A rapid reawakening of the CFPB awaits the financial services industry once President Joe Biden’s pick for the bureau’s chief takes over.
Biden plans to nominate Rohit Chopra, currently a member of the Federal Trade Commission, for a five-year term as the Consumer Financial Protection Bureau’s director. He would replace Trump appointee Kathy Kraninger, who resigned Wednesday at Biden’s request.
Chopra is familiar with the CFPB. The former consumer advocate helped establish the bureau alongside Sen. Elizabeth Warren (D-Mass.) after the financial crisis. He then served as the bureau’s first student loan ombudsman.
Chopra is expected to reinvigorate the bureau quickly, beefing up its enforcement and oversight, particularly with a focus on Covid-19-related consumer relief, said Lucy Morris, a partner at Hudson Cook LLP.
“He’s going to look to use all the tools in more expansive and creative ways,” said Morris, a former CFPB deputy enforcement director who worked with Chopra at the bureau.
Biden on Wednesday named David Uejio, the CFPB’s the chief strategy officer, to serve as acting director until Chopra’s confirmation, according to an all-staff email obtained by Bloomberg Law. Uejio said he doesn’t intend to “perform the role as a steward,” and will focus on Covid-19 relief efforts and fair lending issues during his time as acting director.
The CFPB under Chopra is expected to more closely scrutinize the Covid-19 response from banks, consumer credit reporting bureaus, debt collectors, and mortgage and student loan servicers.
Kraninger had said financial companies wouldn’t face enforcement if they showed “good-faith” efforts to provide loan forbearance and other consumer relief mandated under the CARES Act and other pandemic-related laws. That lenience would likely end under Chopra, said Michael Gordon, a partner at Bradley Arant Boult Cummings LLP.
“Given the widespread hardship caused by the Covid crisis, I would expect the CFPB to devote resources to issues with some nexus to the crisis, such as perhaps debt collection or credit reporting,” he said.
Big financial companies could be vulnerable to the CFPB’s early actions. Under the Obama administration, the bureau’s first three enforcement actions targeted major credit card companies—Capital One, Discover, and American Express.
Enforcement slowed under Trump, in part because the CFPB has targeted smaller companies, such as mortgage firms and payday lenders, that often couldn’t pay fines or consumer relief.
“It is going to feel different for industry, because it has not been an active CFPB for the last four years,”said Vaishali Rao, a partner at Hinshaw & Culbertson LLP.
The CFPB currently has around 100 open investigations, according to a document obtained by Bloomberg Law.
Fair Lending Focus
Chopra could also make a quick mark on fair lending enforcement.
The CFPB under former acting Director Mick Mulvaney moved the bureau’s fair lending office outside of its supervision and enforcement unit. Kraninger’s CFPB brought only one fair lending enforcement action during her approximately two-year tenure.
Chopra could change the CFPB’s structure and announce the renewed fair lending focus through speeches, Morris said. Biden has made fighting discrimination a top priority for his administration.
Chopra also could rescind recent guidance that made it harder for the bureau to charge companies with committing abusive practices, Rao said. The CFPB is unique among regulators in its enforcement power to bring cases for unfair, deceptive and abusive acts or practices.
“That’s the easiest thing, because it’s just a policy statement,” Rao said. “But it’s a policy statement on a big thing.”
Rao collaborated with Chopra on student loan servicing issues during her stint in the Illinois attorney general’s office.
The CFPB student loan ombudsman role wasn’t well defined when Chopra took it on in 2011, but it became a force during his tenure by bringing strong oversight and partnering with the Department of Education, state regulators and law enforcement.
After joining the FTC in 2018 as a Democratic-appointed commissioner, Chopra pushed for more collaboration with the CFPB on debt collection and consumer protection areas.
Chopra is likely to find ways to increase the CFPB’s powers by collaborating with newly empowered state regulators that are peppered with former CFPB staff, or using his bully pulpit to pressure the consumer finance industry, Gordon said.
“Rohit might be uniquely qualified to affect a rapid change in the CFPB’s direction: he knows the issues and what he wants to accomplish, he understands the agency, and he knows how to build support for agency initiatives,” he said. “And he rejoins a CFPB where a substantial proportion of the staff will support the direction he’ll take the agency.”