WASHINGTON—In what some described as a “fiery” exchange, CFPB Director Rohit Chopra testified before the Senate Banking Committee and took heat from Republican members who criticized the Bureau’s enforcement activity around repeat offenders as well as broad requests for information on new financial technology firms.
The Republican members told Chopra the CFPB’s new direction has the potential to stifle innovation and burden companies. In addition, Republican senators also chastised Chopra for what they called his "hostile takeover" of the FDIC, of which Chopra is a board member. The FDIC’s new Democratic majority has moved to advance their agenda.
Chopra, who has been a a longtime consumer advocate, was tapped by Democratic President Joe Biden to crack down on predatory lending and inequities in the consumer finance system. He also responded to Republican lawmaker criticism after the agency in March expanded a standard targeting racial discrimination in lending.
"The CFPB claimed the authority to sue financial services providers for discrimination without any evidence of discriminatory intent," said Sen. Pat Toomey (R-PA), the banking panel's ranking Republican.
Questions from Democrats
Chopra also faced questions from Democrats on his competition push; his focus on lenders' junk fees, including services like overdrafts and credit card late payments; and his efforts to stamp out abuses around loan servicing and credit reporting, according to Reuters.
Sen. Elizabeth Warren (D-MA) called on Chopra to help break up scandal-hit lender Wells Fargo, arguing that repeat offenders should not just be fined, but should be penalized more fiercely.
While Chopra did not directly comment on Warren's suggestion, he agreed tougher sanctions are needed for large recidivist lenders, according to Reuters.
During the Senate hearings, Chopra also said that increased engagement with institutions that do not have direct access to the CFPB, including credit unions and small banks, is a key priority for the Bureau.
Other Topics Covered
During the hearing, lawmakers and Chopra covered many topics, including the CFPB's heightened enforcement on repeat offenders and request for information (RFI) on excessive fees on consumer financial products and services.
Regarding overdraft fees, Chopra noted an increase in competition among banks to offer lower overdraft fees or outright elimination and suggested some consumers may not want to be automatically enrolled in the service.
In addition, Sens. Mark Warner (D-VA) and Tina Smith (D-MN) noted the financial challenges facing rural communities and the prevalence of banking deserts, as mentioned in the CFPB’s report on rural areas. Smith highlighted the importance of community development financial institutions (CDFIs) and questioned Chopra about the Bureau's role in addressing economic empowerment in rural communities. Chopra responded by citing the Bureau’s initiative to focus on farmers and rural communities, NAFCU reported.
CUNA Sends Letter To Committee
Prior to the hearing, CUNA and the state leagues sent a letter to the Senate Banking Committee stating that for credit unions to have the necessary resources to serve members and innovate the CFPB must provide stability in the marketplace.
“Open and transparent rulemaking is a key part of administrative process,” the letter reads, “but throughout the history of the CFPB, regulated entities and consumers have been subject to midnight press releases of upcoming rules; rulemaking based on incomplete data; and enforcement actions based on broad authority. In addition, the CFPB has tried to influence market behaviors in lieu of formal rulemaking. Credit unions support the CFPB protecting consumers and going after bad actors, but overall, we need stability in the marketplace to have the resources necessary to serve our members and innovate. We are concerned we are going down a road that will disrupt more than it will protect.”
CUNA and the leagues also encouraged the CFPB to consistently engage stakeholders in the policy-setting process.
‘Impossible’ to Fulfill
“It is impossible for the Bureau to fulfill its mission, ‘to make consumer financial markets work for consumers, responsible providers, and the economy as a whole,’ if its leadership does not take the time to hear the concerns and priorities of the entities subject to its rulemaking and supervision,” the letter reads. “Facilitating more opportunities for credit unions to provide input to the Bureau leadership directly will improve the Bureau’s rulemaking and supervisory processes.”
CUNA also pointed in its letter to what it called the CFPB’s “failure” to effectively tailor its regulation to account for the disproportionate impact that one-size-fit-all rules have on credit unions.
CUNA and the leagues also renewed their call on Congress to enact legislation to establish a bipartisan multi-member commission to lead the agency, a structure proposed at the Bureau’s inception. The organizations charge that such a structure would enhance consumer protection by ensuring that diverse perspectives are considered before finalizing rules and prevent disruptions caused by leadership changes.
NAFCU also sent a letter to the Senate Banking Committee ahead of the hearing.