A group of 12 Republican Senators have sent a letter to CFPB Director Rohit Chopra in which they urge him “to reverse course and stop using inappropriate tactics to harm financial institutions’ reputations and customer relationships in order to advance your liberal policy preferences.”

In their letter, the Senators assert that “rather than operating as a tough, but fair and sensible regulator, the CFPB is again pursing a radical and highly-politicized agenda unbounded by statutory limits.”  As examples of “uncontrolled and unwarranted” CFPB actions, the Senators point to the following:

  • The CFPB’s use of “name-and-shame tactics to pressure companies into eliminating [overdraft fees].”  The lawmakers’ point to the chart published by the CFPB in February 2022 that listed the top 20 banks by revenue from overdraft fees and statements made by Director Chopra in his July 2022 media interviews indicating that he was “gratified to see where the market has been shifting” while warning that the CFPB would be “increasing our supervisory scrutiny of the institutions that are most dependent on [overdraft fees] as part of their deposit account revenue.”  The Senators state that “[i]t is hard to view [this] statement as anything other than a threat that banks who do not bow to the CFPB’s pressure campaign could expect the agency to target them for increased supervision.”
  • The CFPB’s change in its risk-based supervision rule to allow the CFPB to publicly disclose a decision to subject a nonbank to risk-based supervision.  The Senators observe that the rule change “did not give a nonbank the same discretion to defend itself and instead requires a nonbank to keep confidential information relating to the CFPB’s decision, including facts that could call into question the Director’s decision or raise procedural concerns with it.”  The Senators state that since the CFPB has never used this authority, the rule change “appears to serve as a threat to nonbanks…whose practices are legal but not in line with your liberal policy views.”
  • The CFPB’s change in its rule on adjudication proceedings to allow the Director, at any time, to direct that any matter be submitted to him or her for review.  The Senators assert that this change allows Director Chopra to “authorize CFPB staff to bring an enforcement case based on a novel legal theory and then you can personally rule that it is a valid theory.”
  • A mass email sent by the CFPB to the customers of a bank that is the subject of a CFPB enforcement action about accounts alleged to be opened without customers’ consent.  The Senators assert that the mass email “was not a legitimate investigative or litigation tool, but rather a means to damage the bank’s customer relationships.”

We recently urged Director Chopra to discontinue the CFPB’s current practice of using a potpourri of methods that lack transparency and predictability to interpret federal consumer financial laws.  In our open letter, we called on Director Chopra to instead restart use of the official staff commentaries that are subject to input from stakeholders and provide certainty that they will be binding.

We are surprised that in their letter, the Senators did not criticize the CFPB’s updates to its Supervision and Examination Manual that instruct examiners to consider discrimination in connection with non-credit products and services as an unfair act or practice.  For the reasons we have discussed, we believe the CFPB’s UDAAP interpretation is legally flawed.  Moreover, given the complexity of the questions the CFPB’s expansion of UDAAP raises, we believe this type of a drastic change should be done through a rulemaking and not through an amendment to an examination manual.