A Conversation with CFPB Director Kathy Kraninger - Conference Call Series

Event Overview & Context

• The Milken Institute convened a conference call featuring Kathleen Kraninger, Director of the Consumer Financial Protection Bureau (CFPB), to launch Consumer Financial Protection Week (July 14–17).
• The call commemorated the 10-year anniversary of the Dodd-Frank Act, which established the CFPB in 2011 to enforce federal consumer financial laws.
• Host Eric Kaplan noted the CFPB's role in addressing unprecedented challenges posed by the COVID-19 pandemic alongside its day-to-day mission.

CFPB Pandemic Response & Consumer Resources

• Since the pandemic began, 2.8 million consumers visited consumerfinance.gov for education and resources regarding financial protections.
• The Bureau established a unified housing resource at consumerfinance.gov/housing in collaboration with HUD, FHFA, USDA, and VA to provide consistent information on CARES Act forbearance rights.
• The CFPB issued an interim final rule allowing prepaid cards to be used as a delivery mechanism for government economic impact payments to improve accessibility.
• The agency shifted to a virtual operational model, maintaining call centers and supervision while ensuring compliance during remote work.
• Director Kraninger reaffirmed the Bureau's commitment to enforcement against bad actors, scammers, and fraud targeting vulnerable populations during the crisis.

Complaint Data Trends

• The CFPB's complaint database recorded record-breaking volumes in March, April, May, and June 2020, with June reaching a high-water mark of over 45,000 complaints.
• Top complaint categories during the pandemic included credit reporting issues and mortgage inquiries, specifically regarding forbearance options and CARES Act compliance.
• Historically, mortgage inquiries had not been a primary complaint volume until the onset of the pandemic, reflecting consumer confusion over new relief mechanisms.

Rulemaking Initiatives: Qualified Mortgage (QM) Rule

• The Bureau issued a Notice of Proposed Rulemaking (NPRM) for the Qualified Mortgage rule, addressing the impending expiration of the GSE "patch" that allows Fannie Mae and Freddie Mac to dictate underwriting standards.
• The proposal moves away from the rigid 43% debt-to-income (DTI) ratio standard, instead utilizing a pricing threshold mechanism (APR/APOR) to assess ability to repay more holistically.
• The rule aims to resolve issues where current hard-and-fast definitions inadvertently exclude creditworthy borrowers, such as those with temporary income losses due to the pandemic.
• The Bureau acknowledged that Appendix Q requirements for income verification were overly prescriptive and seeks to allow alternative data (e.g., rental payments, utility bills) to demonstrate creditworthiness.

Loss Mitigation & Mortgage Servicing

• An interim final rule was issued to align the Mortgage Servicing Rule with the CARES Act, preventing confusing disclosures to consumers during short-term forbearance periods.
• The rule facilitates the option to roll forbearance payments to the end of the mortgage term rather than requiring lump-sum payments, creating a sustainable exit strategy.
• Director Kraninger emphasized that the CFPB is actively reviewing servicing rules to prevent "delayed pain" where unsustainable repayment structures are imposed post-forbearance.
• The Bureau continues to supervise the mortgage servicing landscape to ensure consumers understand their waterfall options and are protected from premature foreclosure.

Vulnerable Populations & Fraud Prevention

• The Bureau supported the creation of local elder fraud prevention networks, partnering with social services, law enforcement, and financial institutions to identify fraud vectors before money is transferred.
• A targeted campaign was launched with Treasury to locate and assist millions of Americans eligible for CARES Act economic impact payments who had not yet received funds.
• Guidance was issued to protect low-to-moderate income individuals and minority borrowers, who face disproportionate financial risks and confusion regarding relief options.
• The "Start Small, Save Up" initiative continues to promote financial wellness, though the pandemic has necessitated a focus on immediate survival before long-term savings.

Surveillance, Research, & Advisory Structures

• The CFPB's "Making Ends Meet" survey indicates that 52% of consumers with credit records can cover expenses for two months or less if income is lost, and 40% reported difficulty paying bills in the prior year.
• The Bureau established a Task Force to update 1970s-era consumer finance laws and disclosure requirements to account for modern technology, AI, and alternative data usage.
• Advisory committees and the Consumer Advisory Board (CAB) provide non-binding input on industry trends, with recent efforts to include fresh perspectives from community banks and smaller entities.
• The Office of Innovation and Advisory Opinion Initiative are being utilized to facilitate new business models, such as employer-matched emergency savings accounts and fintech partnerships with housing counselors.

Future Outlook

• The QM rule is currently in a 60-day comment period, with the Bureau planning a transition to a new regime following the expiration of the GSE patch.
• The Bureau intends to develop a consumer index to better track financial well-being and guide future regulatory and educational strategies.
• Upcoming Milken Institute events scheduled for July 22 and August 5 will focus on investment pipelines for an inclusive economy and capital access for minority-owned businesses.