Despite expectations to the contrary, Rohit Chopra faced little in the way of hostile questioning by Republican members of the Senate Banking Committee at the hearing yesterday on his nomination by President Biden as CFPB Director.  It is possible Republican members took a less aggressive approach in questioning Mr. Chopra in order to devote more of their time to probing the views of Gary Gensler, President Biden’s nominee for SEC Chairman, whose confirmation hearing was held together with Mr. Chopra’s hearing.

In response to questions from several Senators about student loans, Mr. Chopra stressed the need for the CFPB to ensure that student loan servicers are meeting their obligations when dealing with distressed borrowers, such as honoring debt forgiveness rights and providing access to income-driven repayment plans and other federal student loan protections.  He indicated that servicers should be proactive to avoid what he described as an impending “avalanche of defaults” when pandemic-related payment moratoriums expire.  He also commented that while the CFPB has a major role to play in this area, it should work cooperatively with the Education Department, state attorneys general, and state regulators that license student loan servicers.  Mr. Chopra similarly noted the need for the CFPB to work more closely with the Department of Justice and state AGs to enforce SCRA and MLA protections for members of the military and their families and for mortgage servicers to be prepared to avoid another foreclosure crisis as a result of forbearances “that can flip to foreclosures.”

Mr. Chopra’s responses to several questions reinforce our expectation that the CFPB will significantly ramp up its enforcement activity under his leadership.  In response to a question from a Republican Senator asking whether Mr. Chopra would engage in rulemaking on the meaning of “abusive” before using the CFPB’s UDAAP authority, Mr. Chopra acknowledged the potential usefulness of rulemaking but resisted the Senator’s suggestion that a rule was necessary for the CFPB to enforce the UDAAP prohibition.  When asked by another Republican Senator if he intended to reinstate the CFPB’s “rulemaking through enforcement” approach under former Director Cordray, Mr. Chopra committed to make the CFPB’s expectations clear to market participants but also highlighted the leveling effect of the CFPB’s enforcement authority for those who are operating lawfully in the marketplace.

Mr. Chopra also defended various dissents that he has written as an FTC Commissioner in which he objected to settlements based on the FTC’s failure to impose larger financial penalties.  He stressed the need for fraudsters to be accountable to consumers and indicated that restitution is critical for remedying wrongdoing, particularly where the wrongdoer is a large company, and that remedying consumer harm should be the focus of enforcement.  He criticized the FTC for targeting small entities and not applying equal scrutiny to larger entities.

With regard to fair lending, Mr. Chopra also criticized the FTC for not bringing ECOA enforcement actions and expressed the view that agencies with ECOA enforcement authority have an obligation to use that authority.  He indicated that the CFPB’s Office of Fair Lending should play a critical role in the CFPB’s enforcement of the ECOA.

Other noteworthy comments made by Mr. Chopra included:

  • Credit reporting and debt collection are among the areas presenting the greatest risks to consumers and enforcement is needed to stop unlawful practices.
  • He plans to use consumer complaints and supervision to guide enforcement activity.
  • He has an “open mind” regarding how the CFPB’s QM rules should be revised, noting that consumer protection needs to be balanced with access to mortgages.
  • With regard to small dollar credit, he acknowledged the need for consumers to have access to small dollar credit but also stressed the need for consumers to have faster access to their own money.
  • It is critical that the CFPB use its enforcement authority to protect small businesses.

Committee Chairman Sherrod Brown asked Committee members to submit any questions for the record by March 8 as he wants to “move quickly” on the nominations.

On March 8, 2021, from 12:00 p.m. to 1:30 p.m. ET, Ballard Spahr will hold a webinar, “CFPB Rulemaking Under the Biden Administration: What’s On the Agenda?”  For more information and to register, click here.