I. What’s changed with the CFPB?
Nothing yet—but on Tuesday, March 2nd the Senate Committee on Banking, Housing and Urban Affairs will hold hearings on Biden’s nomination for the Director of the Consumer Financial Protection Bureau (“CFPB”). The CFPB is a highly polarized agency—largely suppressed under the Trump administration, the agency is repositioning to flex its authority over certain lenders, servicers, and debt collectors again. Dave Uejio has been the acting Director since January 20, 2021 and will continue to serve in that role until Biden’s nomination is confirmed.
Biden has named Rohit Chopra, a Democrat who has served as the Federal Trade Commissioner since 2018, as his nominee. In his Commissioner role, Chopra focused on scrutinizing and closely monitoring “Big Tech” corporations to the extent they threaten privacy, national security, and fair competition. Biden’s nomination of Chopra is unsurprising, as Chopra has worked in the CFPB before.
Senator Elizabeth Warren initially organized the CFPB in response to the 2008 financial crisis. Warren hired Chopra as the Assistant Director, a position he held for five years. During his time at CFPB, Chopra spearheaded the agency’s protective efforts regarding student loans; he also served as a special advisor for the Department of Education. He worked to improve servicers’ treatment of student borrowers, and he helped develop tools to aid student borrows in making better decisions.
II. What can we expect?
As an initial matter, it is expected that the Senate will confirm Chopra. The Director position is a five-year term, but as of June 2020, the President may remove the CFPB Director at will. Notably, when Congress first created the CFPB under the Dodd-Frank Act, the President’s ability to remove the agency’s Director was relatively limited. The President’s recently reinterpreted power over the Director’s employment may act as an additional source of influence on the policies and priorities of the CFPB, but it’s too soon to tell.
Companies should expect a return to a more active CFPB. Chopra is expected to take a view of the CFPB’s role and power more akin to that of Richard Cordray, the first CFPB director. We are likely to see the CFPB being more aggressive in wielding its significant rulemaking, supervision and enforcement authority.
Chopra is highly critical of private student loan servicers, and, consistent with the acting Director’s public statements, it is likely that Chopra will take immediate action to address borrowers injured by the pandemic. Given the pandemic’s impact on student borrowers specifically, servicers can expect a renewed, and likely strengthened, interest in restricting servicing practices and enforcing those restrictions.
Enforcement actions are also likely to increase under Chopra. In a statement to Congress, Chopra described the Trump-era CFPB’s debt collection enforcement as “tepid” signaling that his enforcement, in this and other areas, are likely to increase. Indeed, Chopra has commented that he intends to aggressively seek monetary relief when carrying out his enforcement duties.
It is further expected that Chopra’s history with both the CFPB and the FTC will result in greater cooperation between the agencies in enforcement actions. Specifically, Chopra hopes that improved cooperation will allow the FTC to benefit from the CFPB’s ability to obtain civil monetary penalties. Should the Supreme Court rule that the FTC cannot seek restitution via injunctive relief under Section 13(b) of the FTC Act, which appears to be likely, the FTC will have a strong incentive to cooperate with the CFPB moving forward.
III. What actions should we take?
Companies that are subject to the CFPB’s authority should conduct internal reviews of policies, procedures, practices, and customer communications in order to proactively address any deficiencies or inconsistencies. For some companies, this process is likely already begun to address the CFPB debt collection rules that go into effect in November of this year. Companies should consider broadening the scope of that review in an effort to ensure compliance and avoid coming under the scrutiny of the CFPB under this new leadership.
Considering Biden’s current stance on student loan debt, servicers should be particularly vigilant. While Biden’s constitutional authority to forgive large amounts of federal student debt is unclear, he has indicated his resolve to lower federal student loan debt, whether by executive order or Congress.