Joe Biden has struggled in recent weeks to get his ambitious legislative agenda through Congress. But as work has stalled on his spending proposals, the US president has quietly won a meaningful victory for progressive supporters who want to change the financial services industry through more aggressive regulation.
The victory came in the form of a restricted Senate vote a few days ago confirming Biden’s choice as head of the Consumer Financial Protection Bureau – Rohit Chopra. A 39-year-old product of Harvard and the University of Pennsylvania’s Wharton School of Business, Chopra is a staunch consumer advocate who promotes tough penalties for bad corporate actors.
Its rise marks a critical moment in the short and tumultuous history of the CFPB. The agency was created under the Obama administration to crack down on predatory consumer loans that many on the left have blamed for the financial crisis. Republicans regretted his extended powers early on, and Donald Trump’s White House tried to put the agency to sleep. Now, with Chopra at the helm, the tables have turned once again.
Chopra is about to shake financial cages from Wall Street to Silicon Valley. More aggressive enforcement of fair loan laws is a virtual certainty. Action on cryptocurrency lending products or âbuy now, pay laterâ offers is a tempting possibility. The CFPB has broad authority to protect financial consumers – and its new boss is likely to test his limits.
âIt’s about as big a change as you can imagine for an agency – it’s a transition from an administration that basically wanted to kill the agency and neutralize its mission completely,â Nowell said. Bamberger, partner at Cleary Gottlieb law firm. “We expect the CFPB to be incredibly aggressive in an enforcement context and incredibly ambitious in the context of rule-making.”
Chopra is no stranger to the agency, having served as a student loan mediator during the Obama years. After Trump’s election, he was nominated to take a Democrat-only seat on the five-member Federal Trade Commission, where he became a fierce critic of Big Tech.
Chopra’s taste for battle manifested in 2019 when Facebook agreed to pay $ 5 billion to settle FTC allegations that she misused customer data. The committee voted 3-2 along party lines to approve the settlement – with Chopra voicing passionate dissent. He called the civil sanction, the largest in FTC history, insufficient and called the granting of immunity to officers and directors of the company a “giveaway.”
âBreaking the law must be riskier than following it,â he wrote. âIn my opinion, it is appropriate to accuse officers and directors personally when there is reason to believe that they have significantly participated in illegal behavior or that they have negligently turned a blind eye to them. subordinates doing the same. “
A key difference between the FTC and the CFPB is that, in his new position, Chopra is the only boss. No commissioner stands in his way. Putting its own team together could take some time, but Washington insiders expect that once it does, the CFPB will once again make headlines.
One of the most dramatic changes from the previous administration will involve the enforcement of fair loan laws that prohibit discrimination on the basis of race, religion or sex. Under Trump, it was not a priority. Its CFPB has been reorganized so that its fair loan unit is no longer part of its enforcement division. Several lawyers who had specialized in fair loan investigations have been transferred to “generalist positions,” according to the US Government Accountability Office.
Chopra should expand the scope of fair application of loans. During his days at the FTC, he argued that regulators should no longer simply seek evidence of discriminatory intent in prosecuting such cases.
He said they should consider whether business practices – such as using artificial intelligence to make decisions – have a disparate impact on different groups. “It is rare to find direct evidence of racist intentions,” he said last year. âThis is why disparate impact analysis is an essential tool for uncovering hidden forms of discrimination. “
Chopra’s wild card will be its impact on the rapidly changing balance of power in financial services. When the CFPB was created by the Dodd-Frank Act of 2010, the big banks were the pet peeves of the progressives. Now, major lenders and the left are worried about encroachment by fintechs and software developers.
This puts Chopra in an unlikely position. There is no doubt that it will complicate the lives of traditional players in financial services. The funny thing is, he might save some, too.