Biden's CFPB nominee Rohit Chopra brings 'substantive' regulatory expertise

Rohit Chopra, President Joe Biden’s nominee to lead the Consumer Financial Protection Bureau, is likely to return the agency to its original incarnation, proactively rooting out bad actors and levying hefty fines on violators, regulatory experts say. Chopra's confirmation hearing on Tuesday will be the first of Biden's regulators to face the Senate Banking Committee.

Chopra’s history with the CFPB dates back to the agency’s inception in the wake of the financial crisis of 2008. He was one of the initial architects of its implementation and served first as its in-house student loan liaison, then as assistant director under the CFPB’s initial leader, former Ohio Attorney General Richard Cordray. Since 2018, Chopra has been a commissioner at the Federal Trade Commission, a position for which he was approved unanimously by the Senate.

Consumer advocates say this established record of bipartisan support should help facilitate a smooth Senate confirmation process. Rachel Weintraub, legislative director and general counsel for the Consumer Federation of America, said she expected Chopra to face questions in his confirmation hearing about where he would reverse course and how he would change the agency’s focus to reinstate it as a robust regulator.

“Rohit will be asked about his priorities and how he will return the agency to its mission to make the financial marketplace more fair for consumers,” she said.

The flip side of enforcement is obtaining restitution for consumers who were taken advantage of by bad actors — another aspect where observers say Chopra is likely to reorient the CFPB’s priorities. “The CFPB [should] return to its critical role as an enforcement agency. Under the last administration, the number of cases, consumer restitution, and settlement amounts were lower,” Weintraub said.

Aaron Klein, senior fellow of economic studies at the Brookings Institution, blamed former President Donald Trump for weakening the agency by turning the reins over to his then-chief of staff Mick Mulvaney after firing Cordray, a change that precipitated a legal battle and was ultimately upheld by the Supreme Court.

“Unfortunately, things that should be bipartisan like protecting consumers from getting ripped off have become politicized. The CFPB was highly politicized under Trump,” Klein said.

Mulvaney made no secret of his desire to dismantle the CFPB, labeling it a “sick, sad joke” at the time of its inception when he was a Congressional representative for South Carolina. As acting head of the Bureau, he submitted a budget request for $0, even going so far as to briefly change the organization’s name to the “Bureau of Consumer Financial Protection.” (The switch was reversed by the full-time director he subsequently installed.)

During the Trump era, oversight and enforcement waned. “Consumer safeguards, enforcement and general monitoring of the financial marketplace, arguably, were mediocre,” said Christine Hines, legislative director for the National Association of Consumer Advocates. “The Bureau became more sympathetic to the regulated entities to the detriment of consumers,” she said — a stance observers predict will be the first thing to go.

“They will probably first of all look at the reorganization that Mr. Mulvaney put in place, and probably amend that or completely reverse that,” said Joseph Lynyak III, a partner at the law firm of Dorsey & Whitney and a regulatory reform expert. “There’s a whole host of things they will probably look at, ranging from the debt collection rule to payday lending,” he said.

“The big picture is returning to really focusing on and prioritizing consumer protection,” said Linda Jun, senior policy counsel at the advocacy group Americans for Financial Reform. “There will be a return to fair lending as a priority at the Bureau,” she predicted.

Jun added that, as the first person of color nominated to head the agency, Chopra is likely to focus in particular on the financial impact Covid-19 has had on minority communities in the context of mortgage borrowing, student loans and predatory lending practices, particularly as practiced by the new crop of high-tech, nonbank financial industry participants.

Another big task facing Chopra is overseeing how lenders servicing a myriad of products, from mortgages to credit cards to student loans, manage the winding-down of forbearance programs implemented in the early months of the pandemic. “As the Covid measures recede and long periods of loan forbearance end, there are going to be a lot of consumer-related challenges,” Klein said.

More broadly, observers expect Chopra to address racial disparities in access to credit and capital that have contributed to financial inequity in communities of color. “They’ll probably review and revise protocol around discriminatory lending practices,” Lynyak said.

“The big issues are the ones that do not get much public view, such as… fintech credit approval and pricing and its relationship to fair lending,” said Joseph Mason, professor of finance at Louisiana State University. “These issues are very technical but affect crucially credit availability and, therefore, economic growth,” he said.

Experts in financial industry regulation say Chopra has the experience and skills to tackle these complex issues.

“The CFPB was designed to be the cop on the beat policing the financial system for consumer abuses. If confirmed, Chopra will take aggressive action,” Klein said. “It’s so important to have substantive experts in charge of financial regulators.”