The CFPB director testified before the House Financial Services Committee in the first of two hearings this week. The discussion focused on rulemaking policies, enforcement actions, mortgage servicing, data collection rules and more. Chopra will testify before the Senate Banking Committee Thursday. Editor’s note: This article is available for members only.
Consumer Financial Protection Bureau Director Rohit Chopra’s stance on regulatory processes and enforcement came to light in his testimony and dialogue with Congress during the House Financial Services Committee hearing Wednesday, “Bringing Consumer Protection Back: A Semiannual Review of the Consumer Financial Protection Bureau.”
“I think markets work well when rules are easy to follow and easy to enforce … We have to enforce the law as written; we can’t decide to invalidate parts of the law we don’t like,” Chopra said in response to questions from U.S. Rep. Ann Wagner, R-Mo.
“Do you agree that the bureau should foster a better environment for consumers by rewarding companies that are self-identifying and self-reporting compliance concerns, rather than seeking to punish companies and fining them when they have already taken corrective action?” Wagner asked.
She also stressed the importance of rulemaking and following the Administrative Procedure Act, which ACA International also addressed in a letter to the committee before the hearing.
“Whenever the CFPB seeks to promulgate a rule, we should have always complied with the Administrative Procedure Act,” Chopra said.
As Chopra begins his work leading the bureau, ACA urges the bureau to seek feedback from all stakeholders and plans to continue engagement with the CFPB to resolve unintended compliance complexities associated with Reg F.
“ACA members work with consumers to help them deal with their unique financial situation to address it and improve it. ACA supports the mission of the CFPB to ensure that markets for consumer financial products and services work in a fair, transparent, and competitive manner,” ACA CEO Mark Neeb said in the letter.
Chopra’s prepared testimony for the hearing focused on economic conditions, market monitoring and how the bureau will administer consumer financial laws under his leadership.
“I anticipate that the CFPB will sharpen its focus on repeat offenders, particularly those that violate agency or federal court orders,” Chopra said in his testimony. “The agency has now entered into a substantial number of orders, largely by consent of the agency and the financial institution, and it will be critical that we closely monitor compliance with these orders. Repeat offenders that violate orders and cause ongoing harm to families and law-abiding businesses must be stopped.”
The hearing also touched on fairness and transparency in regulations and the impact of the bureau’s regulations and supervisory guidance on small businesses.
“From my point of view, I want to make sure we have good regulations in place, that we are following them and making sure you are giving businesses who might be under your jurisdiction an opportunity to correct whatever mistakes they have made,” said U.S. Rep. Ed Perlmutter, D-Colo.
Chopra said he has already thought about the issue, including during his time at the Federal Trade Commission.
“I think one of the things that drives me a little crazy is when federal agencies don’t focus their efforts on nationwide or systemic or severe harm,” Chopra said. “I saw this at the FTC. On one hand, the FTC is letting Facebook and Google off the hook [and] on the other hand chasing after small businesses [and] strong arming them into settlements. I think we should focus on the largest firms that are engaged in nationwide harm that are really beyond the pale where they clearly knew what the rules were [and] what they were doing. Focusing on the larger participants in the market I think is one of the best ways we can accomplish our mission.”
U.S. Rep. William Timmons, R-S.C., sought confirmation from Chopra that the bureau will evaluate its processes of naming company owners in enforcement actions without ensuring allegations are factual.
“Many of the enforcement actions issued lately by the bureau have named company owners and the basis for the allegations appears to be the mere fact of ownership of the businesses. This would appear to penalize small-business owners over public companies whose shareholders and CEOS are not being named in CFPB enforcement actions and lawsuits,” Timmons said. “It would appear that you might agree that this discrepancy should end. Will you commit to naming individuals only in circumstances where facts show those people actually committed unlawful acts?”
Chopra said he experienced this issue during his time at the FTC.
“I vigorously opposed the FTC settlement that gave Mark Zuckerberg in the Facebook matter an immunity clause,” Chopra said. “You have my commitment that when it comes to large financial institutions, if there is evidence to suggest that individuals were involved in directing lawbreaking, we will look to determine whether to name them.”
Chopra added he also plans to issue accompanying documents to press releases on enforcement actions, including a statement outlining the bureau’s decision-making process to issue the action.
Additional discussion themes in the hearing included data collection, rescinding the CFPB’s policy statement on Unfair, Deceptive, or Abusive Acts or Practices by Acting Director David Uejio and mortgage servicing rules.
Building on the discussion about the bureau’s regulatory processes, U.S. Rep. Barry Loudermilk, R-Ga., questioned the lack of data and fact used when the CFPB issued an interim final rule that required “debt collectors” to provide written notice to tenants of their rights under the eviction moratorium and prohibits “debt collectors” from misrepresenting tenants’ eligibility for protection from eviction under the moratorium. The rule was issued in April, but is no longer in effect after the U.S. Supreme Court overturned the eviction moratorium.
“Can we get your commitment that future rules will be based on concrete data, not unverified anecdotes?,” Loudermilk said.
Chopra responded that the bureau, under his leadership, is committed to analyzing data before issuing rules.
ACA also submitted a letter to Chopra when he was confirmed as CFPB director by the U.S. Senate, ACA previously reported.
“ACA has served as a resource to the CFPB and has enjoyed collaborating on financial literacy projects as well as other direct outreach initiatives to improve consumer outcomes,” Neeb said. “ACA is eager to regularly meet with Chopra and the CFPB's leadership to provide perspective, feedback, and data, all of which will benefit consumers, creditors, and the ARM industry.”
During Wednesday’s hearing, U.S. Rep. Bill Posey, R-Fla., said he has introduced legislation over several congressional sessions to permit regulated entities to ask the CFPB to absolve uncertainties in the interpretations of regulations and advisory opinions.
“I do believe there is a role of advisory opinions and interpretive rules to be able to develop the law,” Chopra responded. “In many cases, that is helpful to everybody. At the same time, I don’t think the CFPB should be picking winners and losers [and crowning] an individual company to be able to own a market.”
Following Wednesday’s House testimony, Chopra will appear before the Senate Committee on Banking, Housing and Urban Affairs for the hearing, “New Era for Consumer Protection: The Consumer Financial Protection Bureau’s Semi-Annual Report to Congress.”
ACA also submitted a letter to the Senate Banking Committee Chairman Sherrod Brown, D-Ohio, and Ranking Member Patrick Toomey, R-Pa.
Read the complete letter here.
ACA will provide coverage of these hearings in ACA Daily. Subscribe here.
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