Conversation with CFPB Director Rohit Chopra
On Sept. 14, Public Citizen President Robert Weissman engaged in a “fireside chat” with consumer champion and Director of the Consumer Financial Protection Bureau Rohit Chopra. The event marked a year with two anniversaries: the 50th anniversary of Public Citizen — which has been standing up to corporate bullies, government agencies, and protecting our democracy since 1971 — and the 12th anniversary of the enactment of the Dodd-Frank Wall Street Reform and Consumer Protection Act to ensure a safer financial system. The Act created the CFPB to protect consumers (the first agency with that sole mandate), in the wake of the financial crash of 2008..
Dodd-Frank had many charges, and one example of a key rule mandated by the bill is Section 956, which addresses “inappropriate” pay structures for senior bankers. It is not a rule that the CFPB has a hand in, but multiple agencies are needed to finalize it. Sadly, it has remained unfinished in part thanks to lobbying from the banking industry, and a lack of political will. A recent report from Public Citizen reinforced the need for financial regulators to implement Section 956. Public Citizen believes that a strong rule would ban stock options at Wall Street banks; ban executive hedging on bonus pay; and require that a significant portion of banker pay be deferred for 10 years as insurance against potential misconduct. Without this rule in place, even a decade on from the mortgage crisis that precipitated the legislation, corporate bigwigs are still freely fattening their own salaries through fraud, profiteering, and cost-cutting on safety.
Weissman’s conversation with Chopra ranged widely and touched on executive misconduct; junk fees; digital redlining; how financial services are being transformed by technology; how massive data collection and surveillance have been integrated into so-called innovation; and more. At the beginning of the event, Chopra reflected that while the CFPB has accomplished a great deal, the agency “is no longer a new, scrappy agency; it’s punching at the same level as the big banking regulators that we’ve had since the Civil War and the passage of the Federal Reserve Act.” When it comes to policing the economy and making sure that there is fair dealing in the market, Chopra said that the agency needs to act as “financial first responders” to protect people from systemic abuse. “I think that we inherited a system from the Federal Reserve Board of very complicated regulations that in many ways seem designed to fit the business models of the largest institutions, rather than having more clear, bright lines,” he said. Some additional highlights from the conversation are below (these have been lightly edited for length and clarity):
On Big Tech and innovation: “The Facebook Libra proposal was a huge wake-up call globally, to finance ministers, central bank governors, consumer regulators, and privacy regulators. It was a lesson that if regulators just watch from the sidelines, there could be enormous implications and widespread harm. In terms of new technology being developed, whether it’s more advanced use of algorithms in underwriting or tracking and surveillance of our payments data, we have to make sure we’re not waiting for harm to occur and have to be doing something about it now. If, in 10 years, the CFPB has not figured out how to make sure that technology is being developed in a way that truly makes services better for consumers — if it’s all just controlled by a handful of large tech companies — I think we will have failed.”
On junk fees: “We have an issue with junk fees that provide no service whatsoever. Sometimes their cost has absolutely no relationship to the cost to provide it. We’re looking really broadly at how there can be more competition on fees — how we can make it easier for consumers to take their business elsewhere. This means going back to some of the basics and making sure that, especially in banking, people are getting some real service for what they’re paying for. We’re looking at this in debt collector pay-to-pay fees, credit card late fees, and other fees too. Markets need to be competing on customer service, product quality, and upfront price.”
On repeat offender corporations: “We have refocused a lot of our enforcement energies on repeat offenders. The CFPB has filed lawsuits against large actors, including TransUnion and FirstCash, one of the nation’s largest pawn lenders. We’re trying to get to a world where it’s not just cost-of-business penalties. We’ve also been paying closer scrutiny to individuals when it comes to repeat offenders; in one of our lawsuits, we named a longtime executive. We’ll also be looking at other legal tools that exist for addressing repeat offenders, such as the Federal Deposit Insurance Act or pursuing revocation of executives’ deposit insurance.”
On revolving-door misconduct: “We do not want to create a scenario where more well-heeled, well-financed firms can get a different outcome based on the same set of facts. The misuse of confidential information that one gleans while serving in a government agency is a concern. It’s critical for every agency staff to know that they should not be sharing confidential information with their former colleagues.”