A New Day Dawns at the CFPB
With the inauguration of President Joe Biden as 46and President, change is coming to Washington. And this change will be felt quickly and acutely at the Consumer Financial Protection Bureau (CFPB). At the request of President Biden, CFPB Director Kathy Kraninger tendered her resignation on Wednesday, clearing the way for the President to appoint current FTC Commissioner and former CFPB official Rohit Chopra as the next director of the agency. Given the CFPB’s single-director structure, the new director will have significant opportunities to shape the direction of the CFPB over the next four years. Below, we touch on what we can expect to see from the CFPB under the new administration.
Who is Rohit Chopra? Mr. Chopra is a graduate of Harvard University and the Wharton Business School at the University of Pennsylvania. After a stint at McKinsey & Company, he joined Elizabeth Warren at the then fledgling CFPB as its first Student Loans Ombudsman. In this role, Mr. Chopra was an effective advocate for student borrowers and brought attention to the growing burden of student loans in the country. Most recently, Mr. Chopra served as one of five commissioners and one of two Democrats on the FTC. In this role, Mr. Chopra has outspokenly objected to various actions by the agency that, in his view, did not impose sufficiently severe penalties or provide sufficient remedies for consumers. As sole director of the CFPB, Mr. Chopra will no longer have to dissent; it will be the single deciding vote on enforcement, regulatory and policy issues.
What change is coming? The jurisdiction of the CFPB is broad and its powers many, so Mr. Chopra could choose to go in many different directions. However, its history, administration priorities and the current economic crisis all offer clues as to what the CFPB’s top priorities are likely to be.
Fair loan. Congress created the CFPB with a statutorily mandated Office of Fair Lending and Equal Opportunity (OFLEO). Among other things, this office was to have the power to “provide oversight and enforcement of federal laws aimed at ensuring fair, equitable, and non-discriminatory access to credit,” including ECOA and HMDA. When the CFPB was created, OFLEO was part of the Loan Supervision, Enforcement and Equity Division (SEFL). As SEFL’s name suggests, OFLEO has played an important role in setting and executing the agency’s fair lending priorities in the areas of supervision and execution. This all changed with the arrival of Acting Director Mick Mulvaney, who moved OFLEO from SEFL to the Director’s office, cutting him off from his integral role in the monitoring and enforcement process. And, indeed, in the 3+ years since Mulvaney first arrived at the CFPB, the agency has only filed three fair loan enforcement actions (one under ECOA and two under the HMDA), and has significantly reduced the number of referrals it makes to the CFPB. Department of Justice.
Against this backdrop, and the new administration’s focus on issues of racial equity, we expect Director Chopra to restore OFLEO to its previous role as a critical voice in equitable efforts to oversee and agency loan application. This will likely mean a greater focus on fair loan reviews, more fair loan enforcement investigations and actions, and more referrals to the Department of Justice. It will also likely mean a revival of the disparate impact theory of accountability, which has fallen out of favor under the Trump administration. During his tenure at the FTC, Mr. Chopra took a broad view of disparate impact and suggested that practices that have a disparate impact on protected classes could also constitute violations of prohibitions against unfair practices in the non-credit context where ECOA does not apply. .
Student loan. As noted above, Mr. Chopra served as the agency’s first Student Loans Ombudsman. As his official FTC biography describes his role, “He led efforts to spur competition in the student loan financing market, develop new tools for students and student borrowers to make smarter decisions, and obtain hundreds of millions of dollars in refunds for borrowers victimized by illegal conduct by loan officers, debt collectors and for-profit college chains. Between his stints at the CFPB and the FTC, Mr. Chopra also served as special adviser to the Secretary of Education “to advance the department’s efforts to improve student loan servicing, reduce unnecessary defaults, and strengthen the application”.
Given Mr. Chopra’s track record, the enormous size of the student loan market, and the political focus on student loan issues, it’s fair to expect student loans to be a priority area for the new CFPB. This will likely include attention to the creation of private student loans (particularly involving for-profit schools), all student loan services, and a continued focus on student debt relief companies (which the CFPB also pursued aggressively under Kraninger’s direction). As with fair lending, this will likely involve additional focus on student loan reviews for institutions under CFPB oversight jurisdiction and increased enforcement scrutiny over the full student debt life cycle.
Mortgage services. The CFPB was born out of the financial crisis and the mortgage market, the country’s largest consumer credit market, has long been a priority for the CFPB. In the midst of a pandemic, with its impact on the economy, and in light of the federal government’s various relief efforts (in the CARES Act and others), it is clear that the CFPB will continue to focus on mortgage borrowers. , likely with a focus on borrowers affected by the current economic downturn and how banks, mortgage servicers and others are implementing CARES Act requirements and otherwise treating these borrowers. We expect Mr. Chopra to push for aggressive oversight and enforcement in this area, as well as champion congressional and executive branch actions to help consumers.
Aggressive application. Given Mr. Chopra’s dissents at the FTC, it seems likely that he will push for stronger monetary remedies in enforcement actions, both in terms of consumer remedies and civil monetary penalties. We expect the CFPB to continue to focus on Unfair, Deceptive and Abusive Acts and Practices (UDAAP) in its enforcement actions.
Other issues. The list of other possible priorities is long. It includes rules regarding payday loans, debt collection, consumer access to information and small business data collection. This includes rescinding or revising the CFPB policy statement on abuse and developing a consistent approach to this single CFPB authority. And that includes developing strategies to protect consumers in areas as disparate as credit reporting and fintech lending.
Continuity? One of Director Kraninger’s accomplishments during her tenure as Director of the CFPB was to energize the agency’s innovation initiatives, including its no-action letter policy and assistance sandbox. to compliance. Both programs allow businesses to seek approval from the CFPB to offer specific financial products or services to consumers under specific conditions without fear of enforcement action. The CFPB has also launched an advisory opinion program and has issued several advisory opinions regarding the agency’s interpretation of provisions of the federal consumer finance law. These programs are not inherently conservative or liberal, and it will be interesting to see how much Mr. Chopra continues the work of the CFPB in these areas.
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As with any change, only time will tell what the new administration will bring. Currently unforeseen events, limited resources and personnel will all play a part in determining CFPB’s actions in the years to come. But it seems fairly certain that the agency will be even busier than it has been as it enters its second decade of existence.