Update 605 — Consumer Finance:
Chopra’s Reform Agenda at CFPB
The nation’s consumers — aided by robust fiscal stimulus — have been the driving force of economic recovery from the pandemic recession. This is a teachable moment for advocates of consumer protection, where progressive priorities have a greater chance of fruition than most economic policy agenda items.
Consumer protection took center stage this week as Consumer Financial Protection Bureau Director Rohit Chopra offered the Bureau’s Semiannual Report to Congress before Senate Banking and House Financial Services. In this update, we focus on Director Chopra’s leading consumer protection priorities, their status, and prospects.
Good weekends all,
CFPB Director Rohit Chopra testified before the Senate Banking and House Financial Services Committees this week, in accordance with the semiannual reporting requirements in Dodd-Frank. In conjunction with the hearings, the CFPB published its Semiannual Report updating Congress on activities within each division of the agency and analyzing complaints the Bureau receives.
Despite Republicans’ attacks against Chopra and the CFPB, Democrats overwhelmingly endorsed Chopra’s agenda, calling on him to take further action.
An Aggressive Agenda
Chopra’s tenure at the helm of the CFPB has been characterized by aggressive actions to rein in harmful financial products and services while continuing some of the more mundane, yet still crucial, work from previous Directors. The Director was able to highlight his top priorities throughout the hearings while fleshing out the role the CFPB would play in various other issues on the radar.
- Overdraft and Junk Fees: The CFPB has released various reports detailing the negative consequences of overdraft and other banking and credit fees that have cost American consumers billions each year. The pressure exerted by the CFPB, mixed with market forces, has helped encourage financial institutions to reduce these fees. Chopra is looking into a formal rulemaking process on this front.
- Medical Debt Reporting: The burdensome nature of medical billing has resulted in frequent mistakes for consumers that impact their credit. Following the CFPB’s increased scrutiny of medical debt reporting, the three largest credit bureaus reduced the role of medical debt in credit reports.
- Financial Technology: Invoking dormant authority from Dodd-Frank, the CFPB decided to increase its supervisory capacity of nonbank financial companies to prevent them from engaging in predatory practices or exposing consumers to undue risks. Chopra is adamant about keeping these institutions honest through supervisory oversight.
The top priorities have garnered the most attention, but that has not prevented Chopra and the CFPB from nimbly engaging in other issues bubbling to the surface.
On the Radar
- Section 1033 and 1071 Rules: Chopra is hoping to finalize two rules required by Dodd-Frank that would ensure consumers have a right to their financial information and require lenders to provide demographic data in order to detect and prevent discrimination. Chopra’s aim is to have the rules finalized and implemented before the end of President Biden’s first term.
- Student Loans: Since returning to lead the agency where he once was the Student Loan Ombudsman, Chopra is increasing his oversight over student loan servicers to ensure the servicers do not engage in deceptive practices, especially as it relates to eligibility for Public Service Loan Forgiveness. The reinvigoration of scrutiny was paired with a $1 million fine against a servicer for engaging in deceptive practices.
- Rural Banking: With a large number of physical bank branches closing in rural America, the CFPB is hoping to reverse the trend and ensure every American has access to financial services. Chopra also highlighted the need for banking with a human in many rural communities as opposed to the growing sector of algorithmic banking with a computer.
While there are other issues the CFPB has begun to tackle under Chopra, these examples show how active the Bureau has become. Chopra also outlined the road ahead. His steadfastness and vision are why Chopra is among the more successful agency heads in the Biden administration. Regardless of what is thrown at him, Chopra continues to build progress and score victories. His success is arguably why Republicans are so hostile to him beyond their usual opposition to the CFPB.
Overall, Democrats offered praise to Chopra for the work he and the CFPB have done to protect consumers from financial predation, scam, and fraud. At the same time, Democrats brought up a litany of issues under the CFPB’s purview for the Director to keep working on.
Unlike most of their colleagues across the aisle, Democrats in both chambers were focused on tangible issues that make a difference to consumers. Democrats brought up a range of issues from student loans to overdraft and junk fees to banking access and many more. The stark difference between the questions Democrats and Republicans asked highlights how Democrats see the agency as a way to benefit small businesses and working families while Republicans see the agency as a menace.
Republicans used the two hearings to level attacks on Chopra, citing agency takeovers and skirting the rule of law to grab power for the CFPB. Republicans’ main lines of attack centered on the resignation of Jelena McWilliams as Chair of the FDIC and the use of UDAAP (unfair, deceptive, or abusive acts or practices) authority from Dodd-Frank to root out discrimination using disparate impact theory. Chopra said that McWilliams was violating her authority as FDIC Chair and that the agency was fulfilling its statutory mandate under Dodd-Frank by cracking down on discrimination and UDAAP.
Paving a Path
Chopra’s leadership of the CFPB provides a playbook for other financial regulatory agencies and their leaders. Under his guidance, real progress has been made on the issues that matter most to consumers. The CFPB has tackled a host of policies, instead of only targeting a narrow selection of actions to take. Other agencies should take a page out of Chopra’s book: his all-of-the-above approach of using press releases, official reports, supervisory actions, and more is making a difference. Chopra’s assertive leadership played a role in the rapid reductions in overdraft fees as financial institutions have felt pressure from the agency to act.
With the CFPB’s wide breadth of focus, other financial regulatory agencies should get involved to amplify Chopra’s effort to solve these financial problems. Many issues like overdraft fees and mergers aren’t solely within the CFPB’s jurisdiction. Other agencies can step in by releasing pointed press releases as well as the enforcement and supervisory actions to shepherd institutions in the right direction. If other agencies follow Chopra’s playbook, consumers may have a financial regulatory system that works more for them than against them.
Chopra has confronted accusations head-on and oftentimes dispelled notions of wrongdoing. Even if Republicans aren’t persuaded, Democrats and others watching are reassured by Chopra proudly advocating for working families and accomplishing what he set out to do. If other nominees, can learn from Chopra on this, it will allow them to pursue bolder agendas without fear of political liability.
Director Chopra might just be “Washington’s Best Hope” at the moment, as he has learned how to use the levers of power in a system marred by gridlock. His relentless pursuit of justice and fairness for consumers has already left its mark. Other policymakers can learn a lot from the man who spent two days before Congress rigorously defending his work to support consumers in the face of tense opposition from Wall Street.