Emerging View from CFPB Director Chopra – Focus on Oversight and Potential Rulemaking – Finance and Banking

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Last month, CFPB Director Rohit Chopra sat down with Washington Post economics columnist Heather Long in an unusual but illuminating conversation published by the washington post live. In this article, we highlight what we think is likely to come next for The Office, both based on what the director has said and what hasn’t been said or the future. .

Not asleep at the switch.

First, though, if there’s one thing to take away from the director’s comments, it’s that Rohit Chopra won’t allow the CFPB, in his own words, to be caught “asleep at the switch.” He focuses on “proactively monitoring these markets” and avoids what he claims “the American public has seen this time and time again -[of]law enforcement agencies and regulators are simply asleep at the switch, not understanding how markets work, and then being too late when things go wrong. And that’s just not how we’re going to operate.

CFPB Market Objectives.

We recommend the full interview, as it covers a wide range of issues from the potential emerging risks of financing the sale of Buy Now, Pay Later products to the perils of sharing information with consumers; from the potential challenges of servicing student loans and defaults to the prospects of a digital dollar. In our view, a handful of key themes emerge across the spectrum of financial topics and services.

  • Transparent and competitive pricing for consumer financial services products.

  • “Service and Quality” – Real Value for service and products

  • Reliable Support when challenges arise.

  • Leverage data analytics for the benefit of consumers, not potentially harm them.

Chopra believes there is room for improvement in our industry. “When the forces of competition work, costs go down, consumers are better served, and I’m not really sure we totally have that in many banking sectors.”

Chopra also flagged two other ensemble prospects. Despite the specific responsibilities delineated to the CFPB under Dodd Frank, he focuses on the CFPB being the eyes and ears of a larger forum. “One of the things I’ve asked our staff to do is that we need to make sure that we gather information, investigate and report to the public, because sometimes it’s not just about our authority. Sometimes it involves others.

The director worries about the disparate impacts on financial services, particularly in light of inflation and other market trends: “How can we maintain the stability of our financial systems, since the risks of financial instability massive burden fall disproportionately on those who can least afford it? And they become – we’re all really angry because in some cases, the individuals and politicians who helped bring about the financial crisis, it seems like it have no consequences for them.

Data analysis – Possibility of assistance and risk of abuse.

We have seen, even under previous directors, a clear focus on data analysis, including the CFPB’s consumer complaints database. Chopra is fully committed to the CFPB by leveraging the power of data to identify concerns and assess the negative impact on consumers. He is also wary of using consumer data in a way that the director says can be harmful to consumers. Discussing the growing scope of personal consumer data being collected, Chopra commented, “I really wonder if it makes sense that this data doesn’t have a clear set of transparency on how it’s being used, I think. , when that data is combined into black box algorithms, used for financial gain, and sometimes people can’t even explain the decisions that come with it. He returned to that risk later in the interview, concluding “we want ensuring that technology meaningfully improves our lives, not necessarily turning into a state of surveillance, not necessarily reinforcing prejudice and discrimination.” As a result, we expect to see more attention and activity in the areas fair loan underwriting, pricing and debt servicing We may also see in the future the Bureau advocating that institutions take t used data analysis to help consumers. Criticizing the insufficient funds fee, Chorpa noted that “many of these fees are determined by simple timing inconsistencies between when your paycheck is deposited and when certain debits are processed.”

Development of specific rules and problems under the microscope of the CFPB.

Director Chopra clearly intends to use all the tools at his disposal to move the Bureau forward and achieve its goals. In several cases, he indicated that rule-making may be in sight, but that an additional tool that the CFPB will leverage is prudential supervision. While we can expect the CFPB to continue to exercise authority over all aspects of consumer credit, Chopra focused its comments on the following products and services:

  • Credit Cards and Auto Loan: Chopra expressed concern about the lack of competitive interest rates and prices in the credit card and auto loan markets, especially when costs rise due to inflation. For auto loans, growing demand resulting from parts shortages is further increasing the total cost of ownership of new and used vehicles. We plan to monitor cooperation and data sharing between the CFPB and other regulators to promote competitive options for consumers in the credit card and auto loan markets.

  • Digital currency: Chopra noted the importance of distinguishing stablecoins from speculative trading when considering the risks of digital currency to consumers. He has also expressed interest in ensuring that digital asset transactions enjoy similar protections to debit or credit cards, including but not limited to issue escalation, privacy and security measures. adequate and fraud prevention. Digital currency is one area where Chopra suggested we could see the CFPB collaborate with other agencies, taking a co-regulatory and multi-jurisdictional approach similar to that of the mortgage industry.

  • Costs: For all consumer markets, the CFPB pays close attention to what Chopra called “junk fees,” including overdrafts, insufficient funds, surcharges, tickets, and resort fees. Chopra comments, for example, “[insufficient fund fees are] a key place where so many consumers feel kicked out when down, and often people ask me… ‘what service am I getting?’ It doesn’t look like a service at all. It’s like a punishment. So I think that’s part of what we need to think about. The CFPB also assesses whether consumers are provided with sufficient advance information to make comparison purchases and make informed decisions regarding fees. It is unclear whether we will see rulemaking or other activity with respect to fees. However, companies can mitigate risk by assessing the basis of their current fee agreements, disclosures about those fees, and whether their fees generate value for consumers to promote a fair and competitive marketplace.

  • Student loan : As other branches of government address the ongoing discussion of student loan forgiveness, we can expect the CFPB to focus its attention on redressing the harms suffered by students who have borrowed to attend institutions in for-profit but have not derived value from these programs, or may have been harmed as a result of kickback scandals between schools and student loan companies. Director Chopra is also paying close attention to the upcoming transition of federal student loans to repayment status after more than two years of interest-free forbearance in the wake of the COVID-19 pandemic.

Chopra also stressed the importance of expanding access to financial services for unbanked populations, including the development of safe and efficient payment systems for international remittances, as well as facilitating earlier and more common in wages.

Conclusion and takeaways. Director Chopra is curious, tenacious and principled. Whether or not one agrees with his expressed views on the industry, he invigorates the CFPB with a clear vision and mission. Institutions can leverage the information he has shared to assess consumer services and products with this in mind and align the focus on risk and compliance to mitigate enforcement and oversight risks. Early engagement on emerging risk trends will be beneficial. Applying the principles of fairness, transparency and value he outlined can mitigate consumer complaints and ultimately regulatory and litigation risks.

The content of this article is intended to provide a general guide on the subject. Specialist advice should be sought regarding your particular situation.

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