Regulatory Note – Testimony of CFPB Director Chopra
Earlier today, October 27, the Consumer Financial Protection Bureau Director Rohit Chopra testified at a hearing before the House Financial Services Committee. The Committee customarily holds a hearing on the occasion of the Bureau’s most recent semi-annual report, in this case, the Spring 2021 Report. The report was released on October 8, 2021, four days before Director Chopra was sworn in. Unsurprisingly, the hearing was devoted almost entirely to Director Chopra’s plans for the Bureau; very little was said of the Spring 2021 Report.
In his written testimony, the Director set forth three broad priorities: (i) stimulating greater competitive intensity in consumer financial markets, (ii) sharpening the Bureau’s enforcement focus on repeat offenders, particularly those that violate agency or federal court orders, and (iii) restoring “relationship banking.”
Director Chopra did not break new ground in his testimony or in response to members’ questions, but several items are noteworthy:
Relationship banking. The Director uses this term to cover extensions of consumer and small business credit where lenders’ decisions are based on well understood criteria and on knowledge of the borrower’s circumstances. The Director favorably contrasts the transparency of the relationship banking structure with the opacity (to his thinking) of newer algorithmic and artificial intelligence-based lending.
Enforcement actions. Several Republican members of the committee pressed for commitments that the Bureau would not use enforcement activity to create new law and would bring such actions only where the law was already clear. Director Chopra declined to make any such commitments. He expressed his general distaste for actions against small actors and said that the Bureau would focus its enforcement activity on system- and nationwide participants.
Big Tech. The Director mentioned several times that the CFPB’s jurisdiction over Big Tech companies is limited to reviewing their role in payments systems, although he did not definitively rule out expansion of the agency’s jurisdiction. The Director is concerned about possible anti-competitive behavior, privacy of consumer data, and data security. Last week, on October 21, the CFPB ordered six Big Tech companies to provide information about their payments platforms.
Cryptocurrency. The CFPB is part of an interagency group weighing the financial risks of cryptocurrency and possible regulation. As with Big Tech, the CFPB has a regulatory interest insofar as cryptocurrency serves as a payment system for consumer. The agency will look primarily at compliance with the Electronic Funds Transfer Act and the privacy provisions of the Gramm-Leach-Bliley Act.
UDAAP and “abusive practices.” The Director stated that he would not reinstate the policy statement on abusive practices that was issued January 2020 and rescinded in March 2021. He would also not commit to limiting construction of the term “abusive” to notice and comment rulemaking; he observed that judicial decisions were helpful in determining the meaning of statutory terms.
QM Rule. Director Chopra did not indicate that there would be any changes to the QM Rule. He emphasized that the rule was now in effect and the only postponement of the rule was the extension of the mandatory compliance date.
Pending rulemakings. Members of the committee from both parties asked about the progress of and timeframe for two pending Dodd-Frank rulemakings: section 1033, which provides for consumer access to information about them held by banks or other financial institutions, and section 1071, which requires lenders to collect demographic data on credit applications by women- or minority-owned businesses as well as small businesses. The Director did not commit to any timeframes for completing these rulemakings.