Jonathan McKernan, who was nominated to lead the CFPB, told the Senate Banking Committee during his hearing that the agency has “acted in a politicized manner” and is suffering from a “crisis of legitimacy.”
“It’s clear that the CFPB suffers from a crisis of legitimacy. This must be corrected if the CFPB is to reliably do what it’s supposed to do — look out for the American consumer. To that noble end, the CFPB needs to be made accountable to our elected officials, and its past excesses need to come to an end,” he said in his opening statement.
Under the acting leadership of Office of Management and Budget Director Russell Vought, the CFPB agency headquarters were shut down, and federal funding was cut off, sparking legal battles.
Lawyers for Trump’s administration said this week in court filings that “there will continue to be a CFPB,” but what exactly that will look like is unclear. Trump has said his goal is to “totally” eliminate the agency as his administration works to “get rid of waste, fraud, and abuse.”
“That was a very important thing to get rid of, and it was also a waste. I mean, number one, it was a bad group of people running it, but it was also a waste,” he said on Feb. 10.
Democrats have argued that the agency is a critical safeguard for consumers who use financial products, pointing to the fact that the CFPB has returned more than $21 billion to consumers who were victims of fraud or scams. The hearing on Thursday was the first time Democrats were able to directly question a Republican official on the agency’s future.
Sen. Elizabeth Warren (D-MA), the top Democrat on the committee who helped establish the CFPB as a law professor in 2010, listed all the ways the Trump administration has halted CFPB functions. At one point, she told McKernan, “It kind of feels like you’ve been lined up to be the number one horse at the glue factory.”
She continued to press McKernan, who previously served as a commissioner on the Federal Deposit Insurance Corporation, about whether he would commit to following the law under the Dodd-Frank Act, which created the bureau.
“The north star here is you’ve gotta follow the law … I’m going to make sure the CFPB performs each of its statutory functions,” he responded.
McKernan sidestepped Warren’s questions, including when she asked if he would continue to have employees “locked out of the building and told to do nothing and if they hear another employee is doing something, to report them.”
“I don’t know the specifics of the mandate, but I’m fairly certain there were exceptions there; indeed, to get my application processed so I could get here today, my application had to go through the CFPB,” he said in response.
McKernan didn’t answer definitively when multiple Democrats on the panel asked him if he agreed with Trump that the CFPB should be eliminated.
“As I’ve said, the CFPB is a product of statute. That is a question for our elected officials,” he said in response to a question from Sen. Raphael Warnock (D-GA).
“I certainly think that consumer protection is a very good thing. It’s a critical thing. A federal consumer protection role is a very important thing. That’s a lesson I learned from my experience in the 2008 financial crisis,” he said.
Republicans have long criticized the independent federal agency that gets its funding from the Federal Reserve Board, arguing it’s too powerful, burdensome, and shielded from lawmakers’ oversight. Rohit Chopra, who had an aggressive four-year run as the agency’s former director under the Biden administration, was criticized as a radical regulator who pushed to rein in improper practices by financial firms.
GOP members of the panel commended McKernan’s prior banking experience and highlighted the need for transparency at the agency.
“In recent years, we’ve seen the CFPB extend its authority beyond its original scope, creating uncertainty for businesses and financial institutions,” said Sen. Mike Rounds (R-SD). “With your knowledge, experience, and commitment to fair and effective regulation, you are well suited to lead the Bureau, and until we can ultimately reform the CFPB, I believe you will restore a balanced approach that protects consumers.”
BYRON DONALDS LEADS EFFORTS TO SHUT DOWN ‘ROGUE’ CFPB
Sen. Catherine Cortez Masto (D-NV) asked McKernan if the CFPB should continue to regulate payment platforms, a veiled reference to Elon Musk’s goal of making X a payment platform. Musk, who has been a leading force behind the Trump administration’s cost-cutting efforts, could personally benefit from rolling back the agency’s oversight capabilities.
“Do you believe that one company with a payment platform should be allowed to access confidential information from the CFPB and its competitors,” she asked.
“Senator, I don’t know the terms or the nature of any such issue,” McKernan responded.
“The answer should be no. That would be pretty easy to answer,” Cortez Masto added.
Senate Democrats on the panel released a new report that found thousands of complaints were submitted and unanswered to the agency following Trump’s efforts to dismantle it.
“With the CFPB shuttered by President Trump and Elon Musk, what’s your plan to ensure the bureau resolves those 40,000 pending complaints for my constituents,” Warnock asked.
“Senator, like I said, the consumer complaint function is a statutorily required function, that’s in 1021c, so my mandate, if I’m confirmed, is to fulfill faithfully that statutory mandate,” McKernan responded.
Under questioning from Sen. Mark Warner (D-VA), the nominee declined to say whether returning $20 billion to consumers is a good thing.
“Will you at least acknowledge that you know the $20 billion returned to 195 million consumers was actually a good record for the CFPB,” Warner asked repeatedly.
“I don’t think we should evaluate the success of the CFPB based on dollar numbers or enforcement count. We should evaluate the game on whether it’s fair,” McKernan replied.
The CFPB dismissed at least four enforcement lawsuits undertaken by the Biden administration as the hearing took place. Sen. Tina Smith (D-MN) expressed her frustration that the agency dismissed a case involving Capital One, in which the agency accused the bank of cheating consumers out of more than $2 billion in interest payments on savings accounts.
“I guess Elon Musk or Russell Vought, whoever is in charge, is saying they are going to drop these lawsuits. How do you respond to this? This makes me question who is really going to be in charge of the CFPB,” Smith pontificated.
“Senator, if I’m confirmed, I’m the director,” McKernan responded.
“Well, it’s not clear to me because, at the moment that we’re sitting here talking about you are taking on this responsibility, Russell Vought or others are dismissing lawsuits that you just told me you were going to have the opportunity to review before they were dismissed,” Smith said.
The hearing Thursday also featured Trump’s selections to lead the Council of Economic Advisers, Stephen Miran, the Federal Housing Finance Agency, Bill Pulte, as well as Jeffrey Kessler, who was tapped to run the Commerce Department’s Bureau of Industry and Security.
