A Stronger CFPB
The U.S. Senate Banking Committee will hold a hearing next week to consider the nomination of Rohit Chopra, President Joe Biden’s choice to lead the Consumer Financial Protection Bureau (CFPB). Chopra currently sits on the Federal Trade Commission (FTC), a post he was named to by President Donald Trump.
That fact is unlikely to make Senate Republicans supportive of Chopra’s nomination as CFPB Director.
Readers might recall that, of the FTC’s five commissioners, no more than three can come from the same party. Chopra is not only not a Trump supporter, he is, as a Politico headline recently proclaimed, “a Warren ally” – as in, Sen. Elizabeth Warren (D-Mass.), a vocal critic of the former commander in chief.
Indeed, Chopra helped Sen. Warren set up the CFPB after it was established by the 2010 Dodd-Frank bill. He then served as the CFPB’s student-loan ombudsman during the Obama administration. After a stint at the U.S. Department of Education as a senior adviser overseeing protections for students, school financial aid integrity, and education benefits for military service members, Chopra left the Obama administration. Prior to joining the FTC, he was a senior fellow at the Consumer Federation of America, a nonprofit organization devoted to “advance[ing] consumer interests through research, education, and advocacy.”
What can industry and consumers expect from Chopra once he takes the reins, presuming he is confirmed by the Democratic-controlled Senate?
Broadly, as Politico said, Chopra’s nomination “signals that the Biden administration plans to return the CFPB to the more-muscular posture of its early days.” Lucy Moore, who worked with Chopra to stand up the CFPB, explained that, at the FTC, Chopra “stressed the need to effectively enforce laws and to get more redress and penalties in cases, even if it means having to litigate.” Moore said Chopra now “will be able to pursue these priorities on his own, without the constraints of the FTC's Commission structure.”
To explain how unabashed Chopra is likely to be in carrying out the Biden administration’s mission, Moore noted that, during his previous CFPB stint, Chopra formulated forceful actions taken against for-profit schools. She also noted that, since then, Chopra has boasted that he “secure[d] hundreds of millions of dollars in refunds for borrowers victimized by unlawful conduct by loan servicers, debt collectors, and for-profit college chains.”
Experts at the law firm Gibson Dunn summarized the “themes” Chopra focused on during his tenure at the FTC, which included:
Focusing enforcement efforts on larger firms instead of small businesses;
Targeting firms that facilitate and profit from the largest frauds;
Shifting from one-off enforcement actions to systemic enforcement efforts;
Making greater use of rulemaking, including by codifying enforcement policy; and
Cooperating with state attorneys general in the enforcement process.
As Politico said, Chopra also “pushed the agency to be more skeptical of private equity buyers.”
In a dissent in a case last November against Zoom Communications, Chopra himself summarized his philosophy of government regulation and enforcement. He argued, “[I]nvestigations should seek to uncover how customers were baited by any deception, how a company gained from any misconduct, and the motivations for this behavior.” Chopra also said, “While deciding to resolve a matter through a settlement, regulators and enforcers must seek to help victims, take away gains, and fix underlying business incentives.”
We likely can expect the same themes and approach to surface at the CFPB. And what will this philosophy mean in practice?
Politico predicted Chopra will immediately focus his attention on three issues: enforcing fair lending laws; cracking down on payday lenders by rolling back a Trump administration regulation that relaxed oversight; and building up robust case law on what counts as an “abusive act or practice” under Dodd-Frank.
Regarding fair lending, consumer law expert Kali N. Bracey noted Chopra has advocated for the “use of disparate impact analysis to detect and work to eliminate discriminatory lending practices” and “has highlighted the way in which mass data surveillance can be discriminatory and harm consumers.”
Bracey said Chopra also could increase the CFPB’s efforts to enforce the consumer protection provisions of COVID-19 relief legislation, including the requirement that borrowers be offered extended periods of mortgage and student loan repayment forbearance. Regarding student loans, Bracey also predicted Chopra will resume Obama-era efforts to increase transparency in the lending process, create additional resources for borrowers, and write new regulations that require the industry to step up its oversight and monitoring functions in conjunction with the U.S. Department of Education and state regulators.
Chopra’s former colleague Lucy Moore added to Chopra’s list of priorities. She predicted Chopra also will focus on mortgage servicing, debt collection, credit reporting, and small dollar lending. And to that already-long list the law firm Kelley Drye added fintech. Kelley Drye said Chopra will investigate “how innovative financial solutions use consumer information and whether fintech solutions adversely impact certain groups.”
According to financial services lawyer Tierney Smith, Chopra also will focus on enforcement. As representatives of the law firm Ballard Spahr have noted, Chopra has criticized the FTC’s “go-it-alone debt collection enforcement strategy,” asserting that it “frequently leads to outcomes where victims receive only a minuscule percentage of their losses – or even nothing at all.”
Smith predicted, “The terms by which industry participants seek to resolve any resulting enforcement actions will be more costly, onerous, and heavily publicized by the CFPB.” Smith also said Chopra will “resort to public press releases to round out narratives of why the CFPB pursued a matter.”
Chopra has not been shy about enforcement at the FTC. As The Wall Street Journal noted, he “has staked consistently progressive positions on enforcement actions, often writing separate statements saying he wished the commission had taken bolder action in a variety of cases.” Specifically, Chopra objected to a 2019 settlement where Facebook agreed to pay $5 billion for violating user privacy. Chopra believed the fine “wasn’t tough enough.”
Consumer law expert Bracey also focused on Chopra’s eagerness to go after large firms. She noted Chopra has consistently “advocated for larger penalties for repeat violators” and “emphasizes the dangers of monopolization and the power of large companies compared to small business and consumers.”
In a recent article, The Washington Post noted the relative lack of fines the CFPB had imposed under Trump-appointed CFPB Director Kathy Kraninger. Ed Mierzwinski, senior director of the U.S. Public Interest Research Group’s federal consumer program, told The Post those numbers would increase under Chopra. He said, “When you’re only going after last-dollar scammers and small, fly-by-night companies, you’re not sending a message to the big banks, big debt collectors, and big credit bureaus that there’s a sheriff in town … As soon as he is confirmed, Rohit will bring a renewed sense of urgency.”
Scott Pearson, partner with Manatt, Phelps & Phillips, agreed. He told Compliance Week that Chopra is “a very experienced and committed consumer advocate.” Pearson predicted Chopra “will measure the CFPB’s success by the size of its fines and the breadth of its enforcement actions.”
In a story published after President Biden nominated Chopra to the CFPB, The Wall Street Journal noted the agency “has been politically polarizing since its creation in the wake of the 2008 financial crisis.”
Republicans have so far been very quiet about Chopra but, given the breadth and scope of his agenda, we’re likely to see some opposition to his nomination at next week’s confirmation hearing.