By Jon Hill

Law360 (March 10, 2020, 6:24 PM EDT) -- Senate Democrats on Tuesday pressed the Consumer Financial Protection Bureau's director for a muscular regulatory response to the economic fallout of the novel coronavirus, urging her to push for lenders to help struggling borrowers and for a federal financial risk-monitoring watchdog to specially meet.  

At an oversight hearing before the Senate Banking Committee, CFPB Director Kathleen Kraninger acknowledged the potential "significant economic impact" of COVID-19 and said federal regulators have been in dialogue about it with each other as well as with the financial services industry.

But with the stock market plunging and recession fears mounting, Democrats questioned what they characterized as an apparent lack of urgency from the Financial Stability Oversight Council, an interagency panel made up of various federal financial agency heads including Kraninger and chaired by U.S. Treasury Secretary Steven T. Mnuchin.

Ranking member Sen. Sherrod Brown, D-Ohio, pointed out that FSOC is required by law to meet quarterly but hasn't met since late last year. He said Mnuchin told him on Monday that there are no plans to convene the panel in the immediate future.

"Considering what's happening in public health around the country and considering the law says quarterly, you wonder what they're doing," Brown said to Kraninger. "Would you stand up now and demand that Secretary Mnuchin call a meeting immediately of the council and explain publicly what this administration's plan is to make sure regular Americans don't end up paying the price?"

Kraninger demurred, saying that there is "extensive communication" between FSOC members and that an FSOC meeting is already supposed to take place later in March. The date of this meeting has not been publicly announced, though Kraninger later clarified to Sen. Jon Tester, D-Mont., that it would be within the next 10 days.

Democrats on the committee also called for the CFPB to step up its industry outreach to encourage relief for consumers affected by quarantines, school closures, business disruptions and other ripple effects from the COVID-19 outbreak.  

Kraninger noted that the CFPB joined with other federal and state banking regulators on Monday to issue a statement saying banks and other financial institutions "should work constructively" with borrowers in places affected by the virus and that they won't be dinged by examiners for making reasonable accommodations.

The statement also pledged "appropriate regulatory assistance" for affected financial institutions, including flexibility around scheduling examinations and expedited review of "any request to provide more convenient availability of services in affected communities."

"This is the typical step we take," Kraninger said. "It's similar to a natural disaster context. With respect to going forward, we are looking at day to day, and there are conversations even happening on the Hill today."

But Sen. Mark Warner, D-Va., told Kraninger that he didn't think this response "had any level of detail to it," saying he wants to see the CFPB give more specific guidance in the coming days to auto and credit card lenders about forbearances and other relief measures.

In addition, Warner suggested that the CFPB contact credit bureaus about using special comment codes for lenders to flag affected borrowers, much as lenders do in the aftermath of hurricanes and other natural disasters.

"We're monitoring this day to day," Kraninger responded. "We are in communication with industry … and I definitely will take your recommendation under advisement going forward on how we should deal with this."

Warner, who said he's "gravely concerned" that standard monetary policy tools and the payroll tax cut being floated by the Trump administration won't be enough to ward off a potential economic crisis from the virus, also stressed to the CFPB head the need for "bipartisan creative action."

"This is not going to be business as usual," Warner said. "You have a remarkable amount of power to urge that kind of forbearance from the lender community and from the credit rating agencies. For those of us who have questioned your commitment to these issues, with this enormous power, I hope you prove us wrong and act."

During Tuesday's hearing, Kraninger told Sen. Mike Rounds, R-S.D., that the agency has plans in place to maintain functionality and mitigate potential operational challenges posed by a pandemic like COVID-19. Financial services firms should similarly be conducting their own pandemic planning to address business continuity concerns, she added.

CFPB staff have also been working to make sure they're "getting the best possible information out" and staying "safe and healthy as we look to continue to perform the mission," Kraninger said.

"That's something that we are working through and thinking about as we go forward every day," she said.

--Editing by Alanna Weissman.

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