Chopra, a former assistant director and student loan ombudsman at the bureau, will next go through the Senate confirmation process. What does his nomination mean for the ARM industry? Editor’s note: This article is available for members only.
President Joe Biden on Monday announced his unofficial pick to lead the Consumer Financial Protection Bureau: Rohit Chopra.
Chopra was on the short list of who Biden might pick to replace CFPB Director Kathy Kraninger, ACA International previously reported.
Chopra currently serves on the Federal Trade Commission.
According to Politico, the 50/50 split in the U.S. Senate between Republicans and Democrats could make Chopra’s confirmation process difficult.
What happens next in Chopra’s nomination process and where his priorities will lie as far as debt collection regulations remain to be seen.
What is known is that after Inauguration Day, Biden has the authority to remove the current director of the bureau, Kraninger, at will because of the U.S. Supreme Court decision in Seila Law v. Consumer Financial Protection Bureau.
The process to choose an interim director during Chopra’s confirmation hearings hinges on whether Biden would also have the authority to appoint that person or if the deputy director, Tom Pahl, would step in.
The last time there was a shift in leadership at the bureau—pre-Seila Law—the matter went to court. Former CFPB Director Richard Cordray resigned in November 2017 and Mick Mulvaney, at the time in charge of the Office of Management and Budget, was appointed by President Donald Trump as interim director, ACA previously reported.
However, before he left, Cordray promoted Leandra English from chief of staff at the bureau to deputy director, meaning—under the Dodd-Frank Act—she would step in as interim director.
English is also leading Biden’s agency review team to select the new CFPB director.
Brian Johnson, a partner at Alston & Bird in Washington, D.C., and a contributor to the ACA Huddle webinar series on the CFPB’s final debt collection rule, provided more insight on the future of the bureau’s leadership in an article on the firm’s website, “Could Biden Appoint an Acting CFPB Director Under the FVRA? Not if He Fires Director Kraninger First.”
In the article, the firm’s financial services and products group reviews case law and academic research surrounding the implications of a president removing a department head confirmed by the U.S. Senate before the end of their term.
It is likely the administration will argue the Federal Vacancies Reform Act (FVRA) would allow Biden to go the route Trump did when he appointed Mulvaney.
Democrats, interestingly, argued against this move at the time.
The critical distinction between the English situation and what could transpire next year is whether the CFPB director resigns or is fired. The FVRA clearly covers vacancies created by death or resignation, whereas research and observations on the law’s text, historical context and legislative history suggest that the law does not apply to vacancies created by removal, Johnson reports.
The reason why, according to several notable sources cited by Johnson, is that Congress passed the FVRA to eliminate the threat to the Senate’s advice and consent power posed by permitting the president to create vacancies and then appoint acting officials at will.
“If this analysis is correct,” Johnson concludes, “it means that if Joe Biden removes Kraninger from office, he will lack statutory authority to appoint an acting director to run the CFPB. Instead, the deputy director of the CFPB will serve as the acting director pursuant to Section 1011 of Dodd-Frank.”
What We Know About Rohit Chopra
Chopra served with the CFPB during the Obama administration and under Cordray’s leadership.
Politico reports that during his term at the FTC Chopra “has pushed the agency to be more skeptical of private equity buyers and more aggressive in using its rulemaking powers to rein in businesses.”
According to the article, Chopra is likely to first focus on enforcing fair lending laws, payday lending and building case law on “abusive acts or practices” under the Dodd-Frank Act at the CFPB.
When it comes to the debt collection rule, which takes effect on Nov. 30, 2021, it is unknown where that stands on Chopra’s priority list.
Chopra referenced his comments on the CFPB’s proposed debt collection rule and student loans in his testimony during a September 2019 House Financial Services Committee hearing focused on debt collection legislation.
“When it comes to the companies that collect student loan payments, consumers have little to no market power. Loan servicers and debt collectors work on behalf of lenders and creditors, not on behalf of borrowers,” Chopra said in his testimony. “Despite the wide availability of affordable repayment plans, there are more than nine million borrowers in default on their student loans, with many more in severe delinquency. Student loan default deeply affects Americans of all ages. As the industry’s primary regulator, the CFPB must ensure that any rulemaking keeps student loan borrowers in mind.”
Part one of the CFPB’s debt collection rule was released in October 2020 and published in the Federal Register in November. Part two, which was released in December 2020, is due to be published in the Federal Register Jan. 19.
It is possible for members in the 117th Congress to request to change the rule under the Congressional Review Act, but that would also require bipartisan support in both chambers.
The 50/50 split between Democrats and Republicans in the U.S. Senate following two Democrat wins in the Georgia runoffs also presents uncertainty for the timing of Chopra’s confirmation. The nomination will first be considered in the Committee on Banking, Housing and Urban Affairs led by Chairman U.S. Sen. Sherrod Brown, D-Ohio, and next be considered by the full Senate if he is approved at the committee level after a hearing. The 50/50 split in the Senate could mean there would need to be a tiebreaker vote from Vice President Kamala Harris, but the Senate has not yet indicated whether there will be a power-sharing agreement because of the 50/50 split, which could determine in part how committee work is conducted. The National Review recently reported on how a split between Republicans and Democrats in the Senate could impact decisions.
While Biden has selected Chopra as his choice to lead the bureau, it is unknown how quickly his official nomination will advance in the Senate and how he will go about firing Kraninger.
The First 10 Days of the Biden Administration
Meanwhile, after Biden takes office Jan. 20, he is expected to issue executive orders over the first 10 days of his term on topics ranging from immigration to extending the moratorium on student loan payments and interest for federal loans, according to the Associated Press.
After issuing orders related to safely reopening schools and businesses and expanding testing for COVID-19, Biden is expected to focus on an additional stimulus package.
ACA will continue to report on Biden’s actions and priorities and is rolling out its advocacy strategy to work with the Biden administration and federal and state legislatures. Members can read more on advocacy priorities here.