How CFPB Develops Policy:  A Fragile Cross-Matrix

This is the second post in a series on how CFPB develops policy: the vision, the reality, and the future.

In creating the CFPB, in what was and is a radical departure from the structure and mandate of other federal agencies, Congress sought to give prominence to the voices and experiences of marginalized, or, in the language of the statute, “traditionally underserved”  communities, through research, consumer complaints, market monitoring, and what are known as the “special populations offices”–Servicemembers, Students, Older Americans, and Fair Lending.   In this blog series, we explore:  

  • How was CFPB uniquely designed to listen to the voices of the “traditionally underserved”?  
  • How have recent reorganizations at the CFPB have undermined this congressional mandate?
  • What could be done to course correct and build a CFPB that can serve consumers and the public well for the next 100-years? 

Current demands for racial and economic justice make this conversation, about how the CFPB can fulfill its charge to listen to the voices and experiences of traditionally underserved communities, more pressing than ever.

Early Organizational Decisions

In our prior post in this series, we reviewed the congressional direction to the CFPB to listen to the voices and experiences of traditionally underserved communities in the CFPB’s policy making.  How did this congressional direction play out?

Let’s start at the beginning.  If you had been a member of the team making early operational decisions about standing up the CFPB in 2011, you would be forgiven if you did not know where to start in sketching out a Bureau organizational chart.  

The Dodd-Frank Act did mandate some specific offices and functional units,  but was mostly silent on how the CFPB’s rulemaking, supervision, and enforcement functions should be structured or where the special populations offices, the consumer complaint function, the Office of Research, or other functions ensuring CFPB accountability to traditionally underserved communities were housed.  The statute provided no guidance about whether the 17 federal consumer financial laws the CFPB inherited should influence its organizational chart.  For example, the Federal Reserve Board had an organizational unit dedicated to administering and enforcing the Home Mortgage Disclosure Act: should the CFPB do the same?  

Early CFPB leaders settled on six “Divisions,” led by “Associate Directors.”  The Supervision, Enforcement and Fair Lending Division spurred efforts to integrate the strategies and operations of its component offices.  This integration sent a powerful message to industry that supervision and enforcement were linked strategies, and that fair lending would be a core focus of the CFPB in exercise of its supervisory and enforcement actions.  The Research, Markets and Regulations Division grouped the statutorily-mandated Office of Research with markets teams and rulewriters in a single division, similarly signaling a commitment to data-driven policy, and integration of diverse expertise, at every stage of the rulemaking process, including the establishment of rulemaking priorities.

Figure 1 CFPB’s Divisions in 2017 and FY 17 Headcount 


Under this organizational chart, offices with a specific focus on traditionally underserved communities were, in many cases, placed in Divisions without a primary policymaking mandate.  The complaint function, named “Consumer Response,” reported to the Associate Director for Operations Division.  The Office of Community Affairs was housed in the External Affairs Division, while its statutory functions, providing technical assistance on the needs and assistance of traditionally underserved communities, were given to the Office of Financial Empowerment, housed in the Consumer Education and Engagement Division.  The offices for financial education, older Americans, service members, and students were also housed in the Consumer Education and Engagement Division.  

With the exception of the Office of Consumer Response, these offices mandated by Dodd-Frank to focus on traditionally underserved communities and certain specific populations were quite lightly staffed.  Offices such as Servicemember Affairs, Students, and Older Americans each had fewer than 15 team members.  Altogether the offices focused on traditionally underserved communities constituted a trivial fraction of the CFPB’s budget.

Most critically, under this organizational structure, there were no explicit racial or even consumer-centric inputs formally embedded into the CFPB’s rulemaking process, although certainly the CFPB worked to fulfill its statutory mission to protect consumers.  Instead, the voices of the “traditionally underserved” were funnelled into the Research, Markets, and Regulations Division via “cross-matrix” engagement.

Cross-Matrixed Policy Making in the Obama Era

Under the tenure of Director Cordray, policy making was intentionally, sometimes exasperatingly, cross-matrixed.  Teams on policy initiatives might be led by a manager from one office with staff from other Offices and Divisions.  As described in a 2018 GAO report, policy was developed through a “One Bureau” initiative, which brought together subject matter experts from across the CFPB to set policy priorities and design and develop policy initiatives.   Representatives from every office in the CFPB were expected to attend weekly “Policy Committee” meetings and invited to weigh in on policy matters great and small. Teams would spend weeks preparing for Policy Committee meetings with decks and slides.  Objections raised during a Policy Committee briefing could derail a proposal and require cross-division negotiations before the matter proceeded to the Director for approval.   

In this cross-matrixed environment, offices without formal decision rights in CFPB rulemaking, supervisory, or enforcement actions, such as the Office of Community Affairs or the Office of Older Americans, were able to raise concerns regarding the impact on traditionally underserved communities and other groups of consumers.  Dozens of fair lending supervision activities opened in each fiscal year, even though the Office of Fair Lending staff constituted less than 10% of the total staff of the Supervision, Enforcement, and Fair Lending Division.  The Office of Research built a credit card database of de-identified loan-level data covering over 80% of the credit card marketplace, as well as a mortgage database with a sample of mortgages representative of up to 95% of the market, and began issuing regular reports on a range of consumer credit topics.  This unprecedented research capability was made possible by cross-Bureau support, while the formal resources of the Office of Research remained modest, with a headcount of less than 45 staff.

Structural Changes in a Trump-Controlled CFPB

The ability of the special populations offices to influence policy was dependent on these internal cultural “cross-matrix” norms and practices.  Policy meetings with Director Cordray would often include tens of people, including managers and staff, from across the CFPB.  Acting Director Mulvaney, however, preferred a more streamlined and hierarchical approach.  Meetings shrank.  The One Bureau initiative and Policy Committee meetings were discontinued.  Institutional channels for cross-divisional consultation and collaboration vanished.  A two-year hiring freeze left the smaller special populations offices particularly depleted, further impeding cross-CFPB consultation.   

The first, and perhaps most visible, change to the organizational chart was moving the Office of Fair Lending out of the Supervision, Enforcement and Fair Lending Division.  While the CFPB’s  spokesman proclaimed that the move was not intended to reduce the number of fair lending cases, but only to increase “efficiency and consistency,” it would be more than two years before the CFPB would bring another fair lending enforcement case, other than actions based solely on errors in Home Mortgage Disclosure Act reporting.  This was the longest absence of fair lending referrals in the agency’s history.  

Other, less notorious, changes to the CFPB’s organizational chart also damaged the CFPB’s ability to be responsive to traditionally underserved communities and consumers.  Four offices with a mandate related to traditionally underserved communities and consumers have disappeared from the most recent CFPB organizational chart: the Offices of Community Affairs, Financial Education, Servicemember Affairs, and the Office for Financial Protection of Older Americans.  All are now housed, along with the Office of Students, as  offices within the Office of Consumer Education, itself now partt of a new Division of Consumer Education and External Affairs.  According to the organizational chart, “The Consumer Education Office provides information for American consumers to consider in their financial decision-making process.” Absent is the statutory mandate to twin education with empowerment.  Instead, traditionally underserved communities and consumers become the passive recipients of information, without the visible, formal channels for engagement with the CFPB that their prior prominence on the organizational chart afforded.   

As we can see with the sharp drop-off in fair lending cases, structure both reflects leadership priorities and facilitates certain outcomes.  The decline in visibility of statutory offices designated  to ensure the visibility of special populations and traditionally underserved consumers similarly both reflects leadership de-emphasis on racial and economic justice and further impedes the ability of those offices to do their statutorily-mandated work.

In the next blog post, CRREA Project considers how future CFPB leadership could center traditionally underserved communities and consumers.