureau probably will continue to bring some enforcement actions in bread-and-butter cases of egregious fraud, Saunders predicted.
Scott Pearson, a partner at law firm Ballard Spahr who represents financial services companies, said he expects the bureau will focus on cases in which firms are accused of practices such as overcharging customers or charging illegal fees.
That could leave the door open to more actions like the one the CFPB took in 2016 against Wells Fargo & Co. The bureau and other regulators fined the San Francisco bank $185 million for opening checking, savings and credit card accounts without customers' authorization.
Likewise, there's an expectation across the board that the bureau, even as it seeks to pare back rules created under Cordray, will write some new ones.
In his memo, Mulvaney indicated that rules for debt collectors are high on his list of priorities — while also suggesting rules for prepaid card firms and payday lenders are less important.
"In 2016, almost a third of the complaints into this office related to debt collection," he wrote. "Only 0.9% related to prepaid cards and 2% to payday lending. Data like that should, and will, guide our actions."
Lev said debt collection is an area where some in the industry "would welcome some rules of the road," and Saunders said it's possible that advocacy groups and the industry will be able to agree to at least elements of new rules.
"It's not a zero-sum game between responsible debt collectors and consumer advocates," she said. "There are those in the collection industry who know there are abuses that need to be curtailed and would like to see more rogue actors reined in."
Though the bureau's critics are happy with many of the changes under Mulvaney, they were dealt a setback this week when a federal appeals court upheld the legality of the CFPB's structure. Bureau opponents, including the Trump administration, have argued that the bureau's structure is unconstitutional because it is run by a sole director who can be replaced only for cause and not at the will of the president.
Though the ruling may be appealed to the U.S. Supreme Court, consumer advocates cheered the decision, saying it means the CFPB will remain strong and independent, even if now controlled by one of its critics.
But some argue that, regardless of the court's ruling, the bureau might be better off if its structure were altered — and that all the changes under Mulvaney illustrate why. Instead of having a sole director, Pearson and others suggest it should be run by a bipartisan commission similar to the Securities and Exchange Commission.
"Having an all-powerful director means you have a greater possibility of having big shifts in regulatory policy whenever you have a new director," Pearson said. "Whereas if you have a commission, that makes it harder to create sudden swings in policy."
Brian Knight, director of the program on financial regulation at the free-market think tank Mercatus Center, agreed that a commission probably would be less liberal or conservative than sole presidential appointees, potentially resulting in fewer big shifts. Still, he said there doesn't seem to be much support in Washington for that idea, at least for now.
"There are people who believe a sole director is what you need," he said, "and that it's worth having some bad directors to keep that structure in place."
Indeed, Saunders of the consumer law center said she wants the bureau to keep its current structure. Even bipartisan commissions, she said, can make abrupt policy changes — the Federal Communications Commission's about-face on net neutrality rules is one recent example — and can also become politically hamstrung.
"They're more paralyzed and have more political infighting," Saunders said. "They're less effective even when you have a leader who wants to protect consumers."