Reviews | CFPB’s Rohit Chopra is reforming financial services
We understand why the House is nervous. In the nine months Since the Senate approved the nomination of Chopra, a protege of Sen. Elizabeth Warren (D-Mass.) who once served on the Federal Trade Commission, it has launched a broad investigation as “junk fees”, money banks and credit card companies charge consumers everything from late payments on credit cards at check account overdrafts. The CFPB has also warned financial firms that it will not allow AI-based credit decisions. reproduce pre-existing racial inequalities. It’s looking into the bud”buy now, pay later” applications, and how the tech giants collect and use information about consumer payment behavior. Chopra also made it clear that the days of wrist fines are over and repeat offenders will face serious financial consequences.
But radical? Please. The only “radical” action Chopra has taken is to use existing federal law to begin to restore the balance of power between American consumers and the banks, credit card companies and fintech companies that are supposed to serve, in a way that shows he is serious.
I sat down with him via Zoom last week, before the House went public with his campaign, but after numerous complaints from the financial services industry that he was an out-of-control Washington “bureaucrat” (as the Wall Street Journal recently called it) surging Beltway’s mores in service of his anti-industry vendetta.
“I think larger companies are much more accustomed to having a relationship with their regulators that is more akin to friendship than a traditional relationship between a regulator and a regulated entity,” Chopra told me.
Chopra is already getting results — even before the CFPB takes regulatory action. After a CFPB report revealed banks were gaining $15 billion each year, when customers have exceeded their accounts, a number of banks, including Capital one, Citibank, JPMorgan Chase and Bank of America quickly decided to eliminate or reduce their overdraft fees.
Similarly, in March, the CFPB announced that it would review how the credit reporting industry handles $88 billion medical debts on Americans’ credit reports, including how and when errors are handled, so people don’t feel pressured to pay money they don’t even owe. In response, Equifax, Experian and TransUnionthe three largest credit bureaus, soon announced that they would remove medical debt from individual reports as soon as it was paid off, and would no longer list outstanding amounts under $500.
These types of moves leave opponents running wild, going wild like cartoon villains. Sen. Patrick J. Toomey (R-Pa.), who claimed the CFPB “lenders and rating agencies intimidatedregarding the issue of medical debt, said it could “discourage” people from paying their doctor bills. As for the Chamber, she would like you to know that when Chopra denounces “junk fees”, he wants to “defame legal products whose conditions are well disclosed”.
But everyone knows that many consumers skip the fine print. And disclosure is not always enough. “In today’s economy, very large corporations have enormous power over each of us. And in many cases, we don’t even have the ability to negotiate. We sign boilerplate language, we click yes on the terms of service,” Chopra pointed out.
The House also alleges that a regulatory review the CFPB is undertaking to address discrimination by financial firms is in violation of federal law. The agency counters that this – along with all other parts of the House attack – is nonsense. “Scary tactics,” a CFPB spokesperson said in an emailed statement on Tuesday. “We remain focused on ensuring fair, transparent and competitive markets for American consumers and honest businesses that play by the rules.” The CFPB did not respond to the personal attack on Chopra.
If Chopra’s opponents have complained less in the past, it may be because they were taking advantage of the CFPB’s inaction. They had little to no negative words to say about President Donald Trump’s agency choices of Mick Mulvaney and his assistant, the very unqualified Kathy Kraninger. Mulvaney once described the CFPB as a “sad and sick” joke. Under Kraninger, corporate fines for malfeasance were a misery compared to those issued under the Obama administration.
Chopra’s actions are not abuse. It’s quite the opposite: a plan of attack to even balance in the increasingly unequal relationship between consumers and large companies. No wonder the financial industry and its lobbyists are so furious. But it’s a fight the rest of us should savor — and one that should make the Biden administration, which is less aggressive on so many other fronts, take notice.