CFPB Rohit Chopra's second year could be rockier than his first

Rohit Chopra arrived as director of the Consumer Financial Protection Bureau one year ago today. True to his reputation as an aggressive watchdog from his time as an FTC commissioner and an earlier stint at the CFPB, he has pursued a busy agenda that’s setting up regulatory battles to come.

Chopra hasn't been afraid to challenge big banks or fintechs. His fight against banking’s so-called junk fees, for instance, won plaudits from both consumer-focused groups and fintech trade organizations.

• To little surprise, the agency has been more active under Chopra and the Biden administration compared to the Trump years.
• Fintech-focused initiatives have included promises for greater scrutiny of algorithmic lending, earned wage access programs, and fraud on peer-to-peer payment networks.
• Chopra’s CFPB has also stated plans to invoke the agency’s dormant authority to examine certain nonbank financial companies, including fintechs.
• The agency’s competition-focused office shut down a sandbox program that offered fintechs a regulatory safe harbor to test new financial products.

All eyes in the fintech world are on open banking. The CFPB regulatory docket this fall includes a long-delayed rule-making effort to allow customers to more easily move their data between financial institutions. The effort is part of the Biden administration’s goal to boost competition in markets.

• "We believe that consumers, not financial institutions, own their data and hope the CFPB will provide clear guidance establishing consumers’ right to control and permission their financial information," said Penny Lee, CEO of the Financial Technology Association.
• As for other priorities, a recent agency report on “buy now, pay later” lending also indicates further action is likely. “Exactly what shape that takes isn't immediately obvious,” said Jason Mikula, a fintech consultant and author of the Fintech Business Weekly newsletter. "Any action on BNPL is likely to focus on credit underwriting/credit reporting, how companies assess consumers' ability to pay, consumer protections (chargebacks), and adequate and consistent consumer disclosures.”
• Consumer advocates want to see more protection extended to pay-later loans and other new financial products. They also want the CFPB to ensure that “criminals cannot use P2P services or other means to defraud people and steal their money,” said Lauren Saunders, associate director at the National Consumer Law Center.
• Something to watch: How the agency balances rule-making and the CFPB’s bully pulpit (something close watchers of the agency say he has leaned on more to this point) with enforcement actions. "I think he is trying to use the carrot and the stick," said Jonah Crane, a partner with Klaros Group.

The agency’s tactics and a growing list of priorities are prompting powerful pushback. The industry and Republican members of Congress are circling.

• Banking industry groups and the U.S. Chamber of Commerce sued the agency on Wednesday, claiming it violated administrative procedure law by updating its examination guidebook to include oversight of potential discrimination in bank accounts and other financial products not already covered by fair lending laws.
• The bureau said its mandate to investigate unfair, deceptive, and abusive acts or practices (UDAAP authority, in bureaucratese) gives it oversight of the products. But the lawsuit marks the most significant legal challenge yet from business groups that have been critical of Chopra’s tactics for some time.
• Sen. Pat Toomey, ranking member on the Banking Committee, has called the agency “lawless,” and congressional scrutiny in the form of document requests and oversight hearings will only increase if Republicans gain control of either the House or Senate this fall.

The agency seems to be gearing up for that possibility. American Banker reported that the CFPB launched an office this summer dedicated to responding to congressional requests. Crane, a former Treasury official, said document requests can eat up a lot of administrative resources: “It is a big exercise, but it seems he is preparing to handle it without distracting from his day job.” But there’s little question that Chopra’s second year in the job will be more challenging than his first.

A version of this story appeared in Protocol’s Fintech newsletter. Sign up here to get it in your inbox each morning.