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When established in the wake of the 2008 financial crisis, the Consumer Financial Protection Bureau (CFPB) was established to be the voice of the ordinary consumer, while overseeing the financial institutions that had gone wild in the years leading up to the crash. .
During the Obama years, the agency was a strict authority, imposing multi-million dollar fines on companies found guilty of harming consumers.
But when Donald Trump took office in 2017, the office took a different turn. It has dramatically reduced the number and scope of the enforcement actions it has taken against bad actors. The bureau said its real role was to educate consumers instead of “making excuses to sue,” as former manager Mick Mulvaney put it.
Now that Joe Biden has moved to the White House, the CFPB is set to resurface as the number one consumer watchdog, mass hiring for its fulfillment department and come up with new rules to help consumers in the aftermath of the pandemic. And at the center of it all will be Rohit Chopra, who was confirmed today as the new office manager.
Who is Rohit Chopra?
Chopra is no stranger to CFPB.
The Harvard and Wharton graduate served as the first student loans ombudsman when the office was established in 2011.
During his tenure, the CFPB released a 2014 report that, for the first time, found more than 7 million Americans had defaulted on their student loans. The Bureau has also been tough on for-profit colleges, handing heavy fines to schools found to have misled students into taking out predatory loans.
Chopra left the CFPB in 2015. After a quick stint as an advisor to the Secretary of Education, he was appointed to the Federal Trade Commission (FTC) in 2018. He has since been one of the five commissioners of the ‘agency, where he spoke about protect the privacy of consumer data and impose financial penalties on bad actors to deter them from behaving more inappropriately.
The @FTC Charges recently settled with debt collectors who harnessed the credit reporting system to force consumers to pay debts they have already paid or never owed.
The deal provides almost no aid to victims and allows bad actors to continue collecting. https://t.co/TNObOVvII4
– Rohit Chopra (@chopraftc) December 21, 2020
“His background at the FTC and CFPB demonstrates a commitment to regulatory activism,” said Quyen Truong, partner at Stroock & Stroock & Levan and former deputy director and deputy general counsel at CFPB.
During his CFPB director’s confirmation hearing before the Senate Banking Committee in March, Chopra echoed a position similar to his work at the FTC, promising to penalize violators and stand up for American consumers – many of whom, said. he admitted, have âruinedâ finances due to the pandemic.
“When victims of fraud or misconduct are not cured, it not only hurts them, it hurts all other businesses that try to follow the law,” Chopra said during questioning.
Read more: Will Biden’s CFPB regain its advantage in a post-Trump era?
Resistance to Chopra’s appointment stemmed mainly from fears that the CFPB would revert to its progressive stance during the Obama years, rather than squeeze the middle line, as it did during the tenure of former director Kathy Kraninger of 2018 to 2021. With Chopra in charge, critics say the CFPB will be so anti-business it will stifle innovation.
âBased on Commissioner Chopra’s case, I fear he will refer CFPB to the hyperactive, law-breaking, anti-business and irresponsible agency under which he was [the] the Obama administration, âsaid Pat Toomey (R-PA), a ranking member of the US Senate Banking Committee. during Chopra’s confirmation hearing in March.
More than political bickering, mere trafficking during the Biden administration’s transition delayed Chopra’s confirmation vote. Chopra’s departure from the FTC earlier this spring would have left the agency with just three commissioners to run it. A maximum of three commissioners from a single political party can sit simultaneously, and getting a Democrat on the FTC as soon as possible seemed to be Camp Biden’s priority.
Lina Khan’s confirmation and swearing-in as FTC chairman in June returned the unit to its five full members, making it easier for Chopra – a Democrat – to leave the agency.
What is the next step for the CFPB?
In some ways, the CFPB is returning to its original function as a consumer watchdog with the return of Chopra alongside other CFPB alumni, including interim director Dave Uejio.
“Much of the old is new again, with renewed vigor and focus on the impact of the pandemic and how this has highlighted some areas of concern regarding potential harm to consumers,” Truong said.
But David Anthony, a consumer financial services partner at law firm Troutman Pepper, says it won’t be a repeat of the original CFPB staff. “When the CFPB started, they created the entity and set the rules.” This left companies with a lot of uncertainty as they waited to know what new regulations to follow.
With the CFPB in its 10th year, Anthony expects the office to behave in a more consistent and streamlined manner. “[Chopra] has experience with the FTC, which is a much more mature, process-oriented agency, âsays Anthony. Chopra’s time on the FTC combined with the growing age of the CFPB could benefit his efforts to be effective, he says.
Important elements for the CFPB review likely include:
- Credit reports
- Low cost loans like payday loans
- Student loan and mortgage practices
Under the Obama administration, the CFPB created a rule that requires payday lenders – who often charge the equivalent of 400% annual interest on their loans – to review a borrower’s income as well as their monthly expenses before to give him a short-term loan.
The Trump administration repealed this rule, which the financial industry was widely opposed to adopting. But in September, a district court enforced the rule, allowing the CFPB to set a compliance date for June 2022.
Student loans are also likely to be the order of the day, given Chopra’s knowledge of the industry. Mortgages will also feature prominently. In December, Trump’s CFPB released a rule relaxing borrower standards for mortgages. But many housing experts argue that it loosens mortgage standards too much. The office may attempt to delay the implementation of this rule with the aim of eventually repealing it.
Anthony doesn’t expect companies to have much slack from the new CFPB leadership in areas that are likely to be of priority. âLooking after the best interests of consumersâ¦ will prevail, even if it’s aggressive and not necessarily just for the business side of the equation. “
The success of Chopra’s CFPB can be summed up in what it can accomplish in less than four years. After the Supreme Court ruling last summer that the president can fire the CFPB director at will, a Republican presidential victory in 2024 could further trap the office in a political battle.