Banking

CFPB pick’s past statements set stage for testy confirmation hearing

Rohit Chopra, President Biden’s nominee to lead the Consumer Financial Protection Bureau, doesn’t mince words about corporate wrongdoing.

As a Democratic member of the Federal Trade Commission appointed in the Trump administration, he lambasted Amazon for “cheating its workers” over its policy for tipping drivers, and said wireless data plans offered by AT&T “victimized millions of Americans,” among a long paper trail of nearly 120 public statements.

Such comments could influence Republican lawmakers weighing how to vote on his nomination, and could make for a heated confirmation hearing Tuesday when the Senate Banking Committee questions him as well as the administration’s nominee to run the Securities and Exchange Commission, Gary Gensler.

“His opinions as FTC commissioner are pretty revealing,” Alan Kaplinsky, senior counsel at Ballard Spahr, said of Chopra.

Unlike former CFPB Director Kathy Kraninger, a Trump appointee who had no previous experience in consumer finance, Chopra’s consumer protection background includes not only his time at the FTC but also a prior stint at the CFPB as the bureau’s student loan ombudsman.

In contrast to Kraninger’s more middle-of-the-road approach seen as kinder to the industry, Chopra’s writings show he isn’t afraid to publicly call out bad behavior.

“If he thinks something is wrong and executives have acted in an egregious fashion, he will go after them,” Kaplinsky said. “He is not going to suffer fools kindly.”

When the FTC ordered Amazon to pay $62 million to settle charges that it withheld tips from delivery drivers, CFPB nominee Rohit Chopra issued a statement saying “Amazon stole nearly one-third of drivers’ tips to pad its own bottom line.”

Bloomberg News

As a Democrat, Chopra has served on the FTC under a legal construct requiring a minority of appointees on regulatory boards and commissions to come from the party other than the president’s. Nominated by President Trump in 2018, he sailed through Senate confirmation, which was approved unanimously by voice vote.

But his aggressive past statements coupled with the power and high profile that comes with the CFPB job could lead to some pointed questions from GOP lawmakers at his hearing, and potential opposition from some members on the Senate floor. Democrats hold a razor thin majority, with Vice President Kamala Harris casting a tie-breaking vote.

Some critics may bristle at Chopra’s use of more inflammatory language about business malfeasance than the tone set by Kraninger.

To some observers, Chopra is reminiscent of former CFPB Director Richard Cordray, who issued press releases creating headline risk for large public companies. Chopra’s chief of staff at the FTC, Jen Howard, had been the CFPB’s assistant communications director under Cordray. If Chopra is confirmed, she is expected to become the CFPB’s chief of staff, sources said.

“He will be at least as aggressive as former Director Cordray, if not more so,” said Lucy Morris, a partner at Hudson Cook and a former CFPB deputy enforcement director who worked with Chopra in the CFPB’s early years. “His statements are very hard-hitting and the language is quite charged.”

His public comments and tweets provide a road map for how he would govern as the nation’s top cop for enforcing consumer financial laws.

“He has a very lengthy consumer protection record,” said Linda Jun, senior policy counsel at the Americans for Financial Reform Education Fund. “He believes in meaningful accountability. When people are harmed and companies break the law, he thinks there needs to be consequences.”

Chopra, 38, has taken particularly aggressive stands on FTC enforcement when it comes to large technology companies.

Earlier this month, when the FTC ordered Amazon to pay $62 million to settle charges that it withheld tips from delivery drivers, Chopra issued a statement saying “Amazon stole nearly one-third of drivers’ tips to pad its own bottom line.”

In 2019, when AT&T Mobility agreed to pay $60 million to resolve FTC allegations that it misled consumers about its wireless data plans, Chopra wrote that the carrier “trapped subscribers” in “a bait-and-switch scam.”

“AT&T baited subscribers with promises of unlimited data, trapped them in multi-year contracts with punishing termination fees, and then scammed them by choking off their access unless they moved to a more expensive plan,” he wrote.

In 2019, Chopra dissented from the FTC’s $5 billion settlement with Facebook over charges that the company deceived users about their ability to control the security of their personal information.

Chopra believed Facebook’s exposure likely was far greater, that the FTC’s offer of immunity to Facebook’s officers and directors was “a giveaway.”

“Because behavioral advertising allows advertisers to use mass surveillance as a means to their undisclosed and potentially nefarious ends, Facebook users are exposed to propaganda, manipulation, discrimination, and other harms,” he wrote.

Yet at the same time, Chopra has also taken stances that support free markets, reflecting an interest in finding common ground with his detractors.

“Government has long sought to create laws and regulations to structure and facilitate marketplaces that function well,” he said in a 2018 speech. “Laws that safeguard an individual’s ability to contract and possess property are foundational to functioning markets.”

Those who have worked with him says his aggressive approach his policy-focused, not personal.

“He’s very thoughtful, he thinks about things in a systematic way and he’s really thinking broadly about how to use the bureau’s authority,” Morris said.

At the FTC, he has criticized the agency for not using all of the tools in its arsenal to enforce the law.

“Breaking the law has to be riskier than following it,” he wrote in one dissent.

In another, he said, “I continue to be concerned that the FTC does not use its authority to the fullest extent possible to combat marketplace abuses. This is another missed opportunity for the Commission.”

Chopra served five years as the CFPB’s first student loan ombudsman and often testified on Capitol Hill. Before joining the CFPB, he spent two years as an associate at McKinsey & Co. A graduate of Harvard University, he received a master’s degree in business administration from the University of Pennsylvania’s Wharton School.

Two issues certain to rankle banks, lenders, industry trade groups and Republicans are his positions on fair-lending violations and enforcing the federal prohibition on “unfair, deceptive or abusive acts or practices.” Chopra would likely revive the CFPB’s use of “disparate impact,” a legal standard used to punish lenders that unintentionally discriminate against minorities. Meanwhile, many expect he will apply the UDAAP ban more broadly than Kraninger did.

“I think we will see a reversal very quickly of former Director Kraninger’s policy concerning abusive acts and practices,” said Robert Goldenberg, counsel at Reed Smith. “There is going to be a more aggressive approach and greater scrutiny paid under the new administration, and I think this approach will often dovetail with the administration’s focus on addressing systemic racism issues.”

Last year, Kraninger issued new guidance defining what constitutes an “abusive” act that.

“I’m sure we’ll see a reversal of that [abusive standard] quickly,” Goldenberg said.

Discrimination and racial equity issues are another area where the CFPB, in alignment with the Biden administration, plans to crack down hard on financial firms. Chopra has written extensively about how agencies should handle unintentional discrimination. He will also likely be skeptical of lenders’ use of artificial intelligence and alternative credit data to underwrite borrowers.

In a case last year in which the FTC alleged a Honda auto dealer in the Bronx, N.Y., illegally discriminated against Black and Hispanic families by charging them higher interest rates than white customers, Chopra wrote that “disparate impact analysis is a critical tool to uncover hidden forms of discrimination.”

“With the proliferation of machine learning and predictive analytics, the FTC should make use of its unfairness authority to tackle discriminatory algorithms and practices in the economy,” he wrote.

Acting CFPB Director Dave Uejio already has laid out an aggressive agenda. Judging by Chopra’s FTC comments, auto lenders are likely to be targeted by the CFPB, along with student lenders, mortgage servicers and debt collectors. The agency will likely also take a tougher stance on consumer lenders, including banks, that are seen scamming immigrants, the elderly and military servicemembers.

Large banks and financial companies engaged in wrongdoing should also be on alert, lawyers said.

Higher-profile businesses “are going to get a lot more attention and publicity than going after some fly-by-night scam artist company, which Kraninger did go after,” Kaplinsky said.

“We’re going to see a lot more targeting of larger institutions and the bigger banks in the way Cordray did when he came in and went after every large bank for credit card add-on products,” he said. “I expect [Chopra] is going to be looking for something big to send a message to everyone that the Kraninger era is over.”


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