UPDATE: March 11, 2021: Rohit Chopra’s nomination to lead the Consumer Financial Protection Bureau (CFPB) advanced to the full Senate on Wednesday on a 12-12 vote along party lines — broken by a motion from the majority leader.
“Based on Commissioner Chopra’s record, I’m deeply concerned that he’d return the CFPB to the hyperactive, lawbreaking, antibusiness, unaccountable agency it was under the Obama administration,” said Sen. Pat Toomey, R-PA, according to The Wall Street Journal, in casting a vote against Chopra.
The panel also voted 14-10 to advance Biden administration nominee Gary Gensler to lead the Securities and Exchange Commission (SEC). Sens. Mike Rounds, R-SD, and Cynthia Lummis, R-WY, joined Democrats in supporting him.
President Joe Biden's nominee to head the Consumer Financial Protection Bureau (CFPB) will try to lead the agency in a delicate enforcement balancing act, Rohit Chopra indicated to the Senate Banking Committee at his confirmation hearing Tuesday.
Chopra, who served as the student loan ombudsman at the CFPB when it was created in 2011, spent the hearing reassuring senators he would avoid taking the heavy-handed approach the agency was often criticized for in its early years. He also said that he would not have too-light of an approach that critics of the agency said occurred under the Trump administration.
"I pledge to be a good partner to each of you and approach the agency's mission with an open mind and attuned to market realities," he said.
Chopra said he wants to make sure the government, as the pandemic eases, retains the forbearance policies that are in place to keep lenders from foreclosing on homeowners, because many borrowers have lost their jobs and will need time to rebuild.
"We must not forget that the financial lives of millions of Americans lay in ruin," he said. "Many have seen their jobs disappear and will not be able to easily resume their [rent and mortgage] payments."
Close to 11 million Americans are behind on their mortgage or rent payments, according to estimates, and that won't change once the pandemic gets under control.
"We learned from the last crisis that regulators missed some of the linkages between the mortgage market and our economy," Chopra said. "It's going to be critical for the CFPB to monitor those markets using the best available data and insights to enforce homeowner protections when it comes to foreclosure mitigation and work across the government so we do not see a deja vu of that crisis again."
Critics expect Chopra, who sits on the Federal Trade Commission (FTC) as one of two Democratic appointees, to take a harder enforcement line against banks and other financial institutions than did Trump-era CFPB chief Kathy Kraninger.
"A Chopra-led CFPB will be more active on all fronts, including rulemaking, supervision and enforcement," Isaac Boltansky, director of policy research at Compass Point Research & Trading, told The Wall Street Journal.
Chopra vowed stiffer penalties against entities found to commit fraud or misconduct.
"When victims … are not made whole, that doesn't just hurt them, it hurts every other business that is trying to follow the law," he said. "I have pushed hard against the FTC's no-fault, no-settlement approach. When you rip someone off and don't have to pay them back, how is that much of a sanction?"
He also said he'd bring more focus to fair lending enforcement. Trump appointee Mick Mulvaney moved the bureau's fair lending office from the enforcement unit and aligned it under the director's office. Kraninger brought one fair lending enforcement action during her tenure, Bloomberg Law reported.
Chopra said he wants fair lending enforcement to probe potential discrimination by credit decision-making algorithms.
Chopra also favors cracking down on error-ridden credit reports and strong enforcement against overly aggressive collection efforts by payday lenders targeting hard-hit consumers.
"Accuracy is critical for the credit reporting system to work," he said. "I think the idea of making sure consumers can dispute and get answers is part of the [Fair Credit Reporting Act]."
Chopra also assured senators he would try not to make policy at the agency through enforcement actions, a practice banks criticized when the agency was headed by Obama appointee Richard Cordray.
"The CFPB should be focused on … making it clear what's expected of them," he said. "Ultimately that's what creates a vibrant market, and that is something CFPB must do, adhering to all of the procedures Congress has laid out."
Chopra also said he supports efforts by banking regulators to stem industry practices that make it hard for new market participants to innovative in financial services.
"I don't want to see a banking system or a financial services system where new market entrants cannot compete and win the day," he said. "Dominant players should not be able to squelch out competition, and that's something we need to always be mindful of."
At the same time, big tech companies trying to enter financial services must be scrutinized for privacy, fair competition and money laundering risks because of the control they exercise over data, Chopra said, singling out the Facebook-backed currency Diem.
"We have seen how large technology platforms are increasingly entering financial services," he said. "So I do think we have to make sure we're looking at the issues that are facing our country today."
Other issues he touched on:
- Civil penalty fund. He's opposed to using fines collected from banks and lenders and held in the CFPB's civil penalty fund for anything other than restitution to harmed consumers and financial literacy efforts. "It would be inappropriate if the funds weren't used … primarily for victim redress," he said. "The law is clear it's a victim's relief fund."
- Qualified mortgages (QM). Chopra said he would revisit the CFPB's QM rule with an open mind and not make it more restrictive than it needs to be. The rule requires lenders to make home loans to consumers only for amounts they can reasonably pay back. "With QM, we have to balance consumer protection with access," he said, adding he would "get input from everyone on how the rule needs to evolve."
- Real-time payments. Chopra said he supports the Federal Reserve's effort to create a digital currency. Not only are other countries, particularly China, racing ahead to forge something close to real-time payments processing, but small businesses and consumers can better manage their money if they can access it without unnecessary delays.