To the average observer, the Consumer Financial Protection Bureau (CFPB) is hardly an agency that comes to mind as one of the most consequential in the vast bureaucracy of the federal government. But since its founding almost a dozen years ago as the brainchild of now Sen. Elizabeth Warren, D-Mass., the bureau has slowly amassed power and under its current director has established itself as one of the strongest muscles in the machinery of the U.S. government.
While Chopra himself has acknowledged that there’s a lot to do, many critics would quickly riposte that he’s already done enough.
With the solid backing of the Biden administration, a Democrat-controlled Senate and an economy that many fear is on the precipice of recession, there are signs that the agency may be preparing to flex these muscles. Since the bureau regulates banks, lenders and other financial institutions, mortgage professionals want to understand the outsized role the CFPB could play in their lives.
After a political dogfight and a slender confirmation vote in the Senate, Rohit Chopra became director of the CFPB in the fall of 2021. He is no stranger to the agency, having been employed there at its creation as the agency’s first student loan ombudsman, and he has been heavily criticized for employing heavy-handed tactics (or, alternatively, praised for brilliant ones).
Chopra came into office with an extensive wish list of progressive action items. These included limiting provisions in consumer contracts that require mandatory arbitration of disputes; fighting excessive overdraft and convenience fees charged by banks to consumers; ensuring data security for consumer financial accounts; and addressing persistent lending discrimination claims. Additionally, he sought to harness the power of the agency to assist in preventing, or mitigating the effects of, another recession through the creation and enforcement of underwriting guidelines and disclosure rules, along with providing foreclosure-prevention assistance in a variety of forms.
In little more than a year, Chopra has shown a willingness to confront these and other items with a vigor and style of bureaucratic maneuvering that is both aggressive and imperial. Indeed, while Chopra himself has acknowledged that there’s a lot to do, many critics would quickly riposte that he’s already done enough.
While the legal authority of the CFPB to do much of what Chopra wants has been frequently challenged before and during his tenure (with varying degrees of success), it is hard to argue that it has slowed him or the agency down. In October 2021, Chopra launched information requests to major technology companies regarding payment services offered to U.S. consumers, asserting the CFPB as the primary regulator of the nation’s financial technology companies.
He has since turned his attention to fair lending by attempting to curb historical redlining practices with the help of the Department of Justice. He also has increased regulatory enforcement attention on financial institutions’ treatment of overdraft fees, meeting with state attorneys general to encourage them to bring actions under the Consumer Financial Protection Act.
He has sought to make the CFPB a primary regulator of “securitization trusts,” tightened enforcement of the credit card industry and examined the regulation of private student loans. And he has moved to expand the scope of use of the Fair Credit Reporting Act while attacking the prevalence of “junk fees” charged to consumers.
In the process, he beefed up the CFPB’s enforcement actions, shutting down a small lender for regulatory violations, suing an event registration company, and successfully pursuing enforcement actions against major financial institutions and corporations for credit-reporting violations and errors. By virtue of a report issued by the agency in March 2022, he also was ultimately successful in getting credit card companies to stop reporting certain medical debt for consumer credit scores.
With this backdrop, expectations of the CFPB’s actions going forward are necessarily high for progressive advocates, with an equal mixture of apprehension on the part of political opponents. Already, Chopra has utilized the bureau’s staff (approximately 1,500 people) to review and research obscure and stale parts of federal law to advance the agency’s policies. Rather than limit his sphere of influence to the agency he leads, Chopra also has taken on influential roles within both the Federal Trade Commission and the Federal Deposit Insurance Corp.
Consumer advocates, who have generally embraced Chopra’s activist role over the past year, make no secret in clamoring for more and greater results. At or near the top of their wish list in this regard is a direct attack on the widespread use of mandatory arbitration agreements in consumer contracts.
Advocates claim this type of mandatory arbitration gives undue advantage to financial institutions, particularly for agreements that waive the ability to pursue class-action litigation. This was an issue pursued — and lost — by the CFPB in 2017 when congressional Republicans repealed the agency’s prior arbitration rule that prohibited these types of agreements from barring class actions. Although Chopra himself has acknowledged the bureau’s limitations on issuing a rule that is “substantially the same” as one already invalidated, any casual observer also must recognize both his drive and canniness in obtaining results, particularly with a highly supportive president.
There are a number of indications that Chopra has no intention of letting up for the remainder of his term. Indeed, those who doubt Chopra’s resolve might look to the CFPB’s historic $3.7 billion settlement with Wells Fargo, in the midst of the 2022 holiday season, for various “consumer abuses.”
More telling, however, might be Chopra’s cautionary remarks in the wake of that settlement that “it should not be read as a sign … that the CFPB’s work here is done.” In fact, the CFPB issued a notice this past summer that contemplates changing the rules that govern credit card late fees as well as enforcement activity pertaining to certain overdraft fees.
Not content to confine the agency’s activities to its traditional area of focus — financial institutions — Chopra has continued to place attention on large technology and credit card companies, insisting on both rigorous data security and enhancements for the protection of consumer payment data. Yet given the current state of economic affairs, it is virtually certain that the bulk of the CFPB’s attention for the foreseeable future will be aimed at addressing the possibility of a recession.
Chopra took office when the agency was geared toward staving off a foreclosure crisis as COVID-19 relief measures were expiring. He now faces rising interest rates along with steadily rising rates of default and foreclosure activity. Accordingly, given his experience and predilections, many insiders believe that Chopra will continue to scrupulously ensure compliance with post-2008 underwriting and disclosure guidelines, address credit-reporting obstacles, and hold banks to stringent compliance with loss-mitigation relief programs prior to and after declaration of default.
Still, it is hard to imagine a scenario in which the CFPB does not seek more than simple default- and foreclosure-prevention measures. In fact, in a nod to the importance of the agency, President Joe Biden shared a White House press conference with Chopra in the weeks leading up to the midterm elections. They highlighted the agency’s efforts to expand the scope of one of the banking industry’s bêtes noires for the past 40 years: the prohibition on unfair, deceptive and abusive acts and practices (UDAAP). The bureau’s expansion of UDAAP has already been challenged by trade groups.
Of course, it should not go unnoticed that this press conference occurred after 12 Republican senators sent an open letter to Chopra demanding that he “reverse course and stop using inappropriate tactics to harm financial institutions’ reputations and customer relationships in order to advance (his) liberal policy preferences.” In short, the CFPB shows no signs of backing down, particularly given the reassertion of Democratic control of the Senate.
This past fall alone, the CFPB’s own website highlighted (among other achievements) its work in taking action against a loan doctor for offering what the bureau called fake high-yield bank accounts; its partnership with the New York Attorney General’s office to combat companies that cheated 9/11 victims; its action against a mortgage company for cheating homeowners out of post-pandemic forbearance rights
The CFPB’s website is somewhat unassuming in describing the agency’s role, stating that it aims “to make consumer financial markets work for consumers.” It seeks to protect consumers from unfair, deceptive or abusive practices while taking action against companies that allegedly break the law. It also looks to equip the public with the information, processes and tools needed to make smart financial decisions. In reality, over the past 12 years, the agency has (with a brief pullback during the Trump administration) read its mandate much more expansively.
Economic and political considerations will undoubtedly affect the precise trajectory of the agency’s future activities. But those who prognosticate on what the future might hold (depending on their perspective) can either take solace or torment in Chopra’s own words last year to The Wall Street Journal: “There’s a lot. I just got here.” ●
Brian Rich is a partner at the law firm Barclay Damon. He regularly represents some of the world’s largest banks and financial institutions as well as local and regional clients. He handles a variety of business and commercial disputes, including contract claims, real estate litigation, contested commercial and residential foreclosure actions, mortgage resolution, unfair business practices actions, and fraud and lender liability claims. Reach Rich at (203) 672-2670 or email@example.com.
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