CFPB Likely Here to Stay, but Big Changes Await

Details: Written by: Emily Flitter and Madeleine Ngo; Category: Breaking News - Daily; Published: 08 December 2024

Rohit Chopra is using his final weeks as director of the Consumer Financial Protection Bureau to remind banks and other financial industry groups that there’s something for them to love about the regulator they mostly love to hate. Over the past month, the bureau has issued a flurry of new rules and regulatory proposals designed to do things like monitor big tech companies’ payment services and rein in the sale of consumers’ personal data. The rules have garnered praise from financial industry groups and others who generally don’t have anything nice to say about how Mr. Chopra has been running the agency. The more palatable regulations come ahead of a Republican takeover of Washington that could once again put the consumer agency in the cross hairs. Republicans have long tried to chip away at the agency’s power and independence. More recently, banks have challenged its authority in lawsuits over rules established under Mr. Chopra’s direction. “The rulemakings that we’ve seen over the past three weeks are strategically intended to show that there are indeed areas of bipartisan agreement in the financial regulatory system, and, by extension, that the C.F.P.B. has a legitimate place in the regulatory ecosystem,” said Isaac Boltansky, an analyst at the brokerage firm BTIG.

The bureau’s latest actions could help blunt some of financial industry representatives’ fierce anger toward it, which has only grown over Mr. Chopra’s tenure. It could also create fissures between competing forces in the industry that could make it harder for officials to completely do away with some of the bureau’s latest rules or eliminate the agency altogether. For instance, powerful banks have applauded the bureau’s move to regulate the payments services that big tech firms offer to customers. Banks have long argued that if their companies must be subject to extensive regulation, then tech firms providing the same services should as well. If the consumer bureau were weakened enough that it could not carry out this task, it could put banks at a competitive disadvantage. “I believe that the C.F.P.B. is likely here to stay,” said Lindsey Johnson, the president and chief executive of the Consumer Bankers Association.

Ms. Johnson said her group has been one of the most vocally concerned about the direction of the consumer bureau because she thought its current leaders were more focused on leaning into “political polling to drive their agenda.” But she said the agency has taken some steps in the right direction to fulfill its mission of protecting consumers and that there were opportunities for banks to work with regulators. Still, the agency’s fate is far from certain. Some of Mr. Trump’s advisers, including Elon Musk and Vivek Ramaswamy, who will lead what Mr. Trump has called the Department of Government Efficiency, have voiced support for eliminating the bureau altogether.

On Nov. 27, Mr. Musk posted on X: “Delete C.F.P.B. There are too many duplicative regulatory agencies.” In a separate post, Mr. Ramaswamy said that consumers were “no better off” since its establishment. But getting rid of the agency would require legislators to abolish it and reassign its regulatory powers, an option Republicans are already viewing as unlikely given the slim margins in Congress.

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Representative French Hill, a Republican of Arkansas who is likely to become the leader of the House Financial Services Committee, which oversees the bureau, said his first choice would be to abolish the C.F.P.B. But he believed there would be wider support for a milder change to how it was run, like restructuring its leadership to make it a bipartisan commission, which would be similar to the structures of the Securities and Exchange Commission or the Commodity Futures Trading Commission.

Mr. Hill also believes the bureau should not have authority over smaller banks. Currently, it supervises any bank with more than $10 billion in assets. He wants that lower limit raised. “I want to make sure that we have and make the reforms in the C.F.P.B. that makes it a more responsive agency to Congress, and allows that consumer protection mission in federal statutes to be met, but be met in the most effective way possible with the least cost, with benefits to the consumer, but not disproportionate burdens to the financial services sector,” Mr. Hill said.

The bureau has been under fire since its creation as part of the 2010 Dodd-Frank law, but Republicans took their biggest swings at it after Mr. Trump was first elected in 2016. Mick Mulvaney, whom Mr. Trump named its acting director in 2017, tried to zero out its budget and change its name. Neither change lasted. The Supreme Court has since upheld the constitutionality of the bureau’s funding structure.

Mr. Trump has yet to tap anyone to lead the bureau, but bankers, former Trump officials and regulatory experts said they expected whomever assumes control will almost certainly freeze the rules issued under Mr. Chopra and examine whether to scrap them, or adjust them according to industry feedback. The bureau’s next leader could also reduce the number of investigations and punitive actions for financial firms that break its rules.

Since taking over the agency in 2021, Mr. Chopra has sought to expand the authority the bureau exercises over the banks and other financial firms it is tasked with overseeing, often using broad interpretations of the laws that created it. Bank lobbyists generally describe his tenure as an uncompromising power grab. Douglas P. Faucette, a partner at Locke Lord who is chairman of the law firm’s bank regulatory group, described Mr. Chopra as having been “as radical as any regulator could be.”

Among the most-criticized rules Mr. Chopra has finalized are a cap on credit card late fees and new public reporting requirements for small business lending. Banks also sued over Mr. Chopra’s plan to start using an unfair and deceptive practices law to check their activities for discrimination. And they decried new limits the bureau imposed on their ability to charge overdraft fees, even though many had changed their overdraft practices even before the new limits were put in place.

But some recent rules have garnered more mixed reactions from the industry. One requires banks to share customer data with other technology firms offering those customers services the banks don’t provide. It prompted Jamie Dimon, the chief executive of JPMorgan Chase, to call for banks to “fight back” against regulation, but was a boon to financial technology companies, popularly known as fintechs. On the other hand, banks loved the rule that came next: a finalization of the bureau’s proposal to oversee big tech companies, including Apple and Google, that provide payment services. To read more click here.