The Kraninger Discount

The CFPB has been chugging out enforcement actions and settlements at a fairly fast clip the last several months. Part of that might be businesses deciding to settle because they think they're going to get a better deal with Director Kraninger than under any Director appointed by President Biden. And here's the thing:  they might well be right because there is a clearly observable "Kraninger Discount" in CFPB enforcement statistics. Director Kraninger has suspended nearly 18% of civil monetary penalties and 11% of consumer redress. That's nearly 7x and 3x the rate penalty and redress suspensions under Director Cordray.

The Bureau's been tracking these statistics itself. The Bureau tracks its enforcement statistics not just by year, but by Director, which itself indicates some sensitivity to the charge that the Bureau's been light on enforcement under Director Kraninger. Now the Bureau thinks that the statistics indicate just how vigorous Kraninger's enforcement has been because it looks at them relative to the average number of months or enforcement orders for each Director. But that's actually a misleading metric because enforcement actions do not happen instantaneously.  It takes time to do an investigation and achieve a settlement. That's why there were no settlements in 2011, the first year the CFPB was open for business. It also means that Mick Mulvaney—and Kathy Kraninger—inherited a bunch of cases from the Cordray CFPB. It's not fair to give them credit for those cases, which included some huge ones like Equifax and Wells Fargo (that's $600 million of civil monetary penalties and $425 million in consumer redress right there for actions started under Director Cordray—that's a huge chunk of the Mulvaney and Kraninger CMPs and consumer redress). 

What each Director does control, however, is the suspension of consumer redress or civil monetary penalties in a settlement. Redress is often suspended when a defendant cannot afford to pay. I do not understand that. Compliance with the law is an essential cost of doing business. If a business can't afford to comply with the law, it shouldn't be operating. Pleading poverty should not be get a business off the hook, and what is the reason for wanting to keep a bad actor firm in business?

As it happens, the Bureau's three directors to date have take a very different tack regarding suspension of both consumer redress and civil monetary penalties. As the tables below show, Director Rich Cordray suspended only a very small portion of consumer redress. Acting Director Mick Mulvaney and Director Kathy Kraninger both suspended a much more substantial percentage of consumer redress. 

Consumer Redress
Director	Consumer Redress	Consumer Redress Suspended	% of Consumer Redress Suspended
Cordray	$4,435,892,768.51	$172,794,881.86	3.9%
Mulvaney	$464,429,648.11	$56,645,826.00	12.2%
Kraninger	$892,922,344.81	$95,744,164.51	10.7%

With Civil Monetary Penalties, Director Cordray again suspended a very small percentage. Acting Director Mulvaney also suspended very little in the way of civil monetary penalties (but that was basically the $500 million CMP ordered against Wells Fargo), but Director Kraninger has suspended almost a fifth of civil monetary penalties. Put another way, there is a clear Kraninger Discount at the CFPB. 

Civil Monetary Penalties
Director	Civil Monetary Penalties	Civil Monetary Penalties Suspended	% of CMP Suspended
Cordray	$754,182,142.00	$20,099,999.00	2.7%
Mulvaney	$553,959,993.00	$5,200,000.00	0.9%
Kraninger	$253,689,182.00	$55,988,481.00	17.9%

Now I can think of two stories for what's going on. One is that Director Kraninger is just a softie. The other is that she's been pursuing small fry. Both stories might be right, but I tend to think that the real issue is that while the CFPB has brought a large number of enforcement actions under Kraninger, they have generally been against very small, poorly capitalized firms, and that's where the CMP suspensions are happening.

Let me be clear—the CFPB should be pursuing actions against firms that break the law, irrespective of their size. But that goes both ways—it means holding wrongdoers to account be they small or large.