Big Banks Targeted in CFPB Shift to High-Profile Enforcement

The pace of Consumer Financial Protection Bureau enforcement actions has been far slower than expected under Director Rohit Chopra as the agency focuses on big banks and repeat offenders.

During Chopra’s tenure, the CFPB has taken on the likes of Wells Fargo & Co., Bank of America Corp., TransUnion, and MoneyGram International Inc. while bringing fewer cases against debt collectors, credit repair organizations, and other smaller companies.

The focus on larger businesses has driven down the total number of cases the CFPB has either settled or litigated since Chopra’s October 2021 swearing-in as the agency’s director, but also resulted in two of the agency’s largest-ever settlements, as well as high-profile—and costly—litigation against some of the biggest companies in consumer finance.

That’s by design, Chopra said in a July 17 interview in his Washington office.

“The biggest value add we have in enforcement is really to be able to go up against the most well-financed defendants and to be able to prove our case,” he said.

Strategic Shift

The CFPB has filed 32 enforcement actions, including negotiated settlements and contested litigation, between Oct. 12, 2021, and July 14, 2023, according to a review of agency records. By contrast, the CFPB filed 71 enforcement actions between December 2018 and January 2021 under former director Kathy Kraninger, a Trump appointee.

But the types of cases are different.

Kraninger’s team brought cases against regional banks including Citizens Financial Group Inc. and Fifth Third Bancorp, with the Fifth Third case alleging that bank employees were creating fake accounts to hit sales targets.

Kraninger’s CFPB also brought a fair lending case against Townstone Financial Inc., a Chicago-area mortgage lender alleged to have used racist language in podcasts and other materials to discourage Black loan applicants.

But the agency’s docket under Kraninger and even its first director, Obama-appointed Richard Cordray, was filled with cases against small companies that were unable to provide restitution to customers. Those cases often resulted in $1 settlements that allowed fraud victims to access the CFPB’s civil penalty fund.

“The approach that the regulator had to the markets was that no actor should think you’re too small for the CFPB’s attention,” said Jenny Lee, a Reed Smith LLP partner and former CFPB enforcement attorney.

Chopra’s targets are different.

The CFPB notched a $3.7 billion settlement with Wells Fargo in December 2022 for a host of violations in mortgage, auto lending, and other business lines. The agency, along with the Office of the Comptroller of the Currency, reached a $250 million settlement with Bank of America on July 11 over credit card fee issues, fake account generation, and other alleged violations.

Those two settlements were among the CFPB’s largest ever.

Chopra said his enforcement staff hasn’t abandoned smaller actions, noting that some of the agency’s recent cases have targeted relatively small credit repair organizations and debt collectors.

But the biggest actions against repeat offenders can have the biggest impact, Chopra said.

“When an agency only really looks at small-time scammers, they may not necessarily be able to remediate harm at scale. Nor are they demonstrating to the biggest players a willingness to litigate and challenge unlawful conduct,” he said.

Wider Net

State financial regulators and attorneys general are better positioned to take on some smaller actors, Chopra added.

“The CFPB does not have a monopoly on consumer financial protection,” he said.

The CFPB in May 2022 released an interpretive rule allowing state agencies to bring parallel enforcement actions, even where the CFPB is bringing its own case, as part of a broader effort to encourage states to get involved.

Parterning with state agencies and other federal regulators is vital to widen the enforcement net, Chopra said.

The CFPB had 1,632 full-time employees at the end of fiscal 2022, and only 44% of those employees worked in the agency’s Supervision, Enforcement, and Fair Lending unit, according to the CFPB’s latest financial report.

“We are a small, small agency. So part of what we are also counting on is having many more enforcers at the table,” he said.

Relying on state enforcement agencies poses some of its own risks, said Craig Cowie, the director of the Blewett Consumer Law & Protection Program at the University of Montana Blewett School of Law and a former senior CFPB enforcement attorney.

“Even some of these small companies can cause a lot of consumer harm,” he said.

But overall, Chopra’s approach is likely to have a big impact for consumers, even if it results in a smaller number of cases, Cowie said.

“The strategy of having the CFPB go after big actors is valid, because, quite frankly, it has more resources and it’s not at all clear who else can,” he said.

Working with states can force Chopra at times to cooperate with state attorney general offices that oppose the agency’s existence.

On July 13, South Carolina was among 11 states to join the CFPB in an enforcement action against tech “boot camp” Prehired. Just days before, South Carolina’s attorney general signed on to a US Supreme Court brief arguing that the CFPB’s funding through the Federal Reserve is unconstitutional.

“I’ve become sort of numb to that duality,” Chopra said.

Hitting the Gas

Overall enforcement numbers can be a bit deceiving.

A typical investigation can take about two years before either a settlement is reached or a lawsuit is filed, Cowie said.

And there is a lot of activity bubbling under the surface, said Lucy Morris, a Hudson Cook LLP partner and former deputy CFPB enforcement director.

Civil investigative demands are being filed at a rapid clip, Morris said. And the CFPB is expecting quick responses to investigative demands.

“There haven’t been a ton of public enforcement actions. It feels like it’s accelerating, and kind of intentionally so,” she said.