olegkruglyak3 / AdobeStockThe new nominee to head the CFPB, Jonathan McKernan, will testify before the Senate Banking Committee today, February 27, 2025. Mr. McKernan’s prepared statement, released prior to his testimony provides insight into how he views the CFPB and the manner in which he would steer the agency if confirmed. According to Mr. McKernan, “the CFPB has gotten in the way of its own mission” and “suffers from a crisis of legitimacy.” If confirmed, McKernan says he will ensure the CFPB “center[s] its regulation on real risks to consumers by focusing its enforcement on bad actors.”
The highlights of the chaos that has transpired over the last month at the CFPB, can be found here, here, and here.
So, who is Mr. McKernan, and where does he stand on the bureau?
As a lawyer, his career started as the 2008 financial crises unfolded; he practiced in the areas of banking and consumer financial law. Over the last two years, he has served as a member of the Federal Deposit Insurance Corporation (FDIC)’s Board of Directors. While at the FDIC he helped navigate the second, third, and fourth largest bank failures in its history. Before serving on the FDIC his public service focused on the mortgage market, and he held staff roles in the Senate, the Department of the Treasury, and the Federal Housing Financial Agency (FHFA).
According to his prepared testimony, he believes that consumer protection is a critical component of a financial regulatory system that works for everyday Americans. However, citing the CFPB’s politicization and penchant for regulation by enforcement, he opined that the CFPB has “failed to strike an appropriate balance between costs and benefits in prescribing new regulations.” For the CFPB to do what it is supposed to do, Mr. McKernan believes it needs to be “made accountable to our elected officials and its past excesses need to come to an end.”
insideARM Perspective.
The ARM industry has a complicated relationship with the CFPB. There’s widespread acknowledgement among the industry that the agency is necessary to eliminate bad actors and provide guidance so all stakeholders can play by the same rules. However, the increasingly vitriolic rhetoric coming from former Director Chopra, his reluctance to acknowledge unintended consequences of proclamations or meet with industry stakeholders, and the CFPB’s longstanding practice of regulation by enforcement, created significant friction between the industry and the bureau. Industry participants believe this unnecessary and avoidable friction has harmed, rather than helped, consumers.
Mr. McKernan gives the impression that he is a centrist, acknowledging both the need for the bureau and that the CFPB has pushed beyond the limits of its statutory authority. Hopefully, this view translates into a bureau that engages with all stakeholders, instead of the one-sided approach taken by the last CFPB director. As noted quite regularly by insideARM’s Consumer Relations Consortium, debt collection and consumer protection are not mutually exclusive ideas; they can and should coexist. Perhaps under the leadership of Mr. McKernan, we’ll finally see an end to regulation by fiat and find the right balance.
