America’s personal money watchdog is starting to flinch again.
The Consumer Financial Protection Bureau was created in the aftermath of the mortgage crisis of 2008. Its mandate: to ensure that financial products such as loans are not designed to trick people into expensive debt or high fees. The agency washampered by its own leaders during the Trump years, much to the delight of many in the financial industry, who argued that the agency had been given too much irresponsible power.
President Joe Biden’s candidate for head of the CFPB, Rohit Chopra, is expected to obtain Senate confirmation within a few weeks. But the regulator is already sending the message that it is getting more and more difficult. On-site reviews are underway, bank executives tell consultants. Student loans, subprime auto loans, debt collection, mortgage services, and payday loans are all set for further review, analysts say.
For a time under the Trump administration, the agency’s acting director was Mick Mulvaney, who previously described the CFPB as a “sick, sad” joke. Over the past four years, the bureau has generated approximately $ 2.3 billion in consumer assistance through enforcement actions, up from more than $ 10 billion in the previous four years. Chopra will likely be more in tune with the original militant mission of the CFPB. He was the deputy director of the bureau under Obama-era leader Richard Cordray, and is an ally of Senator Elizabeth Warren, the Democrat of Massachusetts who is credited with designing the CFPB and helping to set it up. .
Chopra took a seat on the Federal Trade Commission in 2018. He has marked the decade since the passage of the Dodd-Frank Act that created the CFPB with a July statement saying “Gullible and passive regulators also share responsibility. “Of the financial crisis, with abusive financial companies”. Chopra said he saw firsthand in his early years at CFPB that the public must ensure that regulators use all available tools “to contain companies that abuse their power and break the law.” He also used his FTC boom to attack large corporations, using equally harsh language. In February,Amazon.com Inc. has agreed to pay$ 62 million to settle FTC claims it refused to tip drivers. Company executives attempted “to mislead his drivers and cover up his theft,” Chopra said in a statement at the time. (Amazon disputed the FTC’s claims and said its compensation policies were clear.)
“I expect that once Chopra is confirmed, he will want to get out of the door quickly,” says Ed Mills, Washington-based policy analyst at Raymond James Financial Inc. “Several bank management teams have told us so informally that they had seen a noticeable change from CFPB over the past two months after not hearing from them in the past few years. It appears that a switch has been reversed. “
Patrick McHenry of North Carolina, the top Republican on the House financial services committee, said in a statement that recent actions by the office show it is “backing down” to over-regulation. “Sadly, I think this is just the start of the CFPB’s comeback to the bad politics, abuse of power and political tactics that we experienced during the Cordray era,” he said.
The agency has a budget of nearly $ 600 million and nearly 1,600 employees overseeing everything from mortgage lenders to student loan managers and credit card issuers. In the weeks since Dave Uejio took office as the agency’s acting director after Trump’s appointee Kathy Kraninger resigned at Biden’s request, banks responded to more requests. agency, according to people familiar with the discussions, who asked not to be identified to discuss the confidential regulations. Questions. Leaders expect more aggressive monitoring and enforcement, including higher penalties.
“We plan to rescind public statements conveying a relaxed approach to law enforcement for which we are responsible,” Uejio said in a message to staff after taking office. “We will also reverse the policies of the last administration that weakened enforcement and oversight.” In a statement sent by email to Bloomberg Businessweek, Uejio said the agency wanted to address issues made urgent by Covid – such as keeping people in housing – as well as discrimination and racial inequalities.
Uejio has also started a recruitment drive to hire lawyers who he says can help hold businesses accountable for consumer breaches. “You only hire lawyers to do law enforcement action, so they put their cards on the table,” says Edwin Groshans, analyst at Height Capital Markets. “We have a sharp turn in the direction of CFPB.”
The big banks aren’t the only companies likely to gain more attention. Groshans believes that the CFPB is likely to oversee private student lenders and loan managers. He also saw Chopra cite car repossessions and defaults in his confirmatory testimony as a signal that Chopra could target subprime auto lenders.
On March 11, the agency rolled back the self-imposed Trump-era restrictions on its ability to collect civil penalties and refunds from banks and financial firms. for abusive acts and practices. This gives him an additional tool to bring lawsuits against consumer credit companies, according to Cowen Inc. analyst Jaret Seiberg. “Equally important, we believe that the CFPB wishes to develop case law on the definition of abusive practice,” he wrote in a note. By setting precedents for what is considered abusive, the agency could make it harder for future regulators to take a more lenient view.
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